Now that Mammon has replaced Mao, corruption is fuelling the rural inequality opened up by migration to the cities

The case of Lu Banglie, who was beaten up by a mob near Taishi in southern China – as reported in yesterday’s Guardian – is not unusual. There has been a rapidly growing number of conflicts between villagers and the authorities, often over the sale of agricultural land on the edge of a town or village to a developer. These conflicts are a graphic illustration of the tensions involved in China’s transformation. The essence of industrialisation is the shift from the countryside to the towns involving, in China’s case in particular, a huge migration to the urban centres. The cities and towns are growing apace and gobbling up the adjoining land in a ceaseless process of expansion.

In the early phase of Deng Xiaoping’s economic reforms the farmers were the main beneficiaries, but by the end of the 80s the rural communities began to lose out to the cities, a process that has accelerated in recent years and is the single biggest cause of the alarming growth in inequality. The sense of rural injustice and grievance, fuelled by widespread corruption, is reflected in the huge increase in protests reported last year compared with previous years.

Part of the problem faced by the peasants is that the legal status of the land they farm by right and custom is unclear. It is therefore open to municipal authorities to sell the land to developers for what are relatively huge sums, to the financial benefit of both local authorities and, all too frequently, local officials. There are countless examples of mayors and officials being accused of pocketing large amounts of money through such corrupt deals. A similar picture can be seen in the sale of state-owned enterprises, with former managers making off with state assets at bargain basement prices. This is one of the inherent dangers of privatisation in a state-owned economy in which the law remains the creature of political power. Russia is the classic example of this process going wrong and becoming hopelessly corrupt. China is nowhere near this, but the dangers are evident.

Nor can these matters be kept secret in the way they once were. Chinese websites are inundated with details of corrupt land deals and the identity of the beneficiaries: in the summer, a rumour spread like wildfire that the son of a former prime minister was involved in one such deal. The press is also increasingly carrying such stories. The once staid but now transformed China Daily carries frequent articles on corruption, often in copious detail and with a muckraking tone. There are two reasons for this change: first, the problem is now too serious and widespread to be kept under wraps; and second, the party leadership recognises that, if corruption is left to go unchallenged, it could begin to undermine the party’s legitimacy. That point has not arrived yet; the protests are invariably directed at corrupt local officials rather than national government, but nobody knows where the tipping point might be.

The dilemma facing the party is that those who have the greatest opportunity to engage in corruption are its own members. It is they who run the local authorities, the state-owned companies and the major public institutions. Once the perks of party membership were tempting but hardly overwhelming. But now party membership can offer – at least for some – the prospect of enormous riches if the member is prepared to take advantage of the increasingly blurred line between public and private wealth afforded by privatisation; in their new role as developer, officials make off with the state silver or perhaps take an illicit cut from a deal.

The ability of the party leadership to fight and contain such corruption is limited by the fact that it has become so endemic. Once the old Maoist shibboleths would have been enough to maintain moral virtue, but the new God is Mammon and holding the line and preventing the party becoming too corrupt has become a far more difficult, though not yet impossible, task.

The problem facing the peasants in Taishi – and replicated in numerous examples across China – is not only a local authority that is about to be enriched by selling off farmland, but also a group of village officials who would appear to have a big financial stake in the deal. According to yesterday’s report, among the gang who beat up Lu Banglie were uniformed police. In other words, local officials are using the police in nefarious and covert ways to try to intimidate local opposition to the deal. The growing rural opposition coincides with the first sprouts of democracy in China in the form of the newly elected village representatives, of whom Lu Banglie is one. Not surprisingly, this movement is deeply unpopular with the local-authority chiefs; it demonstrates the potential of the new village councils as representatives of the people in the face of corrupt local power.

Taishi is a microcosm of the convulsive changes and resulting conflicts taking place in China. The peasants may be fighting a rearguard action, but their protests have worried the national leadership and could yet persuade it to take a tougher line on corruption and inequality.