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ProspectsofChina’sAgriculturalDevelo

栏目:财经    发布时间:2018-03-06 12:34
ProspectsofChina’sAgriculturalDevelo

Wei Houkaiand Han Lei

Institute of Rural Development, Chinese Academy of Social Sciences(CASS), Beijing, China

Abstract:Remarkable achievements have been made in China’s agricultural development since the late 1970s. Nevertheless, deep-rooted problems are arisingfrom inefficient farming practices. From mid- and long-term perspectives, migration of China’s agricultural labor will slow and large-scale operation of farmland will accelerate. Although grain supply and demand have maintained a tight balance, new potentials still exist in improving grain production. Under the pressures of resource and environmental constraints, advancing the green and efficient transition of agriculture will become a new trend in China’s agricultural development. In this context, the treatment of agricultural pollution, supply-side structural reform and innovation ofagricultural subsidy policy areof strategic significance to the transition and upgrade of China’s agriculture.

Keywords:agricultural development, mid- and long-term prospects, supply-side structural reforms, transition and upgrade

JEL: Q10, Q16, Q17

Since the early 1980s, China has introduced a host of policies to develop agriculture and improve the structure of the agricultural economy. With 7.6% of the world’s arable land, China has provided food to 19.2% of the world’s population, a major contribution to global food security and agricultural development. Nevertheless, China’s agriculture is confronted with unprecedented challenges arising from a changing economic environment and inefficientfarming practices. From a mid- and long-term perspective, by supply-side structural reform, developing a modern agriculture and creating a competitiveness-oriented policy support system, China is entirely capable of “keeping the rice bowls of itspeople in their own hands”, ensuring national food security and increasing agricultural efficiency, international competitiveness and sustainability.

1. Achievements of China’s Agricultural Development

Over the years, the Chinese government has attached great importance and enhanced financial support to agriculture. Between 2007 and 2014, national spending on agriculture, forestry and water affairs increased from 340.47 billion yuan to 1,417.383 billion yuan, up 22.6% onan annual average basis, higher than the annual average growth rate of national fiscal spending by 5.3 percentage points. Meanwhile, the share of agriculture, forestry and water affairs in national fiscal spending increased from 6.84% to 9.34%, up 2.5 percentage points. Under vigorous pro-agriculture fiscal spending and policy support, China’s agricultural development achieved remarkable progress.

1.1Food Security Further Enhanced

For a populous developing country with scarce arable land, grain has always been considered a fundamental strategic resource. With the start of market-based reform of the grain distribution system in 2004, China initially created a pro-agriculture policy system based on price support and dominated by direct subsidies. After2004, China successively implemented direct subsidy for grain producers, subsidy for the purchase of superior crop species, subsidy for the purchase of agricultural machinery and tools and general subsidy for the purchase of agricultural supplies. Total spending on agricultural subsidiesjumpedfrom 14.52 billion yuan in 2004 to 165.15 billion yuan in 2015, up 24.7% on an annual average basis (Cheng Guoqiang, 2013; Wei Houkai et al., 2016). At the same time, China implemented grain minimum purchase price policy and raised grain purchase price with considerations given to production cost, market supply and demand and efficiency.

Obviously, China’s policy shiftfrom “negative protection” to “positive protection” in tax imposition onagriculture increased return to agriculture, stabilizedexpectations and greatly enhanced the enthusiasm of farmers. Thanks to pro-agriculture policy, technology progress and favorable climate, China’s food production steadily increased. Between 2004 and 2015, China’s total sown area of farm crops increased by 11.734 million hectares, yield of grain grew by 152 million tons, and yield per unit area and per capita yield increased by 18.7% and 24.8% respectively, achieving the 12thconsecutive yearly increase in the total yield of grain (see Figure 1), which further enhanced China’s food security. In 2015, China’s per capita grain production reached 452.08 kilograms, which was above the international safety line of 400 kilograms for six conecutive years since 2010.

ProspectsofChina’sAgriculturalDevelo

1.2 Agricultural Production Continuously Developed

Before 2003, China’s agricultural growth was unstable with wild swings. In particular, between 1985 and 2003 agricultural growth was unstable and slow. During this period, the growth rate of value-added for China’s agriculture, forestry, livestock and fishery sectors fell in the range between 1.8% and 7.3%, averaging a mere 3.57%. However, since 2004 China’s agriculture has embarked upon a fast track of steady development owing to vigorous support by pro-agriculture policies, with the growth rate of value-added in agriculture, forestry, livestock and fishery in the range between 3.7% and 6.3%, averaging 4.65% (see Figure 2).

