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Jikun Huang
Center for Chinese Agricultural Policy
Chinese Academy of Sciences
China’s Agricultural Development and Policies: Past Performance and Future Prospects
Average annual growth rate (%) of agricultural GDP
0
1
2
3
4
5
6
7
8
1979-84 1985-95 1996-00 2001-05 2006-08
Average annual growth rate in agricultural GDP was about 4-5 times of population growth rates.
0%
20%
40%
60%
80%
100%
1980 1985 1990 1995 2000 2005
Forestry
Fi shery
Li vestock
Crop
Shares of output values within agricultural sector, 1980-2005, (%)
Within agricultural economy: falling the shares of crops,rising the shares of livestock and fishery
0%
20%
40%
60%
80%
100%
1980 1985 1990 1995 2000 2005
Cash crops
Other cereal s
Mai ze
Wheat
Ri ce
Shares of crop areas, 1980-2005, (%)
Rising horticulture and other cash crops…
Share of non-agri employment of rural labor, 1981-2006 (source: based on CCAP’s surveys)
0
0.1
0.2
0.3
0.4
0.5
0.6
Full timeFull time + seasonalFull time + seasonal + part time
Source (%) of farmer’s income
0
10
20
30
40
50
60
70
80
90
1978 1980 1985 1990 1995 2000 2005 2007
Agri cul ture Non-Agri cul ture
Per capita rural income in real term (1978=100)
0
100
200
300
400
500
600
700
800
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005
Per capita real income: Rural vs Urban
(indexed in 1978)
0
100
200
300
400
500
600
700
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005
Rural Urban
Urban income / rural income
0
0.5
1
1.5
2
2.5
3
3.5
4
Rati o
Inequality trend: Gini ratio in rural
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
1978 1983 1988 1993 1998 2003 2008
Rural poverty incidence in China, 1978-2007
0
5
10
15
20
25
30
35Under official poverty line
Under $1/day in PPP
%
Calories per capita per day (gram)
0
500
1000
1500
2000
2500
3000
1979 2003 0
10
20
30
40
50
60
70
80
90
1979 2003
Source: FAOSTAT
0
10
20
30
40
50
60
70
80
90
1979 2003
Protein per capita per day (gram)
Fat per capita per day (gram)
Share of undernourished in total population (%)
0
5
10
15
20
25
30
1979-1981 1990-1992 2001-2003
FAO, 1996 and 2006
Questions
• What are major driving forces of China’s agriculture in the past?
• What are prospects of China’s agriculture in the future?
The Rest of the Presentation
Agricultural Development and Policies in the Past 30 Years: Successes, Challenges and Recent Policy Responses -- Institutional reform -- Agricultural technology -- Market liberalization -- …
Prospects of Agriculture in the future
Concluding Remarks
Institutional Reform
Total Factor Productivity for rice, wheat and maize in China, 1979-95
50
100
150
200
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Rice
Wheat
Maize
Institutional change (HRS) was major source of TFP growth in 1979-84
Source: Jin et al., 2002, AJAE
Small farming: Challenges for labor productivity, modernizing agriculture and food safety
Average farm size (ha/farm)
0
0. 1
0. 2
0. 3
0. 4
0. 5
0. 6
0. 7
0. 8
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Source: NSBC
Opportunity:Rising rental market…
There are signs that China’s land rental markets are rising…
• Rapidly increasing over time
• Nearly 30% in Zhejiang Province
Land Rented-In
0
2
4
6
8
10
12
14
16
1988 1995 2000 2005
Per
cent
Age Range 1990 2000
16-20 23.7 75.8
21-25 33.6 67.2
26-30 28.8 52.5
31-35 26.9 47.6
36-40 20.5 43.3
41-50 20.8 37.6
Challenges: Percent of workforce off-farm, by age range
Source: CCAP’s surveys
200695
Number of farmers’ associations in a national representative survey
Source: CCAP’s survey in 2009
0
20
40
60
80
100
120
140
160
180
2003 2004 2005 2006 2007 2008
Percentage of villages with FAs:
22%
Percentage of farmers participated in FAs: 4.5%
Estimated number of farmers’ associations in China, 2008
Major Decisions on Key Issues of Promoting Rural Reform and Development
The 3rd Plenary Session of CCCP, 12 Oct 2008
• Rural reforms and institution changes:– Agri operation institutions: agri land (30 yrs
long term); farmers’ cooperatives; etc;
– Rural land institutions: land titling; rental market; but more restrict in land use change; etc;
– Rural financing/credit: …
– Integrated urban and rural development: factor markets; public goods provision; …
– Rural governance and democracy management institutions; and
– Establish resource-saving and environmental friendly agricultural production system.
