www.elsevier.com/locate/geoforum

Geoforum 36 (2005) 720–734

Markets in the Chinese countryside: the case of ‘‘rich Wang�s village’’

Michael Webber *, Mark Y.L. Wang

School of Anthropology, Geography and Environmental Studies, The University of Melbourne, Vic. 3010, Australia

Received 24 June 2003; received in revised form 22 September 2004

Abstract

Social change in rural China is to be understood as a complex interaction of global effects, state and regional actions and com-peting systems of valuation. An important implication of this model of path dependence is the development of distinctive forms ofmarkets in different regions of the country. One such distinctive model that is emerging in southern Inner Mongolia is based on theindependent commodity production of milk (on small dairy farms) for large, capitalist dairy corporations. Yet this production sys-tem is also being challenged by the emergence of large, capitalist dairy farms in this region. The outcome of the competition betweenthese two forms of production will depend on locally specific trajectories of costs and opportunities. The long run evolution of thisproduction system is thus not plannable in advance and is locally contingent.� 2004 Elsevier Ltd. All rights reserved.

Keywords: Inner Mongolia; China; Dairy industry; Globalisation; Rural development; Path dependence; Region

1. Introduction

In rural China, as in many other parts of the world,market forms of valuation are increasingly being appliedto wider and wider areas of daily life. More and morethings are produced in order to be sold, and their valueis set on a market. In the formerly socialist countries,this process is often called transition, the replacementof socialist forms of allocation by market forms (Kor-nai, 1992). Although transition is commonly regardedas unidirectional (Solimano, 1994) and has been widelycommended (Nolan, 1993), economic change is not tobe understood through a blueprint (Webber et al.,2002). Whatever the conceptions of the early reformersin the late 1970s, the initial changes have themselvesset in train deep changes to the social structure of China.As a consequence, the internal pressures for and the nat-ure of continuing change have themselves become mod-ified, a process known as path dependence (Nee, 1994).

0016-7185/$ - see front matter � 2004 Elsevier Ltd. All rights reserved.doi:10.1016/j.geoforum.2004.10.003

* Corresponding author.E-mail address: m.webber@muprivate.edu.au (M. Webber).

In this paper, we seek to illustrate some aspects of thisprocess of change within the Chinese countryside. Inessence we are advancing a model of regional changewithin a developing society, a project initiated in suchclassics of rural political economy as Armstrong andMcGee (1985) and Friedland et al. (1991). Our centralclaim is that social change in China is to be understoodas the complex interaction of global economic influ-ences, the central government, the country�s regionalformations and competing systems of valuation. In vil-lages across the country, systems of valuation compete:markets compete with household production, state pro-duction and local corporatism. Capitalist and otherenterprises compete to attract resources (includinglabour) and to sell their products or services; individualsabandon some forms of activity in favour of others; dif-ferent systems appeal in different degrees to govern-ments, depending on their capacity to dispenserevenues or power, to ameliorate social conflict, or todeliver on the promise of economic growth. The compe-tition is mediated by the global economy, by otherregions within China, and above all by the pre-existing

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 721

regional structure of individual, sectional and classinterests. The effect is a new division of activitiesbetween the various ways of organising social life withinthe region and so a new structure of interests, a rescalingof powers between local, provincial and central author-ities, and new impacts on global and other regionaleconomies. Supervising and sometimes encouragingthe competition is the central government, which seeksto set terms by defining the boundary conditions forinter-regional and international pressures, the allowableforms of valuation and the competition between them.Yet the power of the central government to manage thisprocess itself depends on the evolution of the system.

