Hurdles Ahead for Building“New Countryside”
3 min readHurdles Ahead for Building“New Countryside”（1）
According to The Eleventh Five-year Plan，China will endeavor to build new socialist countryside.However，such an unprecedented undertaking may probably encounter the following restrictions and risks.
Firstly，how does the government to guarantee the strength of transfer payment from public finance？Lin Yifu，committee member of CPPCC and one of the designers of The New Countryside blueprint，believed that by the year 2020，there will need a total input of over MB 4 trillion for the construction of the new Chinese countryside.In order to collect such a huge fund，it is necessary for public finance leaning to countryside besides activating rural financial credit.
Nevertheless，the funds actually demanded in countryside are far beyond this.
Only on rural education，the total government input is expected to reach RMB 40 billion；scholar Cao Jinqing estimated that the required input may reach as high as RMB 120 billion to 150 billion in order to accomplish the goal of completely remitting tuition and fees in the rural compulsory education period within the next two years.There has been a huge gap between the capacity of public finance and the funds required.
Secondly，the huge finance budget deficits in towns and villages make it possible for financial transfer payment to be intercepted halfway.
According to the figures provided by Qiu Xiaohua，standing deputy director ofNational Bureau of Statistics in the recent press conference，local financial revenues last year enjoyed a favorable balance of more than RMB 97 billion rather than deficits.However，according to Cao’s estimation，among the RMB 339.7 billion input in 2006，approximately RMB 100 billion are provided by central finance to local governments as subsidies for agricultural tax reduction，and there is still a gap of RMB 70 billion that can’t be made up.
Hurdles Ahead for Building“New Countryside”（2）
In the future，the total transfer payment allocated by central and local finance is only RMB 103.2 billion，which still has a long distance compared with rural financial deficits，direct taxes paid by farmers engaged in other production and operation activities，as well as the sum of indirect taxes and implicit taxes shouldered by farmers.
If the rural taxes and fees reform wasn’t carried out accompanied by the reform of rural grassroots administration，some grassroots governments are well possible toappropriate financial transfer payment as the salaries of government staff in order to get out of financial crisis and existence difficulties，thus public benefit executant becoming public benefit despoiler.We should be prepared for this biggest risk of new countryside construction.
Whether the farmland reform mode in Japan after World War II，or the land reform mode in Taiwan region，these successful reforms，though different in methods，have one point in common:enabling the massive farmers to become the direct beneficiaries of the reform is the best measure to determine the overall economic expectation.
Just on this point，improvement is needed at present.Among local governments’“net income from land transfer fees”of more than RMB 230 billion every year，considerable part of which are from farmland value-added income；however，what the countryside has got from the income is even less than 15 percent（policy object）.
A11 these are important issues deserving policy makers’consideration.