ProspectsofChina’sAgriculturalDevelo

Despite sluggish world economic growth and downward pressures from the overall domestic economy, China’s agricultural economy has maintained fairly stable and rapid growth with sufficient supply of major agricultural products. In 2015, China’s paddy rice, wheat and corn, the three major types of grain, sawrecord highsof production of 208.25 million tons, 130.19 million tons and 224.58 million tons respectively, ensuring a high level of domestic grain ration security. In the meantime, cotton and sugar production decreased somewhat yet the relationship between inventory and domestic demand-supply remained stable. Pork production decreased on a year-on-year basis, while beef, mutton, poultry and dairy production increased. Against the backdrop of sluggish domestic consumption, the supply and demand of major livestock and dairy products are generally relaxed. Over the years, aquatic products, vegetables and fruits have been internationally competitive products in China’s export. In 2015, the output of China’s aquatic products increased by 3.5% on a year-on-year basis, with export value ranking first among domestic agricultural products. The export value of vegetables and fruits grew by 6.2% and 11.5% respectively (Wei Houkai et al., 2016).

1.3Overall Agricultural Production Capabilities Significantly Enhanced

First, agricultural infrastructure further improved. The central government ramped up investments in agricultural infrastructure, allocating over 50% of central budgetary investments to agriculture, farmers and rural areasduring the 12thFive-Year Plan period (2011-2015) (NDRC, 2016). From 2004 to 2015, national fixed asset investmentsinagriculture, forestry, livestock and fishery (excluding investments from farmers themselves) grew from 64.51 billion yuan to 1,906.10 billion yuan, up 36.0% on an annual average basis, which was above the average growth of total fixed asset investments by 15.2 percentage points. During the same period, effectively irrigated farmland increased by 21.9% and water-efficient irrigated area increased by 55.1% nationally. The share of water-efficient irrigated area in effectively irrigated area expanded from 37.4% to 47.5%. Further improvement in infrastructure greatly improved agricultural production.

Second, support of agricultural technology improved remarkably. China began to implement subsidies for the purchase of agricultural machinery and tools since 2004, with the level of subsidy increasing from 70 million yuan in 2004to 23.645 billion yuan in 2015 (Cheng Guoqiang, 2013;Wei Houkai et al., 2016). During the sameperiod, the total power of agricultural machinery in China increased by 71.8%. In 2015, the contribution of science and technology to China’s agriculture reached 56% and the general mechanization level for the ploughing, sowing and harvesting of major crops reached 63% (NDRC, 2016). Agricultural technology liberated farmers from laborious farm work, compensated for the shortage of young labor and vastly enhancedagricultural productivity.

The level of agricultural intensification increased. Large-scale and industrial operation is a sure path to increasing overall agricultural production. By the end of 2014,26.87 million hectares of arable land contractedby householdshad been transferred, accounting for 30.4% of total arable land contracted by households in China (Han Changfu, 2015).Meanwhile, new types of agricultural operation entities emerged, including family farms, professional farmers’ cooperatives and leading enterprises of agricultural industrialization. In 2015, the number of new-type agricultural operation entities totalled 2.5 million and 54% of livestock and poultry breeding achieved large-scale operation (NDRC, 2016).

1.4 Structure of Agricultural Economy Optimized

In recent years, China has vigorously pushed forwardagricultural restructuring and transition, attachingequal importance to the quantity, quality and efficiency of agriculture. Developing a modern agriculture is to create an economic structurefeaturing coordinated development of grain, cash crops and feedstockandintegrated crop farming, livestock raising, processing and fishery. All-round development of agriculture, forestry, livestock and fishery is accompanied by remarkable improvements in the quality, production and processing of agricultural products. Between 2005 and 2014, the dominant position of crop farming in the total output value of agriculture, forestry, livestock and fishery strengthened, with the share of its output value up from 49.7% to 53.6%; the share of output value offorestry increased from 3.6% to 4.2%; the share of output value oflivestockdecreased from 33.7% to 28.3%; and the share of output value offishery remained stable, with mild swings in the band between 8.9% and 10.2% (see Figure 3).