One of the most important implications of this formof regional development is the divergence of the devel-opment trajectories of the regional economies thattogether make up China�s space economy. Many econo-mists have described and attempted to account for thechanging patterns of regional (and intra-regional)income inequality (Benjamin and Brandt, 1997; Long,1999; Lu and Wang, 2002; Wang and Hu, 1999) andthe extent to which markets are efficient (Rozelle et al.,1999; Meng, 2000), but such data are far too limitedto capture the variety of forms of regional economywithin China. Even rural development has taken on anextraordinary diversity, with observers pointing to thedistinctiveness of the social relations, links to the globaland national economy, intra-regional linkages, andregional sectoral specialisation that underpin develop-ment in northern Jiangsu (Liang, 1994), southernJiangsu (Ho, 1994), Wenzhou (Nolan and Dong, 1990)and the Pearl River Delta (Lin, 1997). In these iconicexamples, development has been facilitated by the loca-tion of the regions in the accessible coastal parts ofChina. However, similarly distinctive models of ruraldevelopment are emerging in the inland regions of thecountry and some of them involve different arrange-ments for even the same industry, as global linkagesand new markets penetrate central-west and northChina. As we develop our central claim, we shall alsopoint to the distinctiveness of these forms of inland ruraldevelopment and to the manner in which their distinc-tiveness is conceptualised within our view of regionaldevelopment in China.

We pursue these arguments in the following sectionsof the paper. We begin in Section 2 by developing ourconceptualisation of markets, to make precise the mean-ings of the terms that we shall deploy in the argument.Section 3 explains the methods and sources of informa-tion that we deploy, and provide a little backgroundabout southern Inner Mongolia, a region that figureslarge as we examine the social changes that developmenthas wrought. We turn in Section 4 to examine the his-tory and structure of the dairy industry in China; thisinvolves an analysis of the competition between differentways of organising the production of processed milk.

The regional structure of dairy production is examinedin Section 5, which brings to the fore the manner inwhich provincial-level states, such as Inner Mongolia,have sought to encourage development. Section 6 anal-yses the social relations that are involved in two systemsof producing milk: independent commodity producersin a contractual relationship with urban dairy corpora-tions, and capitalist farms. The small farmers and theirpartners in the dairy corporations have developed a dis-tinctive form of regional economy that is linked to theemergence of national producer and commodity mar-kets and to global technology; however, that economyis being challenged by the emergence of capitalist formsof agriculture. Section 7 sketches the theoretical conclu-sions we draw from the distinctiveness of this new ruralregional economy and the competition between capital-ist and independent commodity forms of production.

2. Markets

First, the notion of marketisation needs to be clari-fied. Several explicit attempts have been made to assessthe degree to which transforming societies like Chinahave become market oriented (see, for example, Chenet al., 2000; Fforde and de Vylder, 1996; Smart, 2000).The evidence from these attempts is that it is useful todistinguish two different forms of markets.

First, we may identify a process through which com-modity markets become generalised. This process is onein which transactions become essentially voluntary orautonomous, based on private calculations of costs andbenefits, rather than centrally planned (Fforde and deVylder, 1996, pp. 29–45). Decision making rights aredecentralised: agents acquire the freedom and ability tomake these calculations and to act on them; enterprisesbecome autonomous rather than simply something likea branch plant of a multi-division (state) corporation.In a commodity market economy, these individuals andenterprises compete to buy and sell, on the basis of pricesthat are set by relative levels of supply and demand. Theagents have self-responsibility for the results of their deci-sions (the incentive), and self-interest, rationally actingfor the benefit of themselves (Chen et al., 2000). In thissense, China�s dairy industry is basically a commoditymarket economy: all the principal actors are autonomousand are competing to buy and sell.

A society in which commodity markets are general-ised may contain a variety of forms of production unitand a variety of modes of social behaviour. Small-scalefarmers, who rely on their own and their householdlabour, make their own production decisions and sellfor an urban market, comprise one such set of agents.Township and village enterprises, employing local citi-zens and producing for a small, provincial market, com-prise another set of such agents. Equally, another set of

722 M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734

such agents are state-owned enterprises that, given goalsby their government owners, are left to make their ownproduction and marketing decisions (such might be, forexample, government corporations in western econo-mies). If individuals could decide for themselves to farm,work for the township or work for the state, then a soci-ety of such agents would be one in which commoditymarkets were generalised, though it would be quitedifferent from the form of market society that exists inwestern countries.

