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    This Year, Remote Lüeyang Beat Poverty. Now Comes the Hard Part.

    As China’s poverty campaign nears its deadline, rural Chinese wonder whether small-scale factories can keep them out of destitution in the years beyond.

    This is part two in a series on the aftermath of China’s now-completed war on “extreme poverty.” View the entire series here.

    SHAANXI, Northwest China — In 2017, after Hou Lihong’s son started a paid internship, the extra income was reason enough for the government to declare her family lifted out of poverty. 

    They had been among some 58,500 people whose livelihoods their hometown, Lüeyang County, needed to improve ahead of 2021 when, according to a promise by President Xi Jinping, China should be rid of absolute poverty. Local officials were more than happy to scratch them off their long list.

    But Hou isn’t so sure her family is out of the woods just yet.

    The deck seems stacked against Lüeyang locals improving their fortunes. The county’s rugged terrain and remote location make it an unlikely place for development. It straddles craggy mountains in a seismic zone, and sits on the Jialing River, a tributary of the Yangtze that this summer flooded parts of the county seat. It is one of many places around China dealing with the decline or departure of once-prosperous state-run industries.

    One way the local government has attempted to lift people out of poverty has been by moving families like Hou’s out of areas deemed unfit for development, such as mountaintop villages, and resettling them in newly built townships. There, they can be employed in small-scale community factories. Hou, 48, spends her days piecing together earphones.

    But Hou complains she works long hours for little pay. Her husband, meanwhile, is in poor health and cannot do too much physical labor, and their son, having graduated and moved out, is no longer contributing income. But Hou is still on the hook to finance her son’s eventual wedding, an especially costly affair in rural Shaanxi province. All in all, it still feels like poverty.

    But to the government, Hou’s is a success story. Earlier this year, Lüeyang was among the last batch of counties in the province to announce it had eradicated absolute poverty, reducing the local rate of poverty — currently defined as an annual income of less than 4,000 yuan ($600) —  from 41% in 2014 to under 1%. It did so in part due to various kinds of direct money transfer programs for impoverished families and central government funding to facilitate local development. But the State Council, China’s Cabinet, said targeted assistance will be reduced from a “warlike” to a “normal” intensity from next year.

    As such, the local government will have to find more sustainable engines of development to make sure families don’t fall back into poverty, a hard task made even harder now that China’s economy isn’t growing as quickly as before. Lüeyang officials have pinned part of their hopes on community factories like Hou’s, also known as “poverty-alleviation workshops.” They are heavily subsidized, with free rent and cheap loans, water, and electricity, plus tax benefits and allowances for every member of an impoverished family they hire. In total, the county has invested over 30 million yuan in 10 community factories — one of which has since ceased operations. Four additional workshops have been built but have yet to open.

    “Why do we need to support community projects? It is because they can ... benefit the poor,” says Wang Ruijun, director of Lüeyang’s migration office who oversees the county’s community factory project. “For rural people, regardless of whether they are designated as an impoverished household, their greatest fear is unemployment and severe illness.” By September, the county’s workshops employed 376 people, of whom more than 100 came from formerly impoverished households.

    Community factories have been a popular poverty-alleviation tool countrywide. By mid-2019, about 30,000 such workshops had been built in central and western China, employing around 700,000 members of formerly impoverished households. They are mostly opened by businesspeople looking for cheap inland labor, or are built by the government itself and handed over to officials, according to Xing Chengju, a poverty sociologist at Northwest A&F University in Shaanxi. It’s been difficult for many of these operations to maintain a steady supply of orders and stay profitable, he says. Wang, too, says the workshops in Lüeyang face challenges, including a constant loss of workers, an inability to compete on the market, and insufficient funding from upper-level authorities.

    The factory where Hou works is owned by 40-year-old Wu Jinquan, a local businessman. His orders are stable, with most work coming from a friend’s firm in Guangdong province, in southern China. Still, it hasn’t been a smooth ride since opening the factory in May 2019. In the beginning, Wu and his wife had to fix many of his employee-made products because they failed quality standards. He now offers applicants a week of paid training. Shifts need to be flexible so they fit around the realities of rural life. During harvest time, many of his workers are too busy working their fields or helping out relatives. The strict time management methods familiar to him while being a migrant worker are of little help back home, Wu says. “This kind of family workshop is definitely not the place for that.” Staff turnover has been high.

    As her family’s main breadwinner, Hou tries to work as much as she can. She used to work in coastal cities but moved back because she needed to deal with some family issues, and also because she just wanted to be home after years away. The factory job is among the best-paying work around in her township, especially for women, but she complains it’s not very profitable. She is paid per item, and during her best month so far she worked over 20 days and earned just 1,200 yuan, a fraction of what she used to make working at the factory of domestic automaker BYD in Shenzhen, Guangdong province. “It’s just chump change,” says Hou. “Sitting there all the time, your waist hurts, and your back and arms — everything hurts.”

