Survey China: A Piece of the Action

A piece of the action

Mar 23rd 2006
From The Economist print edition

How one rural community hit it lucky

THE village of He Hua in Wenzhou municipality, about 365km (225 miles) south of Shanghai, is a typically bizarre product of China's bipolar economy with its rigid distinction between urban and rural. A stranger looking at its streets lined with shops, restaurants, office blocks and apartment buildings would have no idea that it is a village at all. It looks just like any other urban area of Wenzhou, one of China's most prosperous cities.

The rapid outward expansion of Chinese cities in recent years has swallowed many villages like He Hua, which 20 years ago was an expanse of paddy fields. Sometimes the land is appropriated by the government and sold on to developers, with some of the money being used to rehouse the villagers who are reclassified as urban residents. But often villages have remained villages, looking urban but governed by different economic rules. He Hua is one of those.

The He Hua village office, down a shabby alleyway next to a luxury housing development, is now the headquarters of a property company that is making good use of the village's virtual existence within Wenzhou's urban sprawl. These “villages within cities”, as they are called, can take advantage of urban housing demand to rake in fortunes with their remaining plots of collectively owned land. And if the villagers are lucky, as they are in He Hua, they will get a generous share of the money.

He Hua's village committee is just about to redesignate itself as the He Hua Village Economic Shareholding Co-operative, a process that has taken four years. The elected village chief has become its general manager. The village's former Communist Party leader is now chairman of the board. All this has taken a long time to organise because assets had to be valued and, most contentiously, shareholders identified. Only villagers can be shareholders, but it was not easy to decide how to deal with villagers who had moved elsewhere and wanted to come back to enjoy the spoils.

Outside the village office, with its new Shareholding Co-operative nameplate, are the fruits of all this toil: sheets of paper on a bulletin board listing the 363 shareholders. They make up less than a quarter of the area's current population. Mao, who famously said that women hold up half the sky, would not be happy with the list. He Hua has decided that when it comes to share allocations, women are worth only six-tenths of men. Jin Zhengzhong, the general manager, explains that this is based on traditional rural reckoning which values a woman's labour at half that of a man's. But even this is progress of sorts: before the new co-operative was established, profits were handed out only to male family heads, to divide up as they wished.

Turning villagers into shareholders is a big improvement on the hazy “collective” ownership notion prevailing in most of rural China. But although He Hua's villagers will be rich by local standards (an adult male shareholder can expect a dividend of $5,000 a year, which amounts to a comfortable urban income), they have not found the answer to China's land problem. Their shares will be diluted if their numbers grow; they cannot be sold except to other villagers; and the government could still take the land away.