Such variety in the forms of commodity market econ-omies leads to the definition of the second form of mar-ket economy, the capitalist market economy (Smart,2000). Societies in which capitalist markets are general-ised are those in which critical decisions about the orga-nisation of production reflect a distinction betweencapital and labour (Webber and Rigby, 1996, analysethese concepts in some detail). A capitalist enterprise isone that makes and is responsible for its own decisionsin order to enlarge its net worth (by means of profits).Capitalists are those who control capitalist enterprisesand—in their pure form—internalise the motives ofthese enterprises. Labour is the capacity of people towork; it is a commodity, sold on the labour market,by individuals to capitalist enterprises. Workers arethose who sell their labour and—again in their pureform—have only their labour to sell.

All actual societies contain enterprises that are notmotivated by profit (households, family productionunits and cooperatives being the most common). Mostactual workers have assets other than simply theirlabour to sell. Most owners of enterprises are motivatedby other concerns as well as profit. Yet capitalist enter-prises are clearly different from small-scale independenthousehold farmers, township enterprises and marketoriented state-owned enterprises. This difference is cen-tred on the manner in which firms hire, organise and firelabour.

Even the people who work in noncapitalist enter-prises find their labour increasingly marketed, increas-ingly becoming a commodity. The degree to whichpeople�s labour is subject to capitalist market controlsdepends on:

1. Their access to or ownership of other productiveassets, such as land, equipment and social contacts.People who do not own such assets depend solelyupon paid work for their livelihood and so mustaccept the conditions under which work is offered;their labour is more marketed than that of peoplewho own such assets.

2. Whether they are hired or fired in accordance withcompetitive market rules. Other systems of job allo-cation, such as personal contacts, job sharing princi-ples, or job protection rules, represent lesser degreesof market control.

3. The degree of profit orientation of the enterprise: thehardness of its budget and the significance of profitrather than other social goals, for example. (An enter-prise�s budget is hard if the enterprise bears the totalburden of its financial performance: if, for example, itis protected against the effect of making a loss by anoutside entity, such as a government.) Higher degreesof profit orientation correspond to greater degrees ofmarketisation.

In China, different forms of work imply differentdegrees to which labour is subject to market controls,ranging from independent commodity producing peas-ant households, varieties of government employees,those who work for collective or state owned enterprises,through to those workers who are employed in foreignfunded and domestic private enterprises (who may haveeffectively given up their rights to use land for agricul-ture and who are hired and fired within a functioninglabour market). In this sense, China�s dairy industrycontains a variety of forms of organising production,and those forms carry different degrees to which labouris subject to market controls. To the extent that China�sdairy industry is a competitive market economy, thecompetition between individual producers means com-petition between forms of organising production; andthat in turn means competition between forms of organ-ising labour. (And this remains true even if the stateintervenes in the economy through subsidies, regula-tions, and funds for specific projects: producers competeto access these state resources.)

A third set of shifts is sometimes said to be involvedin the emergence of a market economy. Fforde and deVylder (1996) argue that a transition from a centrallyplanned to a market economy requires that the legalinfrastructure of society change, as property rights aredefined, to give people and firms the right to decide aswell as to share the surplus. Chen et al. (2000) refer tosuch changes as contractualisation, legalisation andorderliness, the means through which the behaviour ofeconomic subjects is made credible. This argument hasequally been applied to the development of capitalistmarkets in England (North and Weingast, 1989). Yetsuch institutions hardly exist in China (Smart, 2000).Furthermore, as Oi (1999, pp. 1–16) has observed, suchproperty rights do not have to be assigned only to pri-vate individuals or companies. In China, a key innova-tion was to assign property rights over surplusrevenues to local governments in the 1980s. However,these rights were not assigned by law, but only by gov-ernment policy; local governments lacked security in thissense, just as private enterprises in China still lack secureand clear property rights and yet have grown rapidly inthe 1990s. These items of legal infrastructure thus maynot be necessary for the emergence and proliferationof capitalist market forms; in any event, they represent

Administrative centres

N

Helin(Mengniu factory)

Tumete

Tuoketuo

C H I N A

Location map

Beijing

20 km0

Research sites

County boundaryMunicipality boundary

ZhaojunFarm

Yili factory Huhehaotecity

HighwayRailwayResearch site

Beidaolaban(Hehua

development)

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 723

the (supposed) preconditions for, rather than the exis-tence of, such forms.

