By: Gabrielle Harris, PlaNet Finance Executive Director

Cheng County is in southeastern Gansu. It has a population of 263,000, of which 219,000 are farmers. Around 70% of the farmers are in relative to extreme poverty, earning between RMB 645 – 825 (EUR 60-80) per annum. The country contends not only with poverty, but also with the devasting effects of the May 12th earthquake, which knocked down almost 11,000 houses and damaged more than 46,800 others as well as a lot of the basic infrastructure.

In mid-October 2008, PlaNet Finance China visited part of the Gansu earthquake zone 400km south of where its Tongwei project is located. The area is Cheng County, home to both protected forestry areas and mining belts. The bulk of the population is engaged in subsistence agriculture in 17 townships among 96 villages classified as “poverty villages) (贫困村, which designation means that each person has an average annual income of less than RMB 645). However, unlike nearby Tongwei, the county as a whole has not been recognized as a “poverty county”, which would afford it greater state assistance because of the disproportionate wealth generated by the tin and lead-mining concerns. What we discovered was that the poor farmers in this county are classifiable as “extreme poor” and in need of urgent help because the earthquake has aggravated their already precarious existences. There is a heavy reliance on shipping workers out of the area to earn money for the families who have stayed in these areas.
 

The situation of the farmers whose houses fell down in the earthquake was relatively clear: they were entitled to a total of RMB30,000, paid in installments as they moved through different stages of rebuilding; the first to get such compensation were the sick and elderly who had collapsed dwellings. When the earthquake first struck, the Agricultural Bank of China (ABC) stated that it would make interest-free loans available for 3-5 years, however, because there are no longer bank branches in these deep rural areas, there was no one to implement this plan. Later the state encouraged the rural credit cooperatives (RCCs) to offer RMB15,000 loans for three years to those whose houses had collapsed. Under this offering, the loan came interest-free for two years, with an annual interest rate of 8.64% starting in the third year, and with the Ministry of Finance subsidizing the remaining operating costs of loans. However, most farmers were unable to furnish any collateral as they no longer possessed a viable house, so there is a heavy dependence on personal guarantors from the few locally registered local companies, or from connections in the township administrations.
 

For those whose houses did not actually fall down, but which developed threatening cracks, or whose burned clay roof tiles all fell off the roof, there was a allowance of RMB3,000 in repairs and maintenance, and a monthly allocation of grain flour to the households – however, most of the repair work has only been reimbursed once the repairs were made, which inevitably means that many households are not doing the repairs at all as they do not possess such an amount of cash and may in fact actually be hoping for a strong aftershock to knock down their house so they can get a better level of benefits.
 

Vice County-director Ms. Wu Yong, who is in charge of poverty alleviation work in Cheng County, recommended that PlaNet Finance find a way to work with the local branch of the Poverty Alleviation Office (PAO), which was established only in 2002 and which tends to be resource-starved and has no way to get enough help to the 96 poverty villages of the county. The annual budget of the county government for their work is RMB 4 million. According to the county statistics, 18% of the total population is living in absolute poverty, and almost 70% of the farming population is living in relative poverty (this means they have an income of between RMB 645 and RMB 825 per annum).
 

Mr. Feng of PAO told us that now the new way for the state to work with the poor is to get them into vocational training and to encourage them to become good producers of both unprocessed commodities as well as encouraging the adding of local value through simple processing. Many turn to animal husbandry as a way to increase their incomes or, as we witnessed on a field visit, to be the only means of survival in some households. The state development agency of Canada together with the All-China Women’s Federation have also started a mulberry-growing venture in this part of Gansu, which is favoured with a mild climate compared to the rest of the province.
 

Because of the total disruption caused by the May 12th earthquake, most of the farmers lost a whole growing season. This has caused many of those who had moved into the relative poverty category to slip back into absolute poverty. Asked about other organizations that can bring help into these situations, the county government mentioned that the Agricultural Development Bank will sometimes help a producer finance and locate appropriate processing technologies; other boosts the economy can involve donations of saplings, and seeds, and the grain subsidies are also a welcome support, though flat land is hard to find in Cheng County, which counts just 6,670 hectares of arable land. The main crops in the area are wheat, beans, rape, peppers, the Chinese herbal medicines DuZhong (the bark of Eucommia), Dang Shen and Fang Feng, and , more recently, walnuts.
 

To date, the only outside help afforded to this area as a result of the earthquake has been the rescue and medical intervention of the Hong Kong Red Cross right after the tremblor.