By Aileen Wang and Ben Blanchard
SHENJIAYING, China (Reuters) - The bleak winter landscape of rural northern China is an unlikely home for some of the winners of the country's stubborn inflation problem -- farmers whose income is rising along with food prices.
On the tidy, dusty streets of Shenjiaying village, a two hour drive north of Beijing past the Great Wall, people like vegetable farmer Ma Shuting are reaping the rewards of an issue that has vexed the government right up to the top leadership.
"Inflation has been good to us, as the higher the prices are, the more we will earn," Ma, 49, told Reuters, sweating inside a fragrant greenhouse growing celery, chives and fennel.
His six greenhouses deliver 500 kg (1,100 lb) of vegetables every week to clients in Beijing, and he can barely keep up with demand -- so much so that he wants to double production this year and eventually buy his own delivery vehicles.
"Our customers say these are the best vegetables they have ever tasted," Ma said proudly.
The government has vowed repeatedly to tame inflation, a source of social unrest in the past and a major concern for the ruling Communist Party, which prizes stability above all else.
Though inflation eased in December to an annual pace of 4.6 percent, it is expected to rebound to its highest in more than two years this month, and economists warn that price pressure will continue to mount.
But there is a silver lining. The nature of Chinese inflation is that it has been driven almost exclusively by food costs, providing a boost to farming incomes, which have lagged gains in urban areas during the economy's decades-long boom.
Rural incomes rose 10.9 percent in 2010, outpacing the 7.8 percent increase in urban incomes. It was the first time in 27 years that those in China's countryside fared better than those in cities.
In a sign that this trend could be intensifying, surging demand for food in the lead-up to next week's Lunar New Year pushed wholesale vegetable prices up 12.6 percent last week alone, according to the Commerce Ministry.
It is a tricky balance for the government, which has declared that controlling inflation is a top priority this year but also wants to boost rural incomes.
For Ma, his vegetable farming venture has helped raise his family's income about 15 percent to about 70,000 yuan (6,670 pounds) last year, with the greenhouses generating average profit margins of 20 percent, he said.
"We are selling at quite a good price, and with Spring Festival coming prices will become better still," he added, referring to the New Year holiday.
Despite rising rural incomes in recent years the ruling Communist Party, which rose to power on the back of rural discontent, still has plenty to worry about in the countryside.
The gap with urban incomes remains stubbornly wide, the growing costs of school, college and healthcare remain beyond the reach of many families, and many villagers have been losing farmland without a social safety net to protect them in old age.
NOT ALL GOOD
Inflation has also affected the lives of farmers in far less positive ways.
Zhang Yizhi, another resident of Shenjiaying, benefits from the rising price of vegetables and other foodstuffs, but is less sure the overall impact has been good for her and the cows she raises to supplement her income.
"It's hard to say whether we should like inflation or not," said Zhang, taking a break from cutting fennel leaves.
"Of course, we feel happy when milk prices are rising, but the price of feed has gone up even faster, so it is even harder for us to make money," she said, adding she estimated she lost 30,000 yuan last year from feeding her cows.
The Farmers' Daily, the Agriculture Ministry's official newspaper, cautioned this week that farmers were not reaping the rewards many assumed they would from increases in food prices.
"We can see that the profit for producers, wholesalers and retailers is unevenly distributed," it wrote in a front-page commentary. "Generally speaking, farmers have to invest a lot of money and time, but the profit they get is comparatively low."
Farmers still don't make enough money from planting crops and the government should welcome a rise in food prices, said Xu Xianglin, an economist in the Central Party School, a training ground for senior bureaucrats.
"By growing wheat, a farmer can make about 30 yuan per day according to the current state purchase prices. But if a farmer goes to work on a construction site, he can make 50 yuan a day," Xu said.
MULTI-TASKING
Shenjiaying's Liu Guizhang is one such villager who no longer relies only on farming for his livelihood, working as a construction worker in the summer and in the greenhouses during the bitter and bone-dry winters.
Liu's family used to plant corn, but now rents his land for vegetable greenhouses for 3,500 yuan a year. He gets paid 90 yuan a day for construction work and 40 yuan a day for his efforts in the greenhouse.
"I think my current pay is better than before when I was only farming," said Liu, 60. "I can earn 20,000 yuan a year. My income was much lower when I only relied on growing corn."
His wife, Zhang Yuhua, is proud of her large, new house in the village, complete with a microwave, fridge, indoor bathroom and radiators.
"I've heard about this inflation thing and I know vegetable prices are going up. I'm making 1,000-2,000 yuan a month now, more than before but still not that much," Zhang said.
Even Ma, with his gung-ho attitude to business expansion, admits to some worries about inflation.
"Of course, it's going to affect my business," he said. "Transport costs and the price of oil are going up. Labour costs have slightly increased. It's affecting my business in these areas."
(Additional reporting by K.J. Kwon, and Zhou Xin in Beijing; Editing by Simon Rabinovitch and Robert Birsel)