ProspectsofChina’sAgriculturalDevelo

Constant efforts have been made to restructure the layout of crop farminganddevelop superior regions of agricultural productionin light of localnatural resources and environment. Today, China has developed aswathe of industrial belts featuring superior agricultural products including theHuang-Huai-HaiWheat Production Area, the Northeast and Yangtze River Basin Paddy Rice Production Areas, the Northeast and Huang-Huai-HaiCorn and Soybean Production Area, XinjiangCotton Production Area,the Yangtze River Basin Rapeseed Production Area, and Guangxi and YunnanSugar Production Area.

2.Challenges Facing China’s Agricultural Development

Despiteitsachievements, China’s agriculture is confronted with unprecedented challenges stemmingfrom inefficientfarming practices. Structural overcapacity, lack of international competitiveness and serious pollution have become keybarriersto China’s agricultural sustainability.

2.1Structural Overcapacity

Despite the high inventory of sugar and reduced domestic sugar production, the volume of sugar import significantly increased. In 2015, China imported 4.846 million tons of sugar, up 39.0%. With growing demand for edible oil and feedstock, China’s soybean demand surged. After China became a net importerof soybean in 1996, soybean import continuously increased from the initial 1.11 million tons to 817.41 million tons by the year of 2015. Today, China has become the largest importer of soybeans in the world.

2.2 Inadequate Agricultural International Competitiveness

In the context of economic globalization, increasing the international competitiveness of agriculture is an important strategy to promote agricultural development in China. After entry into the WTO, China’s agriculture is increasingly correlated with the world market. Trade dependence of China’s agricultural products increased from 15.0% in 2001 to 21.0% in 2011, followed by a slight decrease afterwards (see Table 1). Export dependence of agricultural products remained stable after a minor swing between 2001 and 2010 and has fallen in the range between 7.2% and 8.2% since 2010. With surging imports of products like cotton and rapeseeds, the import dependence of China’s agricultural products increased from 6.4% in 2001 to 13.4% in 2012 and currently still lingers around 12%. This suggests that China’s domestic market of agricultural products is increasingly subject to the influence of the international market. In addition to growing domestic demand, lack of international competitiveness is a major reason forthe growingdependenceon imports.

ProspectsofChina’sAgriculturalDevelo

First, rising domestic cost of agricultural production and government procurement policy for certain products have caused domestic prices to exceedinternational prices. From 2004 to2014, the total production cost of China’s grain (paddy rice, wheat and corn) jumped from 395.5 yuan to 1,068.6 yuanper mu(1mu=0.0667 hectares)with annual average growth of 10.5%. This includes the annual average growth of materials and service costs of 7.6%, labor cost of 12.2% and landcost of 14.2% (Wei Houkai et al., 2016). During this period, 45.4% of the increase in agricultural production cost came from labor cost, 32.4% from material and service costs, and 22.2% from land cost. While protecting agricultural producers, the policy of national procurement for grain and major cash crops has increased the prices of domestic agricultural products and led to the situation where production, consumption, import and inventory are simultaneously high for specific agricultural products.

Furthermore, rampant food safety problems have dampened the confidence of domestic consumers and importers of China’s agricultural products. Despite great efforts by the Chinese government, quality and safety incidents still occurred frequentlyfor certain agricultural products. Meanwhile, the United States, Japan, South Korea and the European Union raised the standards of pesticide and veterinary drug residues, micro-organisms and heavy metals in food, which dealt a heavy blow to the export of China’s agricultural products.

2.3Increased Agricultural Pollution

Excessive use of pesticides and fertilizers has led to serious soil and water pollution. According to the Communiqueon the National Survey of Soil Pollution, overall national soil pollution exceedance is 16.1%, with 19.4% of monitored pointsexceeding pollution limits. Major pollutants include cadmium, nickel, copper, arsenic, mercury, lead, DDT and PAHs (The Ministry of Environmental Protection and the Ministry of Land and Resources, 2014). According to China Geological Survey (2015) by the Ministry of Land and Resources, between 1999 and 2014, 29.3% of arable land surveyed experienced soil alkalization with pH value up0.64; 21.6% of arable land was severely acidified, with pH value down 0.85. According to data of the Ministry of Environmental Protection (2015), COD emissions and ammonia-nitrogen emissions fromagricultural sourcemade up40.0% and 31.7% of total national emissionsrespectivelyin 2014. Agriculture has become the largest industry in China subject to nonpoint source pollution.

