Beneath the China Boom

Labor, Citizenship, and the Making of a Rural Land Market

Julia Chuang

• Publisher: University of California Press
• Year: 2020
• ISBN:
  9780520973428
• Edition: 1
• Topic: Ciencias sociales
• Subtopic: Sociología rural

For nearly four decades, China's manufacturing boom has been powered by the labor of 287 million rural migrant workers, who travel seasonally between villages where they farm for subsistence and cities where they work. Yet recently local governments have moved away from manufacturing and toward urban expansion and construction as a development strategy. As a result, at least 88 million rural people to date have lost rights to village land. In Beneath the China Boom, JuliaChuang follows the trajectories of rural workers, who were once supported by a village welfare state and are now landless. This book provides a view of the undertow of China's economic success, and the periodic crises—a rural fiscal crisis, a runaway urbanization—that it first created and now must resolve.

1 China’s Rise

In 2007 I was a graduate student with an interest in the Chinese economy. It was only a year before the global financial crisis, but already China’s economy was showing signs of shifting away from its traditional export growth base. Profits were continuing to accrue within manufacturing, but the new growth area was construction and real estate, a sure sign of a robust domestic market and an emergent middle class.

That summer I traveled to Beijing, hoping to catch a glimpse of what this construction boom looked like on the ground. There I became acquainted with a gang of construction workers hailing from Sichuan Province, deep in the hinterland. Among them was a rural worker, a thirty-three-year-old man named Little Deng. Little Deng often had difficulty securing pay for his work. When he failed to bring in wages, he would fall back on the efforts of his family in his home village. Deng’s wife, Yue-na, lived in a two-story house built with his accumulated wages in Faming Village, two thousand kilometers from Beijing, a thirty-three-hour ride on the slow train.

My examination of China’s construction boom soon took me on a sojourn far beyond the influence of coastal cities. Many workers I met in Beijing were like Little Deng: they shuttled back and forth between inland villages and coastal cities. The tactic was what scholars call a “safety-first” practice; it allowed them to retreat back to rural farms during times of unemployment.¹ Migrant laborers around the world live such dual lives. In China, migrants such as Little Deng have become foundational to the country’s developmental strategy of labor-intensive export production. They work elsewhere during economic booms and then return home to farm in villages during economic crises. For example, in 2010, just after the reverberations of the global financial crisis had emptied China’s factory floors, Little Deng spent a forlorn year in a failed search for work. He left the village with 500 RMB (US$83) and a one-way train ticket to Guangzhou, where a village friend got him a job at an electronics factory. After his first month there production slowed, and Little Deng was fired. He then found work as a woodworker at a Beijing construction site, but within a month a rumor spread that subcontractors had disappeared, leaving workers without wages. At another construction site in southern China, Little Deng worked for several months, only to find that financing for the project had dried up and no laborers would be paid. Finally, Little Deng called his wife, who said with a stiff upper lip, “We have a rice crop and three pigs this year. Worse comes to worst, we can sell two, and butcher one, and that way our son can still eat meat next Lunar New Year holiday.” Little Deng started the year with 500 RMB (US$83), visited four cities, and ended with a loss of 1,100 yuan, or US$182. His family weathered the year because Yue-na had opted to stay behind in Faming, raising their son and farming their few plots of village land, which sustained them despite the losses Little Deng incurred in his migration.

For two years (2010–2012) I lived in various villages in Sichuan Province, where I followed migrant workers like Little Deng as they searched for work, socialized with their families, and recorded the daily events of the local community. During this time I learned that rural villages situated deep in the Chinese hinterland perform a central but hidden function in the national economy. This is where the vast labor force retreats when production slows. It is also, however, a changing and uncertain place. The brighter the skylines of Beijing and Shanghai are, the more deteriorated the rural inland becomes, with its crumbling roads and closed schools; the higher the gross domestic product (GDP) growth rate of cities is, the more stagnant are the rural economy and job prospects therein. This book proposes that these phenomena are related—indeed, that the stagnation of the hinterland enables the dynamism of cities.

