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
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
1. Performance of China’s
agriculture in last 30 years
Average annual growth rate (%) of agricultural GDP
8
7
6
5
4
3
2
1
0
1979-84
1985-95
1996-00
2001-05
2006-10
Average annual growth rate in agricultural GDP was
about 4 times of population growth rates.
Shares of output values within agricultural sector,
1980-2005, (%)
100
90
80
Forestry
70
60
Fishery
50
40
Livestock
30
Crop
20
10
0
1980
1985
1990
1995
2000
2005
Livestock and fishery have grown even faster…
2009
Significant transformation of labor from
agriculture to non-agriculture has also been
occurring…
Share of non-agri employment of rural labor,
0.6
1981-2008 (source: based on CCAP’s surveys)
Full time
Full time + seasonal
Full time + seasonal + part time
0.5
0.4
0.3
0.2
0.1
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
0
Sources of farmers’ income (%)
90
Agriculture
Non-agriculture
80
70
60
50
40
30
20
10
0
1978
1980
1985
1990
1995
2000
2005
2008
2. Major driving forces
• Institutional reform
• Market liberalization
-Domestic marketzation
-Integration into international market
• Investment into agricultural sector
• Irrigation
• Technology
• Other
Total Factor Productivity for rice, wheat and maize
in China, 1979-95
Maize
200
Wheat
Rice
150
100
50
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Institutional change (HRS) was major
source of TFP growth in 1979-84
Source: Jin et al., 2002, AJAE
Integration in China’s Markets (percent of
market pairs that have integrated price series)
1991-92
1997-00
2001-2003
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)
Nominal protection rates (%) in China, 1980-2005
80
Rice
Wheat
Soybean
Milk
Pork
Vegetable
60
40
20
0
-20
1980-1993
1994-2001
2002-2005
-40
-60
… by the 2000s, the prices of most of China’s commodities were nearly
equal
-80 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
Investment in Agriculture
Expansion of irrigated land in China
Million ha
Nearly 50% of cultivated land
60
50
40
30
20
10
0
1950
1960
1970
1980
1990
2000
2010
Government fiscal
investment in
agricultural research
Agricultural research
investment intensity (%)
in China
(billion yuan in 2005 price)
12
10
8
6
4
2
0
1990
1995
2000
2005
Since 2000, the rise in research investment has been
higher in China than any other country in the world …
Agricultural biotech research investment
2003: 1.65 billion yuan = US$ 200 million
or US$ 950 million in PPP
(million yuan
in 2003 price)
1800
New GMO
program:
26 billion
yuan
(US$3.8
billion) in
2009-2020
1600
1400
1200
1000
800
Plant
Agriculture
600
400
200
0
1986
1988
1990
1992
1994
1996
Huang et al., Science, 29 April 2005: 688-690
1998
2000
2002
Equal or
greater
than US
public
support for
plant
biotech!!
Type of PUBLIC GOODS projects
Roads, 21
Other
public
projects,
37
Schools,
14
Clinic, 3
Drinking
water, 11
Irrigation,
14
Around 2/3rds
of public goods
investments
into 5 types of
projects
Total Factor Productivity for rice, wheat and maize
in China, 1979-94
Maize
200
Wheat
Rice
150
100
After middle 1980s, technology
has been major factor affecting
productivity growth
50
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
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
Urban income / rural income ratio 1978-2009
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
Driving forces of demand for agri/food
• Population growth
(++

+
• Urbanization
(+

-/+)
)
impact has been weakening…
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
Cultivated land (000 ha), 1997-2008
140000
120000
100000
80000
60000
40000
20000
0
1997
2001
2005
Groundwater Levels are Falling, but
varies across Northern China
Change in Average Water Level 1995-2004
• Increased:
• No Change:
• Decreased:
8%
17%
75%
Small farming: Challenges for labor productivity,
modernizing agriculture and food safety
Average farm size (ha/farm)
0.8
0.7
Opportunity:
Rising rental
markets for
cultivated
land
0.6
0.5
0.4
0.3
0.2
0.1
0
1984
1987
1990
Source: NSBC
1993
1996
1999
2002
2005
2008
Fertilizer use intensity (kg/ha)
350
300
250
China
200
150
World
100
50
0
1965 1970 1975 1980 1985 1990 1995 2000 2004
4th highest in the world: Japan  Korea  Holland  China
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
20
17.2
15
10
6.4
5
0
China's tariff
Tariff imposed on
China's products
Agricultural export and import (billion US$)
1983-2009
70
Export
60
Import
50
40
30
20
10
0
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
China has shifted from a net food exporter to importer since 2004
4. Policy responses and China’s ag/rural
development plans and policies
• Institutional change
• Marketing
• Investment
– Technology
– Others
Policy responses: enhance land
tenure and facilitate rental market
Percent
• Rapidly increasing
over time
• More than 40% in
developed provinces
(e.g., Zhejiang)
Land Rented-In
20
18
16
14
12
10
8
6
4
2
0
1988 1995 2000 2005 2008
Policy responses: Promote development of
cooperatives (farmer organizations called: farmers
professional economic cooperatives—FPCs)
%
25
Shares of villages with FPCs
20
15
10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Sources: CCAP surveys
Government fiscal
investment in
agricultural research
(billion yuan in 2005 price)
Agricultural research
investment intensity (%)
in China
12
10
8
6
4
2
0
1991 1993 1995 1997 1999 2001 2003 2005
Since 2000, the rise in research investment has been
higher in China than most countries in the world …
Tax Reduction Program Completed
Percent of Value of Output
10
• Completely eliminated
taxes
8
8.1%
6
• Farmers now pay no
taxes or fees
4
2
0
0
2003
2007
Agricultural subsidies (100 million yuan)
1200
1000
Others
Aggregate inputs
Machinery
Seed
Grain
800
600
400
200
0
2004
2005
2006
2007
2008
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
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
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
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
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
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
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