Beijing (AsiaNews/SCMP) – Chen Xiwen, deputy director of the Office of the Central Financial Work Leading Group, a central government think tank, admitted yesterday that rural areas in China are experiencing simmering turmoil and threaten the country's stability. To remedy the situation, he said, the central government is willing to listen to farmers' complaints and address their grievances such as unfair taxes and economic underdevelopment.

Mr Chen said the central government will take different steps to reduce tensions. A new policy will reserve 70 per cent of budget increases in education, health care and culture for rural areas.

"Rural areas are currently experiencing turmoil but given the size of China most farmers are relatively happy for higher grain exports and incomes. The financial burden on farmers has been somewhat reduced," Mr Chen noted.

He pointed out that last year farm incomes have followed better harvests. Higher agricultural output was made possible by better weather, better grain prices and the right agricultural policy. "If we continue the policy that supports farm income, farmers will have more incentives and they will feel better about the future."

According to him farm income increased on average by 300 yuan (€ 27, US$ 50) in 2004. The latest available data show that in 2001 annual farm income in the richer coastal regions was on average 3,266 yuan (about € 400, US$ 520). This was half of what it was in central regions but twice that of the western-most provinces of the county.

Farm incomes are however three to six times lower than those of urban factory workers.

Despite increased grain production China remains a net importer, 8,000,000 tonnes last year, and farm incomes are not expected to rise next year.

Taxes imposed by local government officials in violation of existing laws and regulations are another burden that farmers must bear. According to Chen the government intends to cut in half taxes on farmers and provide them with subsidies. This should mean that in 2005 farmers in 25 of the country's 31 provinces won't pay any taxes.

In the meantime, farmers are still protesting against the construction of the Pubugou dam which is supposed to control the flow of the Dashu River in Sichuan province.

The project has forced 10,000 people off their land but since November farmers have been protesting and blocking roads complaining that the compensation package is inadequate.

The central government has responded by firing local officials but has not increased compensation money.

Li Guifu, one of the first farmers to lose his property, said that he now "owned nothing. My family will survive only if I work in the coal mines."