Chronic corruption behind Dongguan village uprisings

Free-spending rural committees in Dongguan profited from dodgy land deals and loans, but their actions have resulted in huge debt problems

PUBLISHED : Saturday, 18 May, 2013, 12:00am
UPDATED : Saturday, 18 May, 2013, 5:28am

"The police bent my arms back while asking who my husband was and what he did for a living," a woman in her 60s recalls as she describes a scary scene that unfolded at her home last month. "If I had not been carrying my grandson on my back, they would have brought me to the police station."

More than 20 armed police swooped on dozens of senior citizens and took them to the police station in Shuikou village, Dongguan , after a demonstration against alleged corruption by village leaders broke out on April 22. The local governments became so paranoid after the protest that the village had a heavy police presence even a week after the incident, local villagers said.

While rural protests are becoming increasingly common on the mainland, the incident in Dongguan stood out. It was not triggered by land grabs or pollution, but by mounting local debt.

The Shuikou incident is just the tip of the iceberg. Social stability in the 32 counties of Dongguan - once a model example of the mainland's economic miracle - is on a knife-edge. Chronic corruption masked by the free-spending largesse of local governments bubbled to the surface as the economy nosedived.

Committee members borrowed money from a bank in the name of the village and split the money among themselves
A 64-year-old Shuikou Villager

More than 60 per cent of Dongguan's villages face financial deficits due to falling rental income and escalating expenses.

In many ways, Dongguan is an epitome of the local debt problem of counties and villages across the country. The problem has increasingly become a source for concern and could threaten to destabilise the world's second largest economy.

Last month, former finance minister Xiang Huaicheng said local government debt could be much higher than originally believed. Speaking at the Boao Forum for Asia in Hainan , Xiang said the total debt could be more than 20 trillion yuan (HK$25.27 trillion), almost double the figure given in a 2011 report by the National Audit Office.

The combined debt of the central government and the nation's provinces and cities may now be more than 30 trillion yuan, said Xiang, who was finance minister from 1998 to 2003.

Ironically, the burgeoning grass-root level democracy has added to the problem.

The villages, which stand at the lowest level of the nation's political structure, are allowed to elect members of a village administration committee, despite democracy being absent at any other level of the mainland's political system.

In order to win, candidates in local elections often make unrealistic promises and hand out money to gain the support of villagers. Corruption is rampant.

"Village committees on the mainland are entitled to autonomy, which is literally independent of the government of the province or county," said Lin Jiang, professor of public finance and taxation at Lingnan College, Sun Yat-sen University. "Checks and balances are absent in real terms as the peasants are not well educated. Corruption is common as the committee members can reap profits through different malpractices, such as selling land to private companies at a lower price and receiving kickbacks."

Lin says 60 per cent of villages in Dongguan are bankrupt, according to a survey he undertook last year. His findings are in line with an internal audit by the Dongguan government at the end of last year.

Villages have struggled to cover expenses in recent years as local spending, bonuses to villagers and interest on bank loans bite into declining rental income. Rents have fallen as Hong Kong-owned factories pulled out of Dongguan because of rising costs and declining business.

Much of the farmland that once sustained the villages is gone, making way for flats and factories in recent decades. Local economies have declined, as the economic fortunes of Dongguan's villages are closely tied to rental income.

Villagers have become used to receiving a regular bonus as committees rent out communally held land they manage.

The Shuikou protest was sparked by questions about the whereabouts of a 20 million yuan compensation payment promised by the Dongguan government to the village in return for construction of a road through the village. But unrest is an inevitable consequence of a series of disagreements between villagers and the village committee over the past 10 years.

One 64-year-old villager said previous village leaders had reaped large profits from selling 25 hectares of publicly owned land to private investors as industrial land in 2003. The peasants received just 100 yuan per month each as a dividend from the sale until 2009, when the payments stopped as the global economic downturn forced many Dongguan factories out of business.

The plot has recently been converted to residential use, with several 20-storey blocks of flats completed so far and several more under way. Two red banners hang from each building, offering flats at prices of between 4,700 yuan and 5,600 yuan per square metre. In return, the 2,000-odd peasants will receive bonuses of just 500 yuan each this year.

The construction is now spilling out beyond the site onto neighbouring farmland, threatening the main source of income for many villagers. Based on the track record of the village committee, they have little hope that bonuses will even begin to cover their losses.

A 68-year-old farmer who regularly makes more than 400 yuan from selling eggplants, cabbages, chillies and other harvests each month, has no idea when he will be evicted from his farmland. "I try not to think about it and remain positive every day."

But others feel more vulnerable. "My life is full of bitterness now. I can't sleep at night whenever I think of this injustice happening to my homeland," said the 64-year-old villager, tears welling in his eyes. He was forced to abandon his farmland in 1996.

"I preferred the life in the '80s when I could sell my farm products to the market and save money to build my own house," he said. After land reforms in 1984, he built a two-storey house with the 8,000 yuan savings generated from his own 0.8 mu (0.05 hectares) of farmland.

But joy and pride among villagers turned to shame after the village committee began to exploit the ignorance of villagers.

"Committee members borrowed money from a bank in the name of the village and split the money among themselves," he said about one incident.

A minute of a meeting shown by the retiree reveals that five committee members borrowed 2.56 million yuan from the Bank of China in May 2008. The committee claimed a committee member ran off with the money, leaving the village lumbered with repayments.

"Their lies were revealed as the villagers later discovered that the committee member who fled actually left one month before the loan was granted," he said.

In another Dongguan village, Zhangmutou, committee members pledged the village's common land as security for a loan.

"Most of the land in Zhangmutou lacks a certificate of ownership as it has been pledged to the banks," said Woo Wing-keung, a Hong Kong factory owner who has operated in Zhangmutou for more than 10 years. "Once the village fails to repay the loan, banks will seize ownership of the land and the private investor [who developed the site] will get burnt."

Villagers can tolerate corruption as long as they can live a life without starving, said Xiao Gongjun, a popular blogger in Dongguan who berates the local government on Weibo. He said Zhangmutou was heavily indebted, with 1.6 billion yuan owed to banks last year.

"They feel more and more insecure now as the economic downturn has made their lives harder," he said. "Some of them will rise up and try to petition, but most of them will do so in vain."

Local governments are now closely monitoring unrest in the villages and suppress it by any means.

Internet surveillance, undercover police and phone-tapping are common tools to root out potential protests. When a Post reporter tried to communicate with a person who uploaded a photo onto the internet of police storming Shuikou village, the internet signal of the reporter's mobile phone was immediately disrupted.

"The fundamental problem for Dongguan peasants is that they are losing their land while they have to rely on village committees for supervision, if there is any," Xiao said. "They are easily intimidated and vulnerable to any revenge taken on them, as it is a closed community."



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