With these definitions we can now restate our centralargument. The development of markets within Chinainvolves both the generalisation of a commodity-pro-ducing economy and the competition between differentmeans of organising production. These different meansof production, which represent different systems of val-uation, can be indexed according to the degree of whichwork within them is subject to capitalist market control.Thus, one important index of regional rural develop-ment in China is the extent and nature of market-ori-ented production. In turn, the evolution of markets inthe different regions depends on influences from (i) theglobal economy and central government (see Section4), which structure the different ways of organising pro-duction; and (ii) impetuses from the regional social for-mations (Section 5), especially reflecting the manner inwhich regional states have sought to encourage develop-ment. Development and the markets through which itoccurs are path dependent. Thus the forms of changewithin the regions of China also reflect competitionbetween different systems of organising production (Sec-tion 6), including independent commodity producers ina contractual relationship with urban corporations,and capitalist farms.

Fig. 1. Map of the study region in Inner Mongolia.

3. Methods, sources and background

We illustrate and document our arguments by exam-ining the emergence of and forms of production withinChina�s dairy industry. Much of the evidence comesfrom southern Inner Mongolia, particularly Beidaol-aban village (‘‘rich Wang�s village’’) in HelingeerCounty. Helingeer is adjacent to the southern borderof Huhehaote (also called Hohhot), the capital of theAutonomous Region. Hohhot is about 450 km west–north–west of Beijing. Fig. 1 illustrates the location ofthe main places referred to in this paper.

With an annual average per capita rural income ofslightly over RMB 2000 in 1999, Inner Mongolia isone of the poorer regions of China. The poorest prov-inces, in the west, have average per capita ruralincomes of RMB 1300–1500; the richest (the suburbanfarmers of Beijing and Shanghai) earn over RMB 4000each. The south-central region of Inner Mongolia,between Hohhot and the Yellow River (including Bei-daolaban) has below average incomes for the province.Indeed, Helingeer is a national-level poverty county.Farming in this part of Inner Mongolia includes pas-turing of cattle, goats and sheep, particularly in thehillier regions; rain-fed and irrigated cultivation ofgrains (principally corn and wheat); and rain-fed andirrigated cultivation of a variety of vegetables for homeconsumption and (to a lesser extent) urban markets.

Increasingly, the pasturing of large animals in the hillsand mountains is coming under pressure from govern-ments that are seeking to reduce the extensive environ-mental damage that has been ascribed to over-stockingof such animals in a region of low rainfall, very coldwinters and steep slopes. Though Inner Mongolia isAutonomous, Mongols comprise a minority of thepopulation of the Region, and counties in the south(like Helingeer) are virtually entirely populated byHan Chinese: in this part of the Region, competitionbetween Han immigrants and Mongols, in which theMongols were pushed north onto the steppes, isancient history (Williams, 2002).

We do not study Beidaolaban because it is in anysense statistically typical. However, it is a place wherethe competition between different forms of productionand different systems of valuation is being played out.Beidaolaban is located away from the coast, where pro-cesses of marketisation and capitalist development aremost advanced: in Helingeer, the processes can still bestudied over time, as they wreak their changes to socialrelations. Farmers are still imperfectly incorporated intothe market. Furthermore, Inner Mongolia is one of theleading producers of milk in China, a place, that is,where the changing demands of increasingly wealthyurban consumers are pushing changes in the productionpatterns of Chinese farmers. Thus, in this part of Inner

724 M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734

Mongolia are to be found the headquarters of China�ssecond and fourth largest milk processing companies(Hong Kong Trade Development Council, 2003).

Our information about the village and forms of pro-duction within it comes from a variety of sources. Wehave both visited the village in 2000, 2001 and 2002,for informal discussions with village leaders and villag-ers. Formal interviews were conducted with 28 farmersin September 2002, to gain more quantitative informa-tion about changes in their lives over the previous fiveyears. Two managers (Ma Rongmei and Ma Zhiguang)of one milk processor, YiLi Corporation, were inter-viewed in Hohhot on 9 September 2002 and a managerof another milk processor, MengNiu Corporation (GuoYihong) was interviewed in Hohhot on 22 January 2003;the owner–operator of a large dairy farm, Zhao Junfarm, was interviewed on 24 January 2003. Personalinformation has been collected during informal discus-sions over three years with one of the partners in theland development scheme that will be described in Sec-tion 6. Finally, a variety of documentary informationhas been obtained about the main actors in the eventsthat are being played out in Beidaolaban.

