29 Nov, 2015

Xinhua Insight: China changes tactics in financial fight against poverty

Imtiaz Muqbil

BEIJING, Nov. 26 (Xinhua) — Zhang Xiangyin still remembers the day his daughter-in-law left home three years ago, leaving her 33-day-old son. She could no longer bear living entrenched in poverty in their mountain village.

Zhang, a 58-year-old farmer in Bijie City of southwest China’s Guizhou Province, knows exactly what poverty means. With two daughters, who got married and moved away and his son in the coastal Shenzhen City as a migrant worker, the baby boy was left to the elderly couple.

But two 11-month-old Simmental cows he bought with a 24,000-yuan (3,762 U.S. dollars) government loan this September are expected to change his fate.

“The cows will give birth soon and are likely to have four calves within three years, which would produce 40,000 yuan in revenue,” said Zhang.

After four years, Zhang expects between 20,000 to 30,000 yuan in net profits with newborn calves, which would lift him out of poverty.

In the past, Zhang was too poor to think of raising cows. A cow costs 12,000 yuan in the local market while Zhang’s annual income was just a tenth of that, relying on a tiny plot of corn and potato crops.

The three-year interest-free loan is a new tactic for the Qixingguan District, which is home to 230,000 people living below the poverty line of 2,300 yuan in annual income by 2010 price standards, or 15 percent of its total population.

Industrial development is key for poor people to get out of poverty and funding is the bottleneck, said Gong Xiaonong, Party secretary of the district.

“Even with government loans, some farmers are afraid they cannot pay them back if a natural disaster happens,” said Gong.

Gong visited several villages with researchers last year and concluded that the mortality rate of cows dying in natural disasters, including snowstorms and unavoidable accidents, was 4.7 percent.

The district government then decided to buy a 30 million yuan financial product from the local rural commercial bank with a return of 8 percent in three years, capable of compensating farmers who lost their cows in natural disasters.

“With government guarantees and support from veterinarians, I am confident I will bid farewell to poverty in three years,” said Zhang, whose latest dream is to support the schooling of his grandson who will turn 6 in 2018.

So far, 8,800 households have applied for the cow-breeding loans and more than 100 million yuan loans have been given to poverty-stricken farmers since the project was introduced in August.

The loans, ranging from 5,000 to 24,000 yuan, will also expand to other businesses, including potato and vegetable planting as well as chicken breeding.

The trial in Bijie epitomizes China’s grand poverty eradication campaign.

China has vowed to lift all of its people out of poverty by 2020, when its next Five-year Plan is completed. At the end of last year, China still had 70.17 million people in the countryside living below the poverty line.

By 2020, China will lift 50 million people out of poverty through support for industry, education, employment and health care, according to a statement issued after a meeting of the Political Bureau of the Communist Party of China Central Committee on Monday.

Dibao, a program guaranteeing subsistence, will cover the remaining 20 million poor people who are unfit to work, and they will receive financial aid to ensure they live above the poverty line.

Serious illness can be attributed to 40 percent of those impoverished, according to the government figure.

In Qixingguan District, the government allocated another 30 million yuan for people with major illnesses to borrow in advance and pay back when they were refunded by the insurance company.

“Helping families make economic progress in hard times takes new ideas. Innovation is not limited in technology but should expand to grassroots policy innovation that caters for people’s demands,” said Gong.

CROWDFUNDING EXPERIMENT

Crowdfunding, a novel practice for startup companies to raise money from a large number of people, has been used as a new approach to tackle poverty in China.

Like many of his peers, Ma Gang, an elderly farmer in Yuangudui Village, Weiyuan County, northwest China’s Gansu Province, is living alone. His sons are working in cities as migrant workers. His grandson is studying at a college in the provincial capital city of Lanzhou and his wife has passed away.

At the age of 84, Ma is too weak to raise the five ewes the government gave him free of charge two years ago.

The village administration found a way out, equity-based crowdfunding.

Shennong Company, a lamb breeding and processing company, received Ma’s five lambs last February and promised to give him 1,000 yuan as a dividend every year, almost equivalent to the money he would earn if he raised the lambs by himself. So far 40 households have followed suit.

For the poorest people living on government subsistence, Gansu Shengyuan Investment Management Company, a local firm that has a brick manufacturing plant, a concrete mixing plant and a cattle breeding farm at the village, lent them 1,000 yuan as equity and gave them 300 yuan as a dividend every year.

Other villagers can also be shareholders by investing 500 to 6,000 yuan in the company. Some 40 percent of the 447 households at the village have joined the Shengyuan program.

So far more than 80 percent of the village households, including all the 99 households living below the poverty line, have become shareholders at various companies and enjoyed an average of 1,180 yuan in dividends since early 2014, said Jia Yuanping, Party secretary of the village.

The average annual income for Yuangudui villagers was 3,405 yuan in 2014, more than twice that of 2012.

“The most important thing is to change the farmers’ mindset and increase their awareness of a market economy,” said Zheng Jun, adding that the dividend they receive will boost entrepreneurship in the village.

Zheng said his company is not doing charity but seeking a sustainable growth with the participation of villagers, adding that the unpolluted environment is the best strategic resource they can get.

Shengyuan is investing more than 80 million yuan to build a mineral water plant at the village and is expected to produce an annual revenue of 60 million to 100 million yuan after its completion in May 2016.

“We will spare 10 percent of the plant’s shares to villagers and encourage more of them to become our investors in the future,” said Zheng.