Lack of Legal Status Limits Rural Cooperative Organizations

Farmers cooperatives' lack of legal status limits Chinese farmers' ability to use them to protect their rights and advance their economic interests, according to a March 8 Beijing News article. National authorities currently are considering legislative proposals that would grant legal status to such cooperatives. Official restrictions on the establishment of citizen organizations limit the development of an independent Chinese civil society. For more information, see section V(a) of the Commission's 2005 Annual Report, on The Development of Civil Society.

Many Chinese farmers have established voluntary cooperatives, in which they pool their resources and help protect their economic interests. China has about 140,000 such economic cooperatives, according to statistics cited in the article, but the director of the legal affairs office of the All-China Federation of Supply and Marketing Cooperatives says that only 10 percent of these cooperatives have "tight coordination" between members.

Farmers' cooperatives, however, have no status under national law, and operate in an unclear regulatory zone. Some have registered with the Ministry of Civil Affairs, some with the State Administration for Industry and Commerce, and others have not registered at all. Their unclear status creates problems for cooperatives, according to the article. For example, they cannot borrow money from institutional lenders or sign legally binding contracts. Their tax obligations are unclear.

The 2006 legislative calendar for the National People's Congress contains a proposal for a national law on rural farmers' cooperatives, the article reports. As currently drafted, the proposal would recognize cooperatives as a special form of corporation to be registered with county-level offices of the State Administration for Industry and Commerce, but with no minimum capital requirements and with a voting structure to be determined by the charters of individual cooperatives. This national proposal follows earlier provincial experiments with rural cooperatives. Zhejiang authorities issued the Zhejiang Province Regulations on Professional Farmers Cooperatives in 2004, and registered the first group of associations in 2005.

Central government leaders have highlighted their support for the establishment of farmers' cooperatives in policy documents issued each year since 2004, most recently in the December 31, 2005, Opinion on Promoting the Construction of a New Socialist Countryside. The article cites one NPC delegate as saying the central government is "cautious" regarding cooperatives, and the decision to support their creation follows the determination of central government officials that cooperatives are economic in nature, and will not interfere in political issues. Scholars have noted a rise in the number of rural organizations operating outside of Party and government controls, and have suggested that official support for farmers cooperatives may help alleviate rural problems without fundamentally challenging the Party's grip on power.