Korea

ChinaJapan

1960

Year1965 1970 1975 1980 1985 1990 1995 2000

0.0

20.0

40.0

60.0

80.0

100.0

120.0

kca

l / p

ers

on

/ d

ay

Fig. 2. Consumption of milk and milk products (excluding butter) inChina, Japan and Korea, 1960–2000. Source: FAOSTAT.

4. The dairy economy

Cattle, sheep, goats and buffalo have long been raisedin China for milk, though principally by ethnic minori-ties, including Mongols. Although sheep, goats and buf-falo are still farmed for milk (Wattiaux et al., 2002), weare concerned with cattle farming. However, the emer-gence of large scale dairying and the particular formsby which milk is produced are both creatures of theeconomic reforms in China since the late 1970s (for adiscussion of the reforms, see Webber et al., 2002).Three elements of the reforms are important.

To the farmers, the most critical reform was the intro-duction of the household responsibility system. Begin-ning with some local experiments in the late 1970s,and confirmed by State Council in the early 1980s, thissystem saw communal land being redistributed to peas-ant households, so that each household was to receivefor its own use a roughly equal allocation of land (eitherper capita, or per adult, or per male adult, depending onthe region). Households received contracts permittingthem to use the land, not own it; contracts that wererenewed for 30 years in 1997 (Wattiaux et al., 2002).Thus farmers may lease their land to others, but theycannot sell it. In a country with such high rural popula-tion densities, more or less equal distribution of landmeans that holdings are small: in Beidaolaban, theyaverage 4.60 mu per household member (1 mu equalsone-fifteenth of a hectare). Along with the householdresponsibility system came increasing freedom to choosewhat and how to produce and where and how to sell

that produce: market oriented production decisions arebecoming the norm, even in central China.

The second critical reform comprises the changeswrought to China�s system of industrial production. Inprinciple, state owned enterprises are supposed to havebecome profit oriented corporations, with modern man-agement systems; but these reforms have been politicallyfraught, as they have implied the wholesale closingdown of many enterprises, the redundancy of workersin other enterprises that are being made profitable,and the wholesale stripping of workers� conditions.The ownership of many SOEs has been restructuredand even if they have not been entirely sold, the moreprofitable enterprises have gained far greater spacewithin which to make decisions about production andmarketing. As SOEs were reformed, so new forms ofenterprise have been permitted, even encouraged: pri-vate enterprises, foreign invested companies, joint ven-ture companies, and the like. Enterprises of differentkinds are now in competition with each other—forcapital, workers and markets.

The freedom that these two forms of change broughtabout and the opening of China�s economy to the rest ofthe world have themselves spurred a rapid rise inincomes, especially along the coast and in the cities.With increasing incomes and with exposure to westernhabits have come changing demands. One of the clearestof these changes in habits has been the growth of con-sumption of milk and milk products. Within China,milk production is increasing rapidly. The consumptionof milk and milk products has risen from about 6 kcal/person/day in 1977 to 11.4 kcal/person/day in 1988–1989 and 18.8 kcal/person/day in 2000 (Fig. 2). Theprincipal products are fresh milk, UHT milk, milk pow-der, yoghurt and ice cream (milk powder is a convenientform in which to store milk for households which do notown refrigerators). Increasing production and consump-tion of milk reflect the search among farmers for meansto raise incomes after the reforms of the late 1970s,increasing incomes among consumers, an increasingawareness of western consumption norms, and state

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 725

encouragement (through school milk programs, adver-tising campaigns and technical advice to farmers).Despite this growth in consumption, by 2000, Chineseper capita milk consumption was still less than one halfof that in Korea and one-fifth of that in Japan. Thereremains scope for much larger production of milk (thus,neither of the corporations that we interviewed wasseeking to develop markets outside China).

