The net income of Chinese farmers is expected to grow by 5 percent this year, the greatest increase since 1996, said Vice-Minister of Agriculture Fan Xiaojian.

The figure predicted means a great deal to China, where 60 percent of the population is rural. That's about 800 million people.

In this year's first quarter, the average income of each farmer was 834 yuan (US$101), climbing 9.2 percent from the same period last year, according to ministry statistics.

"The increase in farmers' income was at the same pace with that of urban residents in the first three months, which is very rare," said Fan.

The hike was part the result of higher grain prices since last October, but mainly the direct effect of a policy of support adopted earlier this year.

Major incentive policies, including a lower agriculture tax and direct subsidies to grain growers, provided aid for farmers who use fine grain strains and bottom purchasing prices for staple grain products.

"It was a profound turning point when the government gave subsidies directly to us rather than collecting money," said Jiang Wenliang, a farmer in north China's Hebei Province.

Jiang, who lives in the Nanyu Village of Yanshan County, said every farmer in his village got 8.2 yuan (US$1) per mu, or 123 yuan (US$15) per hectare in direct subsidies by June.

"Although the money is limited, it marks a new beginning in the country's agriculture policy," said Jiang. "In the past, we needed to pay money to the government for grain planting, but now the government helps us if we grow grains."

However, for Sun Jiqing, a farmer in east China's Shandong Province, the slashing of agricultural taxes is more helpful than direct subsidies.

"I have gotten 15 yuan (US$1.8) in subsidies for every mu (US$27 per hectare), but the money can only buy half a bag of chemical fertilizers," said Sun.

"While the tax reduction is very significant, in past years, I needed to pay 80 yuan (US$9.7) of agriculture taxes per mu (US$145.5 per hectare). This year I only paid half of that. It saved me a lot of money," said Sun.

He said he heard that his agriculture taxes will be waived next year.

"It's heartening news. The burden on grain growers was dramatically lightened so that we could save more money than before."

According by the Ministry of Agriculture statistics, the country had allocated more than 11 billion yuan (US$1.3 billion) in direct subsidies to farmers by June 15.

And the country has reduced and remitted agricultural taxes by more than 23 billion yuan (US$2.8 billion).

Sheng Huaren, vice-chairman of the Standing Committee of the 10th National People's Congress, said increasing farmers' incomes is difficult but a key to solving problems in the country's agriculture as well as improving livelihoods in the countryside.

Sheng said farmers may regain their enthusiasm for grain production only when they see real benefits from planting.

China's economic reform began in the countryside in 1978 and did bring tangible benefits to farmers. Since 1997, however, farmers have been facing great difficulty in increasing the money in their pockets.

From 1997 to 2003, the annual growth rate of rural per capita net income was less than 5 percent, with the lowest only 2.1 percent and highest 4.8 percent. That's about half the urban average.

As a result, the gap between urban and rural income has been enlarging over the years.

In 1997, rural per capita net annual income was 2,090 yuan (US$253) while urban per-capita disposable income was 5,160 yuan (US$624), leading to a ratio of 1 to 2.47.

Last year, the gap enlarged to 1 to 3.24, with rural per capita annual income standing at 2,622 yuan (US$317) and urban per capita income at 8,500 yuan (US$1,028).

Due to the low returns, farmers became less active in growing grain crops and the country's grain output plummeted to the lowest point last year since 1981.

Fan Xiaojian said although the policies adopted this year proved helpful to resume grain planting, many farmers are concerned about whether these policies will last.

"We need to set up a long-term mechanism to support grain production and increase farmers' incomes," said Fan. "The comparative return of grain planting is very low, so the country needs to fix its supporting policies even if the grain output rejuvenates."

(China Daily July 5, 2004)