Agricultural Technology
TFP of rice, wheat and maize in 1979-1995( 1979=100)
50
80
110
140
170
200
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Rice
Wheat
Maize
Technology changes have been major sources of agricultural productivity growth after 1985 (Huang and Rozelle, 1996; Jin et al., 2002 ;Jun et al., 2008)
In 1985-97, TFP grew at about 3%
TFP Growth Rates of Grains and Cotton (1995-2004)
0
1
2
3
4
5
EarlyIndica
LateIndica
Japonica Wheat Maize Soybean Cotton
TFP
Percent per year
Internationally, if a country’s ag TFP rises more than 2% a year, it is GREAT … China’s rate of rise is nearly 3 percent per year!
Agricultural research investment intensity (%)
in China
0
2
4
6
8
10
12
1990 1995 2000 2005
Government fiscal investment in
agricultural research(billion yuan in 2005 price)
Since 2000, the rise in research investment has been higher in China than any other country in the world …
Agricultural biotech research investment
0
200
400
600
800
1000
1200
1400
1600
1800
1986 1988 1990 1992 1994 1996 1998 2000 2002
Plant Agriculture
Huang et al., 2005, April, Science
(million yuan in 2003 price)
2003: 1.65 billion yuan = US$ 200 million or US$ 950 million in PPP
One of the largest investors in plant biotech in the world
Bt cotton areas in China, 1996-2007
0
500
1000
1500
2000
2500
3000
3500
4000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070
10
20
30
40
50
60
70
面积
Bt%
About 7.1 million farmers adopted Bt cotton in 2007
( 1000 ha) ( %)
Major findings on Bt cotton impacts
in 1999-2001 (per hectare)
• Reduce pesticide use: 34 kg 923 yuan
• Increase yield: 9.6% 930 yuan
• Increase seed cost: 570 yuan
• Reduce labor input: 41days 574 yuan
• Increase net income: 1283-1857 yuan (US$
155-225)
Huang et al., 2002, Science; Huang et al., 2003, Agricultural Economics
Major findings on GM rice impacts (per hectare)
• Reduce pesticide use: 17 kg 270 yuan
• Increase yield: 6 % 406 yuan
• Increase seed cost: ?? yuan
• Reduce labor input: 8.4 days 168 yuan
•Increase net income: 844 yuan
(US$ 102)
Huang et al., 2005, Science
Challenges in China’s Agricultural Technologies
Agricultural research:- Public dominated R&D system- Less response to farmers’ demand- Still lack of funding and too much depend on
competitive grants- Lack of top scientists and innovated team
Agricultural extension:– Unjustified tasks;– Inappropriate institutional setting– Lack of incentives– Inadequate human capacity– Lack of funding
Non-extensionadministrative
Law/regulationimplementation
Commercialbusiness
PUBLICEXTENSION
Holiday andothers
Time location of local extension workers in 2005
Source: CCAP’s survey in 35 counties from 7 provinces
Major Decisions on Key Issues of Promoting Rural Reform and Development
The 3rd Plenary Session of CCCP, 12 Oct 2008
• Agricultural modernization:– ...– …
– Technology innovations: focused in modern tech; research reform; extension reform; etc;
– Infrastructure: irrigation; soil; etc;
– New service system: … 3 public services systems (tech extension, animal disease control, and foodsafety monitoring); etc
– …– …
Market Liberalization
Markets in 1980
• Almost NONE …
• Government bought ALL agricultural commodities / sold ALL inputs
Government rice procurement and free market sales of grain
0
10
20
30
40
50
60
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Total Quota%
quota
free market”}
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)
Agricultural tariff rate (%): Prior to WTO accession (1992-2001) : 42% 21%
China’s WTO commitment (2001-2005): 21% 11%
0
5
10
15
20
25
30
35
40
45
1992 1998 2001 2005
Nominal protection rates (%) in China, 1980-2005
-80
-60
-40
-20
0
20
40
60
80
1980-1993 1994-2001 2002-2005
Rice Wheat Soybean Milk Pork Vegetable
This slide shows that while the prices of some commodities were much higher than world market prices in the 1980s (those commodities > 0) and many were way under world market prices (those commodities < 0)