The market for milk products is divided betweenmany different companies. Milk processors1 have beeninhibited from national marketing strategies in the dairyindustry by a poor transport system that makes it expen-sive to transport fresh milk and creates high risks ofwastage; thus there are more than 1500 dairy enterprisesin China, though more than 90% of these produce lessthan 100 tonnes daily (People’s Daily, 2001). Althoughthe costs of transporting milk are now falling, milk pro-cessors still typically focus on selected regional marketsclose to their factories. Thus, each major market isserved by only one or two dominant domestic compa-nies—Shanghai Bright in Shanghai, Beijing SanYuanCompany in Beijing, YiLi Corporation and the five-yearold MengNiu Corporation in Inner Mongolia, andWanDaShan Corporation in Heilongjiang. The largestdairy processor, Shanghai Bright, has only 9% of thedomestic market. Likewise the foreign dairy companiesthat have sought to serve the entire country have beenforced to refocus on one or two local markets, often inpartnership with Chinese processors. (On the strategiesof the dairy companies in China, see Shanghai WorldTrade Cyber Co., 2001; People�s Daily Online, 2002;Dobson and Wilcox, 2002.) Foreign companies usuallyfocus on big cities (Beijing, Shanghai, Tianjin, Guang-zhou) and the other coastal provinces, but even therehave not yet been successful in overthrowing theentrenched positions of the Chinese companies. TheFrench processor, Danone, however, has bought largeshareholdings in three Chinese dairy corporations,including Bright (Dobson and Wilcox, 2002). By con-trast, the large inland milk producing provinces likeInner Mongolia have attracted little foreign investment,until, that is, Morgan Stanley and two partners invested$US 26 million in MengNiu in 2002 (Chinagate, 2002).One of the forms of globalisation in the Chinese dairyindustry has thus been to incorporate some of theworld�s largest multinational corporations, though stillin a subsidiary role.

On the other hand, globalisation in this industry hashad little to do with international trade. In 2000, Chinaexported some $US 50 million of dairy products, princi-

1 In this paper, we use the term �processor� to refer to the industrialenterprises that process and/or package raw milk and organise itsdistribution to market. The term �production� is used to refer either tothe on-farm production of raw milk or to the entire process of dairyingand processing.

pally fresh milk (especially to Hong Kong and Macau)and milk powder (to various destinations). China thenimported $US 215 million worth of milk products, prin-cipally milk powder (especially from New Zealand) andwhey powder (especially from the USA), for use in bak-ing, pharmaceutical manufacture, ice cream and yoghurtproduction and reconstitution (Wattiaux et al., 2002). Interms of volume, using standard conversion ratios offluid milk to product, imports comprise about 8% ofthe domestic market.

A whole variety of forms of organisation thus operatewithin the milk processing sector (Table 1). There aretwo minor forms of processor: the remnant state ownedenterprises and the large group of small processors. Nei-ther of these has proved competitive within the Chinesemarket for milk products. State owned enterprises havesocial obligations that other enterprises do not carry,and so their costs are high; the remaining important pro-cessors in this category have been corporatised. Smallprocessors are hampered by lack of capital. As notedearlier, multinational capital operates in the Chinesedairy industry principally through the agency of existingChinese enterprises.

The principal forms of organisation among proces-sors are thus the corporatised SOEs and the privatecompanies. Inner Mongolia has examples of bothforms: YiLi and MengNiu. YiLi is a corporatised stateowned enterprise. In 1992, it was transformed into theshareholding system and in 1996, listed on the Shang-hai stock exchange, though about 20% of the sharesare still owned by the state. It has a board of directors,explicit profit goals, and diminished social obligations.YiLi was a mid-sized SOE but has grown rapidly sincethe transformation. There are now more than 10000employees and annual sales of more than three billionRMB in 2001. YiLi has over 20 factories producingdairy products (liquid milk, UHT, milk powder,yoghurt and ice-cream) in Inner Mongolia, Heilongji-ang, Hebei, Beijing, Shanghai, and Tianjin. (For moredetails on YiLi, see Inner Mongolia YiLi Corporation,2002.) The privately-owned MengNiu has a quite dif-ferent history. It is owned by a few individuals (withnow some foreign investment) and started large scaleoperations in only 1999. In that year it began buildinga milk processing plant in Helin that, after severalexpansions, is capable of processing more than 1000tonnes of milk daily. This processing is supplementedby another 20 or so smaller factories, scattered acrossthe region between Harbin and Xinjiang. The corpora-tion now employs some 6000 workers, about two-thirdsof whom work in the Helin plant. It is China�s fourthlargest dairy company. Now that YiLi has convergedtowards the corporate form of MengNiu, there seemslittle to separate the competitive performance of thesecompanies, or, for that matter, their relations withworkers.

