China's Communist Party has long relied on the country's huge peasant population as its base of power. Mao Zedong took over in 1949 with the overwhelming support of the peasantry. Deng Xiaoping was able to smash the 1989 Tiananmen movement in part because peasants remained on the sidelines. Now, the peasants are the ones demonstrating, and Beijing is taking notice. "The central government," says one Western diplomat in Beijing, "is terribly worried."

With good reason. Growing rural poverty is sparking angry protests throughout China. Peasants are being hit by double-digit inflation and higher taxes. To make matters worse, cash-strapped local authorities are paying them with promissory notes. "Peasants are worse off than they were one or two years ago," says William Hinton, an American expert on Chinese agriculture. "They are angry that they're getting poorer."

Now, Beijing is trying to ease the financial crunch. On June 21, the government abolished 37 taxes imposed on the peasants. That's in addition to the 43 it removed earlier this year. Other recent moves include threats to crack down on local officials who are pocketing the taxes taken from farmers, and pledges to funnel millions of dollars into impoverished rural areas.

FEUDING VILLAGES. Beijing's decision to ease taxes came two weeks after violent protests in Deng's native Sichuan province. There, in Renshou county, farmers who already were paying about 18% of their $60 yearly income to the government rebelled when hit with an $8.75 charge to pay for a new road. In early June, 10,000 to 15,000 Renshou residents took to the streets, with some attacking Communist officials, burning police cars, and kidnapping policemen.

Unfortunately for Beijing, Renshou was not an isolated incident. In late May, paramilitary police were dispatched to Henan province to break up fighting between two rival villages over a land dispute. Reports are also trickling out about new abuses. According to the China Youth News, Ding Zuoming, a peasant in central Anhui province, was beaten to death by local authorities after he was recruited by farmers to launch complaints about exorbitant levies. Unable to pay her taxes, one woman in Hunan province committed suicide after officials took her bicycle, pigs, and TV set.

The lure of urban salaries has attracted some 80 million peasants to China's major cities in search of jobs. Per capita income for China's 900 million peasants averages about $105 a year, compared with $350 for urban workers. But even after the peasants find work--usually as construction or factory workers--they feel the pinch. When they mail earnings back home, the post office hands their families an IOU that can take months to convert into cash. Last year, more than $525 million worth of such IOUs were issued.

Efforts to mollify the peasants may not work. Power in China has decentralized to the point where Beijing has lost a great deal of control, particularly in the far-flung provinces. Theoretically, local officials face punishment if they tax peasants more than 5% of their income. But many local authorities simply ignore orders from the center and exact whatever fees they want.

BIG NEWS. The central government is fighting back. The official People's Daily reported the June tax rollback with a banner headline on the front page. Meanwhile, Beijing has called for a moratorium on new IOUs and has sent 49 investigative squads to the provinces to look into the problem. National and provincial leaders say they will spend millions this year to buy crops.

Officials hope that these measures will contain the unrest in the countryside, where communication is poor and education levels are low. Even so, most analysts remain doubtful that the government can come up with the cash needed to alleviate the hardships of the peasants. The biggest danger is that displaced farmers will team up with disgruntled urban workers in future protests. If Beijing doesn't succeed in easing the peasants' burden, it risks seeing unrest that could deal its economic reform program a devastating blow.

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