Nominal protection rates (%) in China, 1980-2005
-80
-60
-40
-20
0
20
40
60
80
1980-1993 1994-2001 2002-2005
Rice Wheat Soybean Milk Pork Vegetable
… 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
Input market liberalizationNominal protection rates of urea and other
fertilizer, 1978-2001
0
20
40
60
80
100
120
140
160
180
1990-91 1992-93 1994-95 1996 1997 1998 1999 2000 2001
Urea 硫酸钾 Potassium Chloride
Challenges: import has been rising faster than export since China joined WTO in 2001
China’s Agricultural trade during 1992-2006
0
5
10
15
20
25
30
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Bill
ion
US
$
Export
Import
China’s WTO accession
The Change of China’s agricultural trade(net export, billion US)
-30
-25
-20
-15
-10
-5
0
5
10
15
20
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Bill
ion
US$
Land-intensive products
Labor-intensive products
… China is beginning to move towards exporting those commodities in which it has a comparative advantage (e.g., labor intensive commodities, such as fruit and meat) … While importing land intensive commodities (such as soybeans and cotton)
Exports – fruit, meats, aquaculture
Imports – soybeans, cotton, hides
Tax Reduction Program Completed
• Completely eliminated taxes
• Farmers now pay no taxes or fees
0
2
4
6
8
10
2003 2007
0
8.1%
Percent of Value of Output
Agricultural subsidies/supports (billion yuan)
0
20
40
60
80
100
120
2004 2005 2006 2007 2008
OthersAggregate inputsMachineryQuality seedGrain subsidy
2004: 0.7% of agri GDP; 2008: 4% of agri GDP
Subsidies and supports have been rising significantly, butmost of them are decoupled, have little intervention in the market
Prospects of China’s Agriculture in the future
Prospects of China’s agriculture under trade liberalization
Models: GTAP Assumptions:
- Major demand driving forces- Major supply driving forces- Trade policies
China’s Agricultural Import in 2001-2020Under baseline (billion US$)
0
2
4
6
8
10
12
1420012020
China’s Agricultural Export in 2001-2020Under baseline (billion US$)
0
2
4
6
8
10
12
14
20012020
Self-sufficient level (%) of agriculture under baseline, 2001-2020
0
20
40
60
80
100
120
Rice
Wheat
Coarse
grains
Oilseeds
Sugar
Fibre
Horticulture
Beef andm
utton
Pork andpoultry
Milk
Fish
Processedfood
2001 2020
Concluding remarks: Agricultural performance
• Agriculture has been growing at about 5% annually since 1980s;
• The growth has been associated with:- Significant changes in agricultural structure: move to more
competitive sectors;
- Rapid growth of off-farm employment.
Concluding remarks: institutional reforms
• Institutional changes have played important roles in China’s agriculture.
• However, there will be great challenges ahead in terms of small farming, lack of cooperatives, and agricultural modernization.
• More innovated policies on land and farmers’ cooperatives are critical for China’s agriculture in the future.
Concluding remarks: technology
• Technologies have been major source of agricultural productivity growth in the past 30 years.
• Technologies will continue to be engine of its productivity growth in the future.
• However, China’s public agricultural research and extension system needs substantial reforms to meet farmers’ demand for technologies.
• Policy response: increase funding; reform R&D and extension system.
Concluding remarks: Market reforms
• China’s market has been increasingly integrating into the global market.
• China’s domestic markets have been also increasingly integrated.
• While import of land-intensive products will rise, export of labor-intensive products will also rise.
• However, there are also great challenges in small farming in ensuring the increasing demand for quality and safety foods in the future.
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