Table 1Forms of organisation among milk processors, China, 2004

Processing unit Principal social relations Trajectory

State owned enterprise Social control; social obligations; welfareobligations

High obligations as compared to other forms; so high costscausing decline or corporatisation

State owned enterprise(corporatised)

State ownership, but focus on profitability;retirement of welfare obligations

Apparently competitive with capitalist processing: one ofthe two dominant forms. E.g. YiLi

Petty capitalist Often started as household operations;now hiring labour

Capital constraint means problems of quality control,marketing, and expansion

Private company Capitalist: formal separation of ownership,management and work

A dynamic form of processing, this is the other dominantform. E.g. MengNiu

Multinational capital From both financial markets and multinationalprocessors

Independent processing not competitive (lack of markets,supply); investment of money and technology in Chinesecorporatised SOEs and private companies

726 M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734

The competition between different models of process-ing that was unleashed when the government started topermit private and foreign investment in processingappears to have resulted in a convergence towards a sin-gle, dominant model. The old SOEs have either closed,remained dormant, or been corporatised. There remainlarge numbers of small processors, but, constrained bylack of capital, their share of the national market issmall. Even multinational dairy corporations have beenunable to penetrate the Chinese market on a large scale.So, the principal processors now are corporatised SOEsand private companies. While China�s market is growingso rapidly, corporations have to organise for growthrather than restructure for new markets; and there isconsequently little difference between corporatised SOEsand private companies in the social relations that areinvolved in processing: workers have few assets otherthan labour; labour is hired competitively (though someof the corporatised SOEs still carry residual pension andother social obligations); and budgets appear hard,though whether the budgets of corporatised SOEs willbe as hard as those of private companies when competi-tion intensifies is still to be seen. Both forms of organi-sation appear for now to be flourishing.

5. Regional structure of production

The location of milk production within China reflectsthe interplay of several factors (Fig. 3). Three provincial-level places dominate production: Heilongjiang in thenortheast, which claims about 18% of national produc-tion; Hebei, which produces about 10% of China�s milk;and Inner Mongolia, which produces a little less thanHebei. The three ‘‘old’’ municipalities of Beijing, Tianjinand Shanghai together produce about as much milk asInner Mongolia. In all these locations, over a third oftotal agricultural output is attributable to dairying (StateStatistical Bureau Rural Yearbook, 2000, pp. 258–259).Other Autonomous Regions, notably Qinghai, Xinjiangand Xizang also produce a high proportion of their agri-

cultural output as milk, but their relatively small popula-tions restrict their share of total national production.The distribution of milk production thus reflects (i)access to markets; (ii) the historical evolution of produc-tion systems based on grazing, especially associated withsome minority cultures; and (iii) the fact that in wetterand flatter areas, high intensity crop production cangenerally outcompete dairy cattle for access to land.

However, various state organisations are activelyinvolved in the development of ‘‘their’’ dairy economies.Quite apart from the urban and rural reforms thatencouraged independent commodity producing farmingand the emergence of enterprises like YiLi and Men-gNiu, has been the active promotion of the Chinese,Inner Mongolia Autonomous Region and local govern-ments. The Chinese government has implemented aschool milk program in selected cities and requiredInner Mongolia, like other western provinces, to reducethe ecological damage caused by rural production (andperhaps reduce the risks of dust storms during the2008 Olympics in Beijing posed by desertification). TheInner Mongolia Autonomous Region�s governmenthas translated this general directive into a plan that pro-vides incentives for herders on the grasslands and villag-ers in the mountains both north and south of Hohhot togive up extensive grazing and to relocate into compactvillages away from the mountains, where dairy farmingis be the main business.