    At other workshops in Lüeyang, earning a stable living can be even harder. Some fill orders for factories whose exports have recently taken a hit due to the COVID-19 pandemic. Others depend on unstable government-directed subcontracting to other companies in and out of the region. A big source of such orders are companies in Haian, a canal city in eastern China’s Jiangsu province. The local government — which was paired with Lüeyang as part of a policy linking wealthy coastal locales with impoverished inland areas to bolster development — compels the companies to subcontract the Lüeyang workshops. Since the pairing in 2017, the Haian government has also donated millions of yuan in poverty reduction funding. Regularly, buses full of unemployed Lüeyang locals leave for Haian jobs that have been arranged for them.

    One community factory that relies mostly on the government is run by Ma Xiaoying. Now in her 50s, she comes from a family that until recently was designated as impoverished. Despite having barely set foot outside her village and having little business experience, two years ago she was pushed and prodded by local officials into owning and managing a workshop. The thinking was that Ma, who had long been the director of the local women’s federation, a state-affiliated organization, would be best-suited to run a factory employing mostly women. “The township officials talked with me many times, and I had no choice but to do it,” Ma tells Sixth Tone. She was ambitious at first, but quickly grew frustrated with the difficulties of running a rural factory. “I didn’t think I’d lose my own money,” she says.

    The stream of government-arranged orders has been unsteady, and the kinds of products Ma’s workshop makes can greatly differ. Now, her employees are putting together smartphone components. Last year, they were busy making plastic flowers for the traditional garb of China’s Qiang ethnic minority. That order turned into a bit of a nightmare for Ma. It was subcontracted twice, first from outside Lüeyang to another factory in the county seat, then to Ma. She fulfilled the order, but was never paid.

    Ma’s government connection means her factory isn’t at risk of bankruptcy, but the unpredictable work supply is frustrating to employees like Luo Ruihong, 34. Her days start at 6 a.m., when she gets up to prepare her two daughters for school. The rest of the day she spends hunched over a workbench soldering together electronics. She can earn up to 1,500 yuan a month, but only in the rare situation when there are enough orders. Luo worked in coastal cities for years as a migrant worker and would like to move back. But she came home in 2018 to care for her children, as well as her ailing parents and in-laws. (China’s strict regulations on internal migration mean the family cannot feasibly move, either.) With her husband still earning money as a migrant worker, she says she initially felt the factory’s low wages weren’t worth her while. But as more women in the village joined, she finally came on board. She dismisses her earnings as just “some pocket money” for her girls, but also admits the family is in debt.

    Fed up with the unsteady work, Luo in September decided she wanted to work for Wu, the township’s other factory boss, instead. Even though Luo, like most community factory workers, hadn’t signed a labor contract, this turned out to be harder than she thought. Ma pressured her not to leave, and Luo felt she couldn’t upset the apple cart too much in the close-knit village. “I tried for two days there, then the boss pulled me back,” she says. Wu cannot quite understand it. “I think this is selfish,” he says. “We are all part of the same economic community.” He offered to subcontract some of his orders to Ma, which she pridefully refused.

    Luo holds little hope the workshops will be able to provide her or her daughters with a good future. “There is not much money to be earned here,” she says. The surest way to escape poverty is still finding a job in a more developed province. In any given year, 40,000 or so of the county’s roughly 200,000 people are migrant workers, and Luo plans to rejoin their ranks once her youngest daughter is a bit older. “When my child is in third grade I also want to go outside (the county) to make money,” she says. “It’s not enough for a family to have just one breadwinner.”

    Commonly, members of rural couples like Luo and her husband initially both work outside their hometowns. But when the young or elderly need care, it is often the wives who move back to Lüeyang while the husbands keep their coastal jobs. It means the county’s working-age population skews heavily female. Xing, the professor, says women make up “if not 100%, at least 80%” of community factories’ workforces. The workshops are so gendered, they all work closely with the local women’s federation. At the same time, they are mostly male-owned. “In the early days, those venturing out (of their hometowns) were mostly men,” he says, adding they built up skills and connections they can now use to run workshops back home.

    Zhang Jun, director at Shaanxi Gender Development Solution, a women’s rights nongovernmental organization working in rural Shaanxi, tells Sixth Tone the current targeted poverty-alleviation efforts don’t sufficiently take gender into account. With poor households now counting on factory work to increase their incomes, he says, a mother in a rural family now has “more burdens” than before, compared with a father who just needs to work. “For many disadvantaged women, the problem they face is how to escape the trap (of poverty and family structures),” says Zhang. He suggests poverty alleviation efforts should include more policies aimed at helping women in particular.

