National

Regional

Taiwan, HK, Macao

Special Coverage

Focus

Society

Profiles

Financial meltdown hurting Chinese farmers

By Xin Zhiming (China Daily)
Updated: 2008-10-29 07:23

The global financial crisis has begun hurting Chinese farmers' income, senior economists said Tuesday.

The annual income growth of farmers is likely to cross 7 percent this year, but that is about 2 percentage points lower than the government target, said Cheng Guoqiang, an economist with the State Council's Development Research Center.

Farmers collect celery at a farm in Gulang, Gansu Province, recently. Farmers have started feeling the pinch of the global financial crisis as their income growth wanes. [Xinhua]

"But we would be happy even if the rate reaches 7 percent," Cheng told China Daily.

Song Hongyuan, an economist with the Agricultural Research Center, affiliated to the Ministry of Agriculture, corroborated him.

"Based on the current situation, it's rather difficult to see farmers' income rise by 9 percent this year," Song told a seminar, organized by China Development Research Foundation.

Song and Cheng both said things could get worse next year. Chinese farmers' income will take a greater beating next year because of the financial crisis.

Chinese farmers' cash income increased by 11 percent in real terms to reach 3,971 yuan ($580) per person in the first three quarters of this year, according to the National Bureau of Statistics. But cash income is not equal to net income, which includes cash plus incomes from other sources after deduction of various costs, analysts said.

Prices of agricultural products rose at home after surging in the international market in the first half of this year, Cheng said. But the financial crisis, which has also hit the agricultural product market, has driven down prices dramatically.

In the past three months, for example, the price of soybean has fallen by about half in the international market, and that of wheat by 20-30 percent. Despite China's recent move to raise grain purchase prices, there is a strong possibility of prices falling in the domestic market, Cheng said.

"Farm product prices are already falling in the domestic market this will hurt farmers' income," Song said. On the other hand, the costs of fertilizers and energy are rising, and that will reduce returns.

The financial turmoil and the slowdown in the global economy have caused a good number of bankruptcies in China. Many of the ones to collapse are small enterprises that mainly used to employ farmers-turned migrant workers.

"China's labor-intensive sectors, such as textile, have been hit hard," Cheng said. "And they are the major employers of migrant workers."

"Enterprises both in cities and rural areas are downing shutters, and our field research shows the process will continue for some time," Song said.

Things are likely to worsen next year abroad, too, because the financial crisis could cut consumption in the US, Europe, as well as Asia and reduce the demand for China's agricultural products, Cheng said.

The country will have a difficult time meeting its target of doubling farmers' income by 2020, taking 2008 as the base year, Song said. The target was set at the 3rd Plenary Session of the Communist Party of China's Central Committee this month.

To achieve that goal, the country would have to have an annual economic growth of about 6 percent throughout the next decade, he said.