Excessive use of chemical fertilizers, pesticides and plastic mulch, as well as antibiotics and heavymetal additives in livestock and poultry industry, is an important source of agricultural pollution. Between 2005 and2014, the use of chemical fertilizers, pesticides and plastic mulchsubstantially increased in China (see Table 2). Of which, the use of chemical fertilizers per unit area increased by 18.2%, the use of pesticides increased by 23.8%, and the use of plastic mulchincreased by 50.2%. Currently, the use of chemical fertilizers per unit of sown area far exceeds the safety limit of 225 kg/hectare; only one third of pesticides are absorbed by crops, while the rest causedpollution by permeatinginto water and soil. According to the Communiqueof the First National Pollution Source Survey, the plastic mulch residueratioin Chinais 19.7% (The Ministry of Environmental Protection, 2010). While fuelingthe “White Revolution” of agriculture, the extensive use of plastic mulch also led tosevere “white pollution.” The livestock and poultry industry is another important source of agricultural pollution in China. According to the Ministry of Environmental Protection, the COD emissions and ammonia-nitrogen emissions from the livestock and poultry industry accounted for 95.2% and 77.5% respectively of total emissions by agricultural sources in China.

ProspectsofChina’sAgriculturalDevelo

3.Mid- and Long-Term Trendsof Agricultural Development in China

Currently, China’s agricultural development has entered into a critical period of all-round transition. In the future, importance will shift from quantity to competitiveness, quality, efficiency, safety and sustainability. From a mid- and long-term perspective, the overall objectives of China’s agricultural development are as follows: to create a new pattern of modern agriculture by 2020 featuring advanced technology and equipment, moderate scale of operation, integrated development of primary, secondary and tertiary industries, equal emphasis on quantity, quality and efficiency and a benign eco-environment. The following trends can be envisioned.

3.1 Migration of Agricultural Labor Slows and Large-Scale Operation Accelerates

China’s urbanization rate has already surpassed the 50% turning point, reaching 56.1% in 2015. This indicates that China’s urbanization has entered into adeceleration stage. China’s urbanization rate is expected to reach 60.3% by 2020 and 68.4% by 2030 (Wei Houkai, 2014). As urbanization decelerated, migration of rural labor slowed as well. From 2001 to 2002, the number of migrant workers in China increased by 13.11 million people on an annual average basis; between 2003 and 2012, this number roseby an annual average of 5.87 million people; between 2013 and 2015, this figure dropped to 1.83 million people (see Figure 4). The share of agricultural employment decreased by 1.04 percentage points between 2001 and 2005, 1.62 percentage points between 2006 and 2010, and 1.80percentage points between 2011 and 2014. The decrease is still accelerating yet at a slower pace. On the one hand, the share of China’s agricultural employment was 29.5% in 2014, i.e., the base number was already very low; on the other hand, as the willingness of farmers to enter into cities reduces, the speed of urbanization begins to decelerate (Wei Houkai, 2016). Hence, in the coming 15 to 20 years, migration of China’s agricultural labor will continue to advance rapidly yet the speed of such migration will slow gradually. By 2030, the share of agricultural employment in China is expected todrop to around 12%.

ProspectsofChina’sAgriculturalDevelo

Resulting fromagrowingurbanization rate and labor migration,the moderately large-scale operation of agriculturein China is already supported by a stable land system. In addition, on the premises of collective ownership of rural land, separation of ownership from operation has stabilized the contractual relationship between farmers and collective economic organizations and increased land efficiency through the transfer of operation rights. Mortgage financing of operation rights provides access tocapital that enableslarge-scale operation. In the short run, overall land transfer and the land transfer of individual organizations (individuals) will continue to expand and the large-scale operation of land will accelerate. From a mid- and long-term perspective, new-type agricultural operation entities will keep emerging, thus further reducingproduction and transaction costs.

