1. Overview of China’s Agricultural Development and Policies
Jikun Huang, Huanguang Qiu, and Jun Yang,
Center for Chinese Agricultural Policy, CAS
Scott Rozelle, Stanford University

2. Outline of the Presentation
Overall Introduction
Driving Forces
Institutional Change
Marketization
Investment
Concerns and Challenges
Policy responses (incorporating new policies in 12th five-year plan, and 2011 No.1 policy )
Conclusions

3. 1. Performance of China’s agriculture in last 30 years

4. Average annual growth rate (%) of agricultural GDP
Average annual growth rate in agricultural GDP was about 4 times of population growth rates.

5. Shares of output values within agricultural sector, 1980-2005, (%)
Livestock and fishery have grown even faster…

6. Significant transformation of labor from agriculture to non-agriculture has also been occurring… Share of non-agri employment of rural labor, (source: based on CCAP’s surveys)

7. Sources of farmers’ income (%)

8. 2. Major driving forces Institutional reform Market liberalization
-Domestic marketzation
-Integration into international market
Investment into agricultural sector
Irrigation
Technology
Other

9. Total Factor Productivity for rice, wheat and maize in China, 1979-95
Institutional change (HRS) was major source of TFP growth in
Source: Jin et al., 2002, AJAE

10. Integration in China’s Markets (percent of market pairs that have integrated price series)
Corn 46 93
100
Soybean 56 95 98
When using statistical tests (on more than 800 pairs of markets), almost all markets move together in an integrated way, up from less than ½ in the early 1990s (when markets were NOT integrated)

11. Nominal protection rates (%) in China, 1980-2005
… by the 2000s, the prices of most of China’s commodities were nearly equal to the prices of the same commodities on world markets … this means that China is VERY OPEN … these numbers are more close to those in Australia and New Zealand than Japan, Korea or Europe

12. Investment in Agriculture Expansion of irrigated land in China
Million ha
Nearly 50% of cultivated land

13. Agricultural research investment intensity (%) in China
Government fiscal investment in agricultural research (billion yuan in 2005 price)
Agricultural research investment intensity (%) in China
Since 2000, the rise in research investment has been higher in China than any other country in the world …

14. Agricultural biotech research investment
2003: 1.65 billion yuan = US$ 200 million or US$ 950 million in PPP
(million yuan
in 2003 price)
New GMO program:
26 billion yuan (US$3.8 billion) in
Equal or greater than US public support for plant biotech!!
Huang et al., Science, 29 April 2005:

15. Type of PUBLIC GOODS projects
Around 2/3rds of public goods investments into 5 types of projects

16. Total Factor Productivity for rice, wheat and maize in China, 1979-94
After middle 1980s, technology
has been major factor affecting
productivity growth

17. 3. Concerns and challenges
Farm income
Agricultural economy
Demand: Food, feed and fibre
Population and income
Biofuels (global)
Supply:
Land
Water
Small farm
Environment
Trade and price
Rural economy

18. Urban income / rural income ratio 1978-2009

19. Driving forces of demand for agri/food
Population growth (++  )
impact has been weakening…
Urbanization (+  -/+)
negative impact for food grain and positive for others
Income growth (++  -/+)
impact has been strong but will be weakening…
New driving forces: biofuels
Weakening demand for food grain Rising demand for meat (feed) and other high value products

20. Cultivated land (000 ha),

21. Groundwater Levels are Falling, but varies across Northern China
Change in Average Water Level
Increased: %
No Change: %
Decreased: %

22. Small farming: Challenges for labor productivity, modernizing agriculture and food safety Average farm size (ha/farm)
Opportunity: Rising rental markets for cultivated land
Source: NSBC

23. Fertilizer use intensity (kg/ha)
4th highest in the world: Japan  Korea  Holland  China

24. Trade and global food market
Trade liberalization and Doha Round
Low tariffs
SPS and other non tariff barriers
Special products for the strategic commodities
Instability and unreliable global food market
In 2002

25. Agricultural export and import (billion US$) 1983-2009
China has shifted from a net food exporter to importer since 2004

26. 4. Policy responses and China’s ag/rural development plans and policies
Institutional change
Marketing
Investment
Technology
Others

27. Policy responses: enhance land tenure and facilitate rental market
Rapidly increasing over time
More than 40% in developed provinces (e.g., Zhejiang)

28. Shares of villages with FPCs
Policy responses: Promote development of cooperatives (farmer organizations called: farmers professional economic cooperatives—FPCs) %
Shares of villages with FPCs
Sources: CCAP surveys

29. Agricultural research investment intensity (%) in China
Government fiscal investment in agricultural research (billion yuan in 2005 price)
Agricultural research investment intensity (%) in China
Since 2000, the rise in research investment has been higher in China than most countries in the world …

30. Tax Reduction Program Completed
Percent of Value of Output
Completely eliminated taxes
Farmers now pay no taxes or fees
8.1%

31. Agricultural subsidies (100 million yuan)
Subsidies and supports have been rising significantly, but
most of them are decoupled (that is, they have little affect on
producer decisions / little or no distortions to China’s markets)
3.1% of agricultural GDP in 2008

32. Highlights of 12th five year plan(2011-2015) regarding rural and agricultural development
Food security and food safety
Increase farmers’ income, reduce urban-rural income gap
Increase domestic consumption, and reducing imbalance of international trade
Facilitate rural factor market development (labor, land and rural financial market)
Increase investment in agriculture and rural infrastructure, and increase farmers’ capacity to cope with extreme weather
Reducing rural and agricultural pollution
Increase rural social safety net level

33. Highlights of 2011 No.1 Central Policy
Major topic of No.1 central policy “Expediting water conservancy reform and development ”
Double investment in irrigation system in the next 10 years
Increase effective irrigated agricultural land area from 58 million ha to 60.7 million ha in the next 5 years

34. Trade and global food market
5. Concluding remarks -Success in the past but still a list of concerns
Demand:
Rising demand for high value products (e.g. meat)
Supply:
Land
Water
Small farm
Environment
Trade and global food market
NTBs (e.g., SPS)
Instability of global markets

35. Demand: Biofuels – cautious strategy
Concluding remarks: policy responses National food security – primary goal of policy
Demand: Biofuels – cautious strategy
Supply-side:
Institutional changes:
Enhance land use rights
Promote cultivated land rental market
Develop farmer cooperatives
Continue to promote labor market development
Invest in agriculture
Infrastructure
Technology

36. Concluding remarks: Trade
China’s market has been increasingly integrating into global markets.
While the export of labor-intensive products will rise, the import of land-intensive products will also significantly rise:
China in 2010 imports 55 million tons of soybean and is expected to import more in the future
China has turned from an exporter of maize to an importer in 2010, and is expected to be the largest importer of maize in the future
China will become even more important in both imports and exports in the world markets

37. Potential impacts and response to the latest winter drought
Facts:
42 percent (about 7 million ha) of winter wheat area are severely affected by the long drought
There were some snows on this February, but still far from enough.
Potential impacts:
drop in wheat production?
Impacts on international food price?
Increase food price in China?
Policy responses:
Allocated RMB12.9 billion to boost grain output and alleviate drought
1,000 wells are being drilled, with the involvement of 5,000 technical staffs and 500 drilling machines