Yet rural China is also changing. Driven by growing fiscal deficits, rural governments have turned toward land sales for revenue, seizing land from households and diverting it toward urban expansion and contract farming. In addition to being profitable for local governments, such land seizures are also central to an official campaign of controlled urbanization, a central mandate under the regime of President Xi Jinping. Since the State Council’s eleventh Five-Year Plan of 2006, urbanization has been touted as a solution to fears that China has become trapped in a low-road, labor-intensive industrialization trajectory. Two processes of urbanization—the territorial expansion of cities and the growth of registered city populations—aid in the pursuit of this remedy. Conversions of rural land, previously collectively owned, to state ownership and urban infrastructure and development allow local governments to lure capital investment, boost industrial production, and unlock potential growth in real estate values. Expansion of the urban population, in turn, boosts domestic consumption, particularly vital in the post-2008 global financial crisis moment, when slowdowns in the global export market left inventories unsold, factories unused, and excess capital with few profitable avenues for investment in manufacturing.

Urbanization creates new frontiers for economic expansion, to wit: former villages become sites for real estate construction, and formerly rural populations become new middle-class bases for domestic consumption. This urbanization occurs at a rapid and accelerating rate. Nationwide rural modernization plans—in particular the “Build a New Socialist Countryside” (BNSC) campaign inaugurated in 2006—cite benchmarks to absorb 250 million rural-born people into cities by the year 2026. From 1992 to 2015 the area of China classified as urban increased from 122,000 to 729,000 square kilometers, a nearly fivefold increase, with an average annual growth rate of 8.1 percent, a rate exceeding the global average by almost 2.5 times.²

Yet this breakneck urbanization was implemented in a peculiar fashion. Although urban expansion is regulated by the central state via limits on the amount of rural land eligible for conversion, it is carried out by local governments now largely dependent on land financing for fiscal solvency. Because of this, local governments disproportionately pursue real estate and infrastructural construction, using land parcels as collateral to underwrite large bank loans, which they can use to service old debts, fund public works, or reinvest in new urban development. Moreover, much of this construction is speculative for buyers and developers, meaning that governments access financing and collect fees from land transfers regardless of whether future sales and full-capacity utilization can be achieved. Expectations of future growth substitute for actual growth, as speculation mania fuels rising real estate values from boom to bubble. China’s overheating real estate sector not only exceeds the overall limits of housing demand, it also results in the allocation of housing supplies to upper-tier market segments rather than to those in need. Governments that obtain land-collateralized mortgages tend to auction future land to highest-bidder developers to pay off past debts, and the latter tend to build luxury properties at price points prohibitive for the projected 250 million formerly rural residents who will populate China’s new middle class.

This runaway urbanization creates yet another kind of disjuncture. As land financing and urban construction become primary revenue bases for local governments, rural localities engage in land seizures that displace large numbers of rural residents from the farming land that otherwise provides a fallback option for people like Little Deng. Thus, such urbanization creates substantial tension in rural communities such as Faming. These villages provide support to rural laborers such as Little Deng, who constitute the majority of China’s labor force, and supplement low wages through agrarian activities including farming and selling pigs. But they also house a high-value asset, namely collective land, indispensable to rural governments low on revenues and now empowered to pursue urbanization via central state mandate. Thus, rural land, once a source of security and household support for China’s vast labor force, has become a substantial source of profit for local governments.

POSTSOCIALIST LEGACY AND INSTITUTIONAL FOUNDATIONS OF CHINA’S RISE

In the 1990s the Chinese economy began more than a decade of continuous double-digit GDP growth. By 2002 the aggregate size of the economy exceeded eight times its size in 1978, at the start of the postsocialist reforms.³ This growth period coincided with the rise of global free trade; by 2005 China was receiving 49 percent of the world’s foreign direct investment.⁴ That same year, the economy produced 4,726 trillion RMB (US$762.3 trillion) in exports to the world. Of this total, 1,012 trillion RMB (US$163.3 trillion) worth of exports was being absorbed by US markets.⁵

China has “exported its way into prosperity,” sustaining a low-cost production model for a longer continuous period than most other developing countries.⁶ When sending production offshore first began, for example, Mexico was the first to become a hotspot for export processing, and yet Mexico’s maquiladora manufacturing industries, which grew as a result of the North American Free Trade Agreement of 1994, were quickly outcompeted in the race for foreign investment by China’s special economic zones (SEZs), a dynamic that persisted throughout the 1990s. Moreover, China’s status as the factory floor of the world marketplace has continued uninterrupted in the twenty-first century, despite the cooldown in export markets after the 2008 global financial crisis and the emergence of Southeast Asia as a new low-cost production zone. Even in 2013, for example, average Chinese wage levels were still a mere one-eleventh of US wage levels and one-third of Brazil’s.⁷

