THE crowd gathered quickly. First one man spoke up, then another, then another. They talked with remarkable candour considering the presence of an outsider. The mood was ugly and bitter. They were angry. As complaint after complaint tumbled out, the sense of outrage was overpowering. If Deng Xiaoping, Jiang Zemin, Li Peng, Zhu Rongji and the rest of the Chinese hierarchy want to know what is going wrong with China's economic miracle they should drop in on this Pudong building site on the outskirts of Shanghai. Scores of peasants toil to earn a living far from their villages, driven from home by poverty and the rampant corruption of local officials. Some were barefoot; almost all were sleeping rough in ragged clothes. The message was clear - their patience was wearing thin. ''Of course, we hate the leaders,'' said Mr Wan, from a group in Anhui province. ''Only a few village leaders are good. But it is not one leader who exploits us, it is the whole class of leaders. That's the problem. It is systematic. ''It is useless to demonstrate but if anyone starts the demonstration we will join them. I will support anything that can improve the living conditions of peasants.'' Another said if things went on as they were there would be riots in the villages. ''China has so many peasants,'' he said. ''If they can't support themselves and rush to the cities what will the result be?'' As the men talked, a grim picture of life in rural China emerged; desperate people being driven to suicide, overtaxed, beaten, imprisoned and fined. Some of the men shook their fists in rage as they recounted official misdeed after misdeed. There are taxes for construction, taxes for the police, taxes for school, taxes for broadcasting, taxes for television. They said there were taxes, levies and fees for everything. And it's getting worse. When they found they were talking to someone from Hongkong, one said: ''It is our internal business. Although what I have told you are the facts I don't want you to write anything to make our country have a bad reputation. We are all Chinese. We all wantChina to be stable.'' That stability is a major cause for concern in Beijing. Trouble flared in Sichuan and Henan provinces recently and senior leader Mr Deng has warned unless action is taken to solve the problems in the countryside, the country's ''economic and social situation would be severely affected''. One Western diplomat in Beijing said: ''I think this is just the tip of the iceberg. I'm sure there are a lot more incidents just like this which go unreported.'' Mainland sources say there have been more than 170 anti-government disturbances in the countryside since late last year. Unrest in the countryside, where 80 per cent of China's 1.17 billion people live, is one of the Communist Party's worst nightmares. Last week the government banned local officials from levying arbitrary taxes and fees on farmers but similar attempts to clamp down on extortion in the past have been largely ignored. Talking to the men on the Pudong building site, they clearly have a long way to go. Liu Hanhe (not his real name) from Anhui province gave a graphic account of the life of exploitation that drove him to Shanghai. He remembered one particularly harrowing story. His neighbour, Chen Junjing, hung himself in November because he could not pay a 100 yuan (HK$135) levy. Despite their anger, neither he nor Chen's family complained. ''Will the government listen to you? Of course not,'' he growled. ''It's just like a dog dying. If you don't have money, you deserve to have a bad life, you deserve to be beaten up. No villager will say a single word to the government.'' From Anhui's Yingsheng county, Huanggang district, he said Chen was not the only one to commit suicide last year. Two more villagers in the same county killed themselves. For more than 50 days late last year and early this year, peasants from another Anhui county organised a march to appeal to the authorities for help against corrupt officials. Mr Liu said all the government cared about was whether you had enough money to pay the levies. ''If you cannot settle the levies, the government will take your belongings at home,'' he said. ''If these are not enough, they will beat you up until you pay the money. If you still cannot pay the money they will put you in jail. ''Even when you are in jail, you need to pay five yuan to the government to cover your expenses, the government will not take responsibility for you even though you are in prison. Y OUR family has to find ways to resolve the problem. If not, the government will beat you up until your family settles the problem. ''That's why so many men and women from the inland cities go to coastal cities. Some get involved in illegal activities. I heard that many farm families from Hunan province were rented to criminal organisations in Shenzhen. ''The criminal organisations will ask the girls, normally only three to seven years old, to beg for money. If they don't do that, they will beat them.'' Mr Liu went to Shanghai in February. He said he could earn 2,000 to 3,000 yuan a year. He plans to take the money back to his family at Chinese New Year. ''It's just enough to keep my family,'' he said, adding that 80 per cent of the 3,000 people from the district had left the village, including elderly people and young people. Some of them were as young as 15. Some become building workers, some become beggars, some pick up rubbish and resell it. ''We heard that the central government had asked the local government to reduce the levies,'' he said. ''But the local government does not reduce the levies and intends to increase them. ''Of course, we feel the situation is hopeless. If not, we would not leave our home.'' He said it was widely known the government took the farmers' money for its own use. ''You have to send gifts to the government if you want to get permission for anything - even a small fish pond,'' Mr Liu said. The way local administrators and party officials flaunt their wealth is another source of anger. ''The local officials always use our money to buy lavish meals,'' he said. ''The cost of one of their meals would cover our meals for the whole year.'' For example, a local official might spend 1,000 yuan on an elaborate meal - enough money to feed a family for a year. Mr Liu said nobody liked to farm because farmers could not make enough money to cover their overheads. Countless thousands of peasants from many poor rural provinces have moved to cities such as Shanghai and Guangzhou in search of work to earn enough money to support their families back home. Mr Liu, 49, lived with his mother, four children and his wife. He has two hectares of farmland. Each hectare can produce 375 kilograms of wheat each year. After processing, each hectare makes 250 kg of flour. The quantity is not enough for their own use. So they don't have any extra flour to sell at market. On top of that they have to pay a series of taxes and levies - 60 yuan for construction fees, school fees, road fees, 40 yuan for fertilisers and 15 yuan for an official's salary. The agricultural policy moved away from an ''iron rice bowl'' system to the contractual system in 1984, when the local government distributed land to the