3.2 GrainSupply and Demand Maintain a Tight Balance and Overall Production Still HasPotentials

China’s grain output has been growing for the 12thconsecutive year. Given the restraint of natural resources, increase of grain production will be confronted with growing pressures. In the 13thFive-Year Plan period (2016-2020) and the coming 15 years, the production of paddy rice and wheat will remain stable (see Table 3); structural adjustment of corn production will achieve remarkable progress and both planting area and output will reduce; given the elimination of ad hocpurchase and stockpiling of corn, further improvement in the soybean target price subsidy policy for the northeast productionarea and the pilot program of “grain and soybean rotation”, the planting area and output of soybean are expected to experience restorative growth. According to 2015 forecast by the United Nations Department of Economic and Social Affairs, by 2020 and 2030, China’s population will reach 1.433 billion and 1.453 billionrespectively. A growing population will increase demand for grain, while rising urbanization will lead to greater demand for feedstock for the production ofmeat, eggs and dairy products. Summarizing the above-mentioned factors, China’s overall grain supply and demand will maintain a tight balance on a mid- and long-term basis, which ensures grain security with self-sufficiency of major grains slightly reduced yet still exceeding 95%.

ProspectsofChina’sAgriculturalDevelo

In order to achieve grain security, the following measures must be taken to explore new potentials of production. First, agricultural infrastructure must be improved. Infrastructure remains a weak area of agricultural development in China. With the completion of land rights confirmation, growing transfers of arable land in the countryside, and the integration of government funding with private capital, the construction of agricultural infrastructure will embrace new opportunities, thus reducing the cost of grain production and enhancing the stability of supply. Second, new potentials of factorswill be unleashedthrough progresses in agricultural technology. New progresses in water conservation, soil and fertility improvement, new crop species, as well as disease prevention and control will support the development of a modern agriculture. According to national planning, by 2020 the contributionof science and technology to China’s agricultural development will surpass 60% and the overall mechanization for the ploughing, sowing and harvesting of major crops will exceed 68% (the Ministry of Agricultureet al.,2015). Third, new potentials of institutional transformation will be unleashed with the transition of the operational system at the core. In the future, China will establish a brand-new agricultural operation system, new business entities will keep growing, private agricultural service organizations will emerge, and modern operation and distribution models such as “Internet+” will take shape. These developments will further reduce cost and enhance grain production.

3.3 Transition towardsGreen Development

Rising factor cost is notaccompanied by improvement in productivity, resulting in lack of international competitiveness in the prices of China’s agricultural products. Due to growing international competition and domestic prices exceeding international prices, it is unsustainable for agricultural products to maintain their competitiveness by government subsidy alone. In the short run, China’s labor cost advantage remains and labor-intensive products still havepotentials. In particular, feature and refined products are highly competitive. Intensive factor input is conducive to increasing productivity.Progresses inland transfer, capital, technology and management will lead to cost reductions of land, capital and management.

Ona mid- and long-term basis, the constraints of resources and the environment force China to accelerate the transition of agriculture. The new pattern of China’s agricultural development will be built upon refineddivision of labor and organization of production and services. Division of labor in agricultural production will be refined at the following levels. From the macro perspective, the division of labor in the layout of production will give rise to regionalspecialization. On a medium basis, industrial organization, division of labor and cooperation will turnfarmers into agricultural industrial workers.From the micro perspective, agricultural production will become more specialized in its various processes and thus more efficient. Cooperative organizations based on the pooling of land have already emergedandwill develop towards service organizations. They not only provide the means of production, agricultural technologyand rural finance but conduct negotiations on behalf of collectives, thus protecting the rights and interests of farmers.

Green transition of agriculture isan important means to addressupgraded public demand,enhance competitiveness, and develop a modern agriculture. Greentransition will become a new trend of China’s agricultural development in the future. According to national planning, by 2020, the effective water utilization coefficient for farmland irrigation in China will reach 0.55, water-efficient irrigation rate will reach 64%, integrated utilization of livestock wastes will surpass 75%, and the use of chemical fertilizers and pesticides will experience zero growth. By 2030, the effective water utilization coefficient for farmland in China will surpass 0.6, the effective irrigation rate of farmlandwill reach 57%, water-efficient irrigation rate will reach 75%, integrated utilization of livestock wastes will surpass 90%, and near-zero emissions of agricultural wastes will be initiallyachieved (the Ministry of Agricultureet al.,2015).

ProspectsofChina’sAgriculturalDevelo
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