How has China sustained its low-cost production model for so long? The primary condition for this sustained wage suppression is neither the absolute size of China’s labor supply nor the ability of its authoritarian government to suppress protest and control labor unions, although these factors do play a role. Instead, the central mechanism enabling long-term wage suppression in China is a postsocialist legacy, specifically an institution of collectivized land and a system wherein rights to welfare and other social benefits are locally administered. Both institutions were originally implemented in the 1950s as a means of assigning rural laborers to agricultural communes. These institutions struck a deal with rural-born citizens: their social rights and entitlements, such as access to schools, health care, pensions, welfare, and social insurance, would be inferior to those enjoyed by the urban born. Moreover, these entitlements would be geographically restricted and only accessible in the place where one’s birth or marriage residence was registered in a national household registration system, called the hukou. In return, however, the rural born would receive a universal right to lifetime use of a small plot of land, approximately a quarter acre per person, in their village of birth, a source of security in the face of unemployment and other market precarity.⁸

These restrictions are fundamental to China’s low-cost production advantage because they have created a workforce whose families are shackled to their village of origin for access to education and by reliance on land. Universal land-use rights in the countryside allow individual laborers to work for employers in cities while leaving their families behind in villages to farm land to defray the cost of food and supplement low wages. Since workers can retreat to farming during periods of unemployment, they can withstand irregular labor contracts and low wages. This has made China’s labor force appear self-replenishing, peopled by migrants from impoverished inland regions who cycle in and out of work while an ongoing subsistence farming economy subsidizes wages and absorbs unemployment.

However, there is a price to be paid for this low road of development. As rural China has been transformed into a holding pen for low-cost labor, rural regions have become sites where few industries can flourish and the majority of the workforce is employed elsewhere. Thanks to a postsocialist legacy that has restricted the mobility of rural populations, allowing them to work but not to settle in cities, rural governments are still responsible for providing public services and public goods for a rural workforce. Indeed, as urban economies have surged ahead, with key industries such as manufacturing and construction employing predominantly rural laborers, rural economies have been left behind. Throughout the 1990s central state lending policies favored urban enterprises over rural industries, and a concurrent wave of deepening market reforms quickly forced many collective enterprises in the countryside to privatize, only to be outcompeted and forced into bankruptcy.⁹ These policies and reforms led to a rise in rural government deficits, which outstripped those of urban governments as fiscal decentralization reforms offloaded additional fiscal responsibilities onto local governments, responsibilities that rural governments struggled to fulfill as their industrial tax base dwindled.

These fiscal troubles in rural governments were the underside of urban growth, directly related to the export-driven economic boom and its reliance on rural labor. By the early 2000s the central state had taken measures to relieve rural fiscal burdens. In 2004 the State Council released a “Number One Document” stating that China had entered a new era in which “industry should nurture agriculture, and the cities should support the countryside.” It was the first time in China’s state rhetoric that industry was assigned a role supporting agriculture. In 2006 the phrase “rural-urban integration” was prominently featured in the eleventh Five-Year Plan, which proposed to BNSC, now a top domestic priority. The BNSC campaign had broad goals: to develop production, enrich livelihood, civilize rural habits, tidy up the villages, and democratize management. Significant resources were channeled to the rural sector as household subsidies and earmarked transfers for public goods.

As a fix to the problem of fiscal crisis, however, rural modernization had a hidden twist. It generated revenues for rural governments not because it brought taxable industries back to the countryside, but rather because it allowed governments to expropriate and auction off use rights to rural land. This was an attractive option for county-level governments in areas with large swaths of undeveloped land. For these governments, rural land was an untapped asset that was collectively owned and unable to be bought or sold. Unlike land within the jurisdiction of a municipality or county seat, which is legally owned by the central state and easily monetized through the sale of finite-term land-use rights to developers, rural land is technically owned by townships and village collectives and cannot be contracted out to private developers.¹⁰ Aside from land set aside for...