farmers. After speaking to people like Mr Liu one is left with an overwhelming feeling of helplessness. They know they are badly treated, but they take it. They are so scared of the government they dare not say no. If they do, they know they will be beaten. Local governments sometimes do not pay cash for the grain they buy from the peasants. In the past few years, peasants have been paid in ''white slips'' or IOUs which can be redeemed for cash later. Lately they have green slips as well. These are IOUs post offices give out to peasants who receive money orders. Peasants working in cities use these green slips to send money back to their families, but the recipients have to wait months to cash in the slips. Wang Dejun, 30, a Hubei peasant from Qichun county now working on another Shanghai building site, said he sent money back to his wife last month. His wife could not get the money immediately because the post office told her the cash had arrived but they did not have any funds to give to her. ''It is very common in the whole of China,'' he said. ''Some peasants get their money in a few days, some in a few months. It's different, depending on your luck. ''Nobody likes to sell the products to the government because you can't get the money fromthem.'' Mr Wang's family has 1.2 hectares of land which produces 500 kg of rice. He also produces sugar cane. In total, he could earn 600 yuan a year but has to pay 150 yuan in various taxes and 400 yuan for fertilisers. ''Many new levies have come up,'' he said. ''For example, additional school fees - everybody pays eight yuan. Broadcasting fees - everybody pays 1.5 yuan, television fees - seven yuan. Of course, we don't have enough money. But we have no way to find more.'' He said local officials had a much better life than most of the peasants: ''They get 1,000 to 2,000 yuan a year as their salary. They also have the best farmlands. They can produce fine products.'' Peasants in the Shanghai region also face problems. They say they are not properly compensated when their land is taken away for development; they also do not understand the value of their land. Xu Yangde, 50, a grain farmer in Jidong village, Shanghai county, lives with his parents, his wife, his son, his daughter-in-law and his grandson. ''If you ask me if I have any complaint I would like to urge the village leaders to be fairer,'' he said. ''All the leaders only improve the infrastructure - for example road construction - near their homes. Our district does not have any leaders so our roads will never be built. ''In our country, nobody dares to ask what the leaders are doing. It happens in every organisation - factories, companies and government authorities. Who will dare to argue with the government? If you fight with the government, you just ask for trouble for yourself.'' Lu Gouyun, from the same county as Mr Liu but from a different village, told how a secondary school complained to the Anhui party secretary, Lu Rongjing, last year about the amount of levies being imposed in villages. Later the provincial government sent a team of investigators there which was received by the village leaders. ''Of course, the village leaders did not reveal the true story,'' Mr Lu said, adding that many had contacts in the county, city and provincial governments. ''Everything is covered up,'' he said. This month it was revealed riots and unrest had rocked several Chinese provinces. In Sichuan thousands of angry peasants rioted in Renshou county. Provincial officials confirmed the trouble lasted several days, with peasants beating officials, burning vehicles and holding a police officer hostage for hours. The worst clashes were on June 3 and June 6, when more than 10,000 people besieged government offices and threw rocks at paramilitary troops. The problems began last year when the government decided to build Highway 213 through Renshou county, which is about 80 kilometres south of the provincial county capital, Chengdu, and asked residents to pay for the construction. It is claimed some officials used the opportunity to extort money from the peasants, who first took to the streets in January. Calm was restored after a visit by senior officials put an end to the graft. Sichuan officials said an alleged troublemaker, Xiang Wenqing, stirred up trouble which sparked this month's riots. Xiang and seven others are under arrest. In other incidents, villages along the Yellow River clashed over rival land claims, forcing the authorities to rush in paramilitary troops. In Henan province, farmers armed with clubs beat up officials from a rival village. In another dispute, farmers near Luoyang set up roadblocks for nine hours and stopped vehicles to demand money to buy guns. At least five other disputes involving public land along the Yellow River have been reported in Henan. There are many other trouble spots. In Jiangsu, farmers from the north of the province feel they have a raw deal compared with their southern neighbours. In Fujian, dwindling farmland and shrinking funds for agriculture are causing a surplus of labour in some areas. Inland areas are becoming increasingly impoverished, sparking mass illegal immigration to the United States. Doubts are growing about the central government's ability to control provincial and county officials. ''Regional economies have evolved into warlord economies,'' said one economist. ''The central government is losing its total grip on the economy.'' Last week China unveiled a five billion yuan rural loan package. The loans will boost growth of rural enterprises in central and western China. The China Daily said another 100 million yuan had been earmarked for the development of small cities and towns in the countryside - a move aimed at appeasing peasants who feel the wave of urban affluence has passed them by. Farmers' incomes averaged only 787 yuan last year, compared with an average annual urban wage of about 1,800 yuan. The latest moves involve construction of 100 small cities and towns to serve as magnets for economic activity and improve chances of prosperity. ''These moves are aimed at helping more and more Chinese farmers adapt to the country's 14-year-old market-style reform and open-up policies,'' the newspaper said. ''They are also designed to maintain a stable countryside.'' The government wants to encourage rural people to stay where they are rather than follow the millions of farmers who have already left in search of more lucrative jobs in the big cities. ''Government officials see the construction of more small cities and towns as important to increase farmers' incomes at a time when a growing number of farmers are losing enthusiasm for planting rice, wheat and corn,'' the newspaper said. But while Beijing struggles to find the answers to this pressing problem, a letter in the official Legal Daily appeared to accurately sum up the peasants' plight. ''To extort the money farmers earn with their own sweat and blood will not only add to the problems of agriculture as we develop a socialist market economy but will also sprinkle salt on the farmers' wounds,'' it said. The last word belongs to Mr Liu, who said: ''Our life is getting tougher. We are certainly worse off compared with life before the reform.''