    Lüeyang used to have more local job opportunities. For one, many villagers still do their own farming, but the total size of the county’s fields has decreased steadily over the years due to a government campaign to transform farmland along the upper reaches of the Yangtze River and its tributaries into forests. Fields are also farther away now that many villagers have been resettled into townships. But a greater loss has been the county’s slipping status as a regional economic hub. Zhang Cuncheng, a county publicity official who is not related to Zhang Jun, misses the good old days when the county seat’s train station welcomed tens of thousands of people every day arriving from all directions to do business and hawk cheap clothes. “It was once called the region’s little Hong Kong,” says Zhang Cuncheng.

    For a long time, Lüeyang’s economy relied on heavy industry. But as China began cracking down on polluting industries, much of the county’s quarries and mines were closed. Lüeyang’s flagship steel plant befell a similar fate in 2015, though it partially reopened later. Moreover, the local quarters of China Railway Xi’an Group moved to Hanzhong, a nearby city that urbanized more quickly and now administers Lüeyang. A legacy of socialism, the railway operator, a state-owned company, still ran its own school and hospital, which also moved away. The county’s GDP for 2015 shrank by 13.2%. The old complex, which also included accommodation for thousands of workers, now looks like a ghost town. Located across the river from the road into the county seat, it reminds every visitor of days past.

    The Lüeyang train station, formerly the most bustling stop in southern Shaanxi, now only sees three or four trains every day. And even this paltry number had to be secured with some lobbying. In 2018, when word got out that the sole train line servicing Lüeyang would no longer stop in the town, public panic about the county disconnecting from the outside world prompted the local government to openly petition against the move. “Currently we are in the critical period of poverty alleviation,” the open letter addressed to China Railway reads. “The railway is extremely important to increase the flow of Lüeyang’s passengers, logistics, and business. If it all is canceled, it will gravely affect the completion of the major political task of poverty alleviation.”

    Train connections have also dwindled in the area following a deadly earthquake in 2008 in neighboring Sichuan province that laid bare the area’s vulnerability to natural disasters. That year, 95% of buildings in Lüeyang’s county seat were damaged. Its location amid steep mountains has also meant the high-speed railroads that now connect much of China have bypassed the county.

    With Lüeyang’s local hub heyday now a distant memory, the government has pinned its hopes on developing tourism, producing higher-cost agricultural products, and attracting more businesspeople. Li Youdong is among the few such outsiders who has decided to invest in Lüeyang. Rising labor costs had already eaten into the profitability of his pet toy factory in eastern China’s Anhui province when COVID-19 dealt the final blow. He tells Sixth Tone he closed it this spring and moved most of his business into a community factory in Lüeyang that he had already opened a year earlier.

    “For anyone who does business, you can succeed as long as you have the support of the government,” says Li. With the first three years of rent waived, he can save some 200,000 yuan a year, he says. But like the other businesspeople the Lüeyang government has lured, Li has had to temper his expectations. In the giant two-story building, only the second floor is in use, because Li only managed to recruit 70 workers — less than half of what he had planned.

    When asked why this might be, Li says the locals lack motivation. Those he did manage to hire aren’t as productive as the workers he used to employ in Anhui, either. “It’s a kind of apathy. They have no pressure,” he says, echoing an often-heard stereotype that impoverished people owe their lot at least in part to laziness. To address the issues of Li’s workforce, the local women’s federation director decided to hold “thought work” meetings to “change their mindset.”

    The evidence on the ground has made it clear to officials in Lüeyang that the county’s status of having eradicated poverty is by no means secure. Reminders have come from up above, too. President Xi has urged local governments to persist in their alleviation efforts, and Premier Li Keqiang shocked the country in May when he reminded people there are still some 600 million fellow Chinese who, with monthly incomes of about 1,000 yuan or less, are precariously close to poverty.

    Walking on the downtown road that has recently been restored from the previous month’s flood, when heavy downpours submerged large swaths of China, Zhang Cuncheng, the publicity official, is lost in thought. His superiors tasked him with writing an article on the further economic development of Lüeyang after poverty alleviation campaigns end this year, and he seems short on ideas.

    Awaking from his reverie, he asks, “What do you think should be the next step for Lüeyang?”

    Editor: Kevin Schoenmakers; photo editor: Ding Yining.

    (Header image: Villagers wait for their children outside a school in Lüeyang County, Shaanxi province, Sept. 29, 2020. Wu Huiyuan/Sixth Tone)