04/04/2009 05:12 am ET Updated Dec 06, 2017

China Hopes Farmers Will Replace US Consumers And Provide Economic Boost

YANGQU, China -- With a raft of subsidies and thousands of new stores to spur spending, China is eyeing its poorest people -- farmers -- to kick-start the economy with a buying spree.

Trouble is, most Chinese farmers, already burdened with rising health care costs and school fees, don't have extra yuan to spend. In the past decade, their vast migration to factory boom towns sent new wealth back to families in the countryside. But with 20 million of those boom-era jobs gone in recent months and 5-6 million more expected to be on the chopping block, most in rural China find themselves slipping economically.

In other words, Beijing's new hope of depending on the country's 700 million rural residents to replace the sudden loss of spending by comparatively rich U.S. consumers is a risky proposition.

Per person income average in rural China is about $700 per year, less than one-third of that in the cities. Though rural earnings have increased dramatically in the past decade, most farmers are far from able to buy a houseful of appliances.

Yet the government is banking that $3 billion in aid for rural residents to buy televisions, refrigerators and air conditioners will help make up vastly slowed American and European demand for Chinese exports. It's just one part of the government's massive economic stimulus plan that is targeted at rural areas.

Guo Gaiying, a 42-year-old dairy farmer near Yangqu, makes slightly less than the average farmer in central China. She is in no position to spend on luxuries for her two-room, dirt-floor farmhouse. Three years ago, Guo broke her leg and had to have it set with steel pins. The pins were supposed to be taken out after the break healed. She cannot afford to see a doctor, let alone spend more than half the family's yearly income on a second surgery, so the pins remain.

Most of Guo's family income comes from three cows, 10 pigs and roughly 15 acres of corn. With a third of that income gone to school fees for two children and the rest spent on basic living expenses and animal feed, Guo laughs at the idea of buying a new electrical appliance. She washes the family's clothes by hand, has no running water and depends on a filthy open coal stove to warm the house and cook the meals. She does, like most every other Chinese farmer, have a television set -- the family's lone luxury.

Buying one appliance wouldn't change Guo's life.

"I don't dare take a bank loan," she said. But if she could, "I'd build a whole new house and save some of the money for my son's wedding."

When the National People's Congress convenes in Beijing this week, the personal finances of farmers like Guo will draw a spotlight as lawmakers discuss ways to prop up the slowed economy. Already, the country's top rulers have targeted farmers as a source of economic salvation through consumption. Along with the subsidies, the government says it will open 150,000 new stores in rural areas this year to encourage residents to buy appliances.

In a recent press conference, an official with the Chinese Ministry of Commerce said rural incomes are now on par with urban earnings of the late 1990s, when city dwellers went on an electrical-appliance spending binge. The subsidies and stores are aimed at igniting a similar splurge among farmers. Of course, prices have increased substantially since then with inflation, but the government is steadfastly optimistic.

"Purchases will not be limited by the government subsidy, and the actual consumption could be larger," said Liu Haiquan of the Commerce Ministry.

While many farmers are barely getting by, there is some evidence that the plan might work -- for some. Liu Jinlian, 42, and her husband, Zhao Jiqing, 44, are just the kind of farmers the government is targeting. Last year, after earning more than most farmers, thanks to some seasonal factory work, the couple was able to buy a new television to replace their broken set and watch the Beijing Olympics.

More importantly for Liu, who raised three children and hand-washed all the family's laundry, the couple bought a washing machine. The large white machine sits covered carefully by plastic in their bare kitchen. They bought it before the subsidies were introduced and would not have had the extra money to do it this year, because her husband's factory is closed.

"This was my 20-year-dream," Liu said, beaming at the machine.

Read more at Globalpost.