By Dexter Roberts When Chinese riot police fired on rural protesters last week in the southern village of Dongzhou, many China watchers instantly drew parallels to the June 4, 1989, massacre in Beijing's Tiananmen Square. But the shootings in Dongzhou -- which left at least three protesters dead and eight injured -- have much more to do with the economic challenges facing rural residents than the calls for greater democracy demanded by the students at Tiananmen. And Dongzhou is only the latest manifestation of growing discontent among workers and peasants as the mainland rapidly sheds its socialist skin. Last year, some 3.7 million Chinese participated in a total of 74,000 such protests, officials acknowledge -- 10 times the numbers of a decade ago.
Why are China's farmers and factory workers so angry? A key complaint is growing inequality, especially in rural areas. Some 99% of China's poor reside in the countryside, the Organization for Economic Cooperation & Development reports. And last year the gap between urban and rural incomes widened to its highest level in decades -- with farmers making an average of just $372 per year, or less than one-third what urban Chinese earn.
Another big issue is land seizures. Peasants often feel ripped off by local officials, who pay them next to nothing when taking their land to build luxury villas, golf courses, or factories. Indeed, the riots in Dongzhou were sparked when local farmers and fisherman protested what they viewed as insufficient compensation for land that was taken to build a wind power plant.
2,600-YEAR TRADITION. The good news is that Beijing understands the need for reform. China must expand "the consumption of more than 800 million rural residents, thereby relying further on consumption to push economic growth," Premier Wen Jiabao said in a recent speech. So, after decades of a national household registration system called hukou -- which barred most farmers from moving to cities in search of work -- the controls have been loosened. This allows rural Chinese to legally move to urban areas -- in effect legalizing employment for the estimated 120 million migrants from the countryside already working in China's cities.
Of course, that doesn't solve problems for those who remain on the farm. So Beijing has boosted subsidies to agriculture, and it has ordered an end to taxes on crops and to arbitrary fees imposed on peasants for everything from raising livestock to getting construction permits. That ends a 2,600-year-old tradition of local governments relying on farmers for funding. Already this year, a majority of China's provinces, including largely rural and poor Jiangxi, have abolished the onerous taxes, with the rest of the country ordered to follow suit in 2006.
At a Dec. 1 meeting of the Central Work Committee, Wen said in speech that the party must "persist with the central task of developing the rural economy, promote the liberation and development of the forces of production in the countryside, [and] promote a sustained increase in the incomes of peasants."
ANTIRIOT SQUADS. The government is also giving peasants a firmer grip on their land. Two years ago, Beijing implemented a land-tenure law aimed at guaranteeing 30-year-use rights to farmers. That was followed last year by a decree that mandates public hearings for farmers angry over land seizures. And in March, the National People's Congress is likely to pass a property law that provides even better protection for farmers, even letting them take mortgages on their land, says Li Ping, Beijing-based representative for the Rural Development Institute, a Seattle land-rights institute. "The central government is really trying to reinforce farmers' land rights," says Li. Beijing knows that "if you take away farmers' land, you are taking their means of survival."
But even as Beijing shows its softer side with farmer-friendly policies, it's getting tougher on dissent. Earlier this year, China's State Security Ministry set up special antiriot squads to deal with protests. And in the wake of labor protests in the northeast rustbelt three years ago, Beijing punished local officials who were seen as corrupt and who mishandled the protests, while assuring protesters that some action would be taken to redress their grievances. But at the same time, it locked up the protest organizers, accusing them of deliberately inciting unrest.
So far, the government appears to be taking the same approach in Dongzhou. On Dec. 11, the top newspapers in Guangdong Province reported that a police commander involved in the shooting had been detained after dealing "with the situation improperly and bringing about mistaken deaths and accidental injuries." And officials have suggested that an investigation will be made into whether the local residents were fairly compensated in the land seizure. But the newspaper accounts also blamed "a tiny minority of troublemakers," for the protests, and called three farmers "instigators" who had misled others into taking violent action against the police.
"MESMERIZED." Beijing's mixed methods aren't likely to quell the rising tide of discontent for long. One crucial issue is that the central government is increasingly unable to control local officials. So when Beijing orders local governments to end rural taxes or stop seizing land without compensation, the edicts are ignored -- particularly now that localities are taking on increased responsibility for their own finances. "It's another example of tension between the central and local governments," says Andy Rothman, Shanghai-based economist with CLSA Asia-Pacific Markets. "The center wants to do certain things, but getting the thousands of townships to follow along isn't always easy."
Ultimately, Beijing's desire to improve conditions for the disadvantaged and stop the protests will run up against an obstacle of its own making: the leadership's fear of independent organizations that might seriously represent the interests of workers and farmers, but which could challenge the party's supremacy. That means China won't consider independent unions that might keep workers from taking grievances to the streets.
And it has led to a crackdown on journalists who report too openly on rural corruption and the jailing of lawyers advocating farmers' rights. "The government is still too mesmerized by memories of Solidarnosc in Poland," says Robin Munro, research director at Hong Kong-based China Labor Bulletin. So "the central government is trying to act as a fireman when these incidents erupt, but that is essentially an impossible task." Even if Beijing's latest attempt to put out the conflagration in Guangdong is successful, expect plenty more protests ahead.
Roberts is BusinessWeek's Beijing bureau chief