China is to increase compensation for millions of farmers relocated to make way for dams and reservoirs, in a bid to prevent rural unrest. The funding package is part of a new regulation that stipulates minimum levels of compensation and an annual subsidy for those displaced by water projects.

Yao woman hauls dirt from farm

The Chinese government said Sunday it would raise more than $1.6 billion a year to subsidize 22 million people, mainly peasant farmers, forced off their land by the country's numerous water projects.

The government will make annual payments of $75 each for the next 20 years to those displaced.

The money will be transferred directly into the bank accounts of those affected in a bid to prevent corrupt officials from embezzling the funds, a common problem in China's land acquisitions.

City University in Hong Kong Political Science Professor Joseph Cheng says direct payments are a step towards fair compensation, but may not reduce corruption.

"It is possible that corrupt local officials will behave like bullies and they will try to squeeze the money from the peasant families concerned, imposing all kinds of levies, charges, charging money for various processes, procedures and so on," he said. "So, this can remain a serious problem as long as you have very corrupt local officials."

The new resettlement regulation promises farmers displaced by water projects a minimum compensation of 16 times the average annual output value of their land.

The new rules also require local governments to pay farmers directly and in full for personal assets such as facilities on confiscated land, and to stop forcing standardized housing on relocated families.

Discontent over inadequate compensation for forced land seizures has led to confrontations between local officials and farmers.

Announcing the package, China's State Development and Reform Commission said a great number of those relocated still live in poverty, with negative consequences for local economic development and social stability.

The Chinese government technically owns all land in the country and issues long-term leases to farmers. Experts say compensation disputes would largely be eliminated if Beijing granted farmers full ownership of their land.

Li Ping is a lawyer based in Beijing for Seattle's Rural Development Institute. He says the government is reluctant to give up ownership of the land because of the enormous profits involved.

"This will create a kind of mechanism for local government to buy the land low through the taking process and sell the land high to the highest bidder," he said. "Through this way the government can just pocket a lot of money, especially the local government."

The new regulation will take effect in September and the Chinese government says it intends to raise money for the compensation package by increasing electricity charges.