The government of the Inner Mongolian Autono-mous Region (2002), for example, recognises animalhusbandry as one of the Region�s five strategic indus-tries. Milk production is to be organised as a large scale,high quality, green industry. There are to be two princi-pal regions of dairy production, one centred on Hohhot(including Helingeer county) and one in the northeast ofthe Region, centred on HulunBuir. It is planned thatbetween 2002 and 2005, production of milk in InnerMongolia will expand from 1.4 to 2.5 million tonnes;of the planned total, 1.2 million tonnes is to be producedin the Hohhot region and 1 million tonnes in HulunBuir.This goal is to be achieved by:

0 500 km

GuangdongGuangxiYunnan

GuizhouHunan Jiangxi

Fujian

ShanghaiAnhuiHubeiSichuan

ShaanxiHenan

Shandong

Tianjin

Liaoning

Jilin

Gansu

QinghaiShanxi

Beijing

Hong Kong

Heilongjiang

>400300 - 400

200 - 299

100 - 199

50 - 99

<50

Milk output per agriculturallabour (kg/person, in 2002)

Total cow milk output(in 1000 tons, 2002)

20001750

1000500

Hainan

Jiangsu

Ghongqing

Xinjiang

Tibet

N

Zhejiang

Hebei

Inner Mongolia

Ningxia

Fig. 3. Milk output (total and per agricultural labourer), China 2002. Source: State Statistical Bureau 2003 China Statistical Yearbook 441, 436.

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 727

1. Establishing model households and villages thatothers can follow.

2. Providing financial support. For example in 2001, theRegion organised 300 million RMB investment in thesector, as interest-free or interest-subsidised loans,agricultural support funds and work relief.

3. Privileges for key enterprises, including special poli-cies for them to import equipment, import raw mate-rials and cows, tax deductions and bank loans. Boththe YiLi and MengNiu factories in Hohhot arelocated in development zones, for example.

These Regional policies are supported by stateactions at a more local scale. The Hohhot Municipalgovernment is planning for the city to become knownas China�s ‘‘Milk City’’, in which at least 20% of thegross value of industrial output will derive from thedairy industry; in 2001 alone, the Municipal governmentbuilt 10 demonstration breeding centers for cows and424 milking stations (CRI Online, 2002). Helingeercounty and the villages within it are encouraging milkproduction, operating some milking stations of theirown, and guaranteeing loans to farmers.

Both the historical–cultural legacy of milk produc-tion and the competition for land between differentforms of production certainly have their effect on thelocation and scale of milk production in China. Butthe geography that has been created is now being

actively manipulated by the state, at various levels.The competition between regions for China�s nationalmilk market is thus not simply about the efficiencyand location of producers, but also about the mannerin which they have been organised into production sys-tems by the state. In other words, regional competitionis also competition between the different systems ofproduction that occur in the different regions.

6. Producing milk

However, just as there is a variety of forms of enter-prise engaged in processing milk, so there is a variety ofways of producing milk in the first place. The workinglives and wellbeing of farmers are inextricably boundup with the competition between the different kinds ofprocessors; but also with the competition between differ-ent ways of organising dairy farming.

Five different forms of dairy farming exist in Chinanow (Table 2). In addition, a relatively small proportionof China�s milk market is served by imports. Subsistenceproduction is in decline throughout China�s regions; andin such places as Inner Mongolia no longer exists in pureform. Most household farmers do produce for their ownconsumption, especially in isolated areas, but all sell(and produce in order to sell) at least some of their pro-duce. At the other extreme are state owned farms, the

Fig. 4. Taking the cows to be milked, Beidaolaban. Photo by BrianFinlayson, July 2002.

Table 2Forms of dairy farming, China, 2004

Form of farming Social relations Dynamics

Subsistence Owner–worker households, no interaction withmarket

In decline: demand for consumer goods

State owned farms Large farms: social control; social obligations;welfare obligations

High obligations to labour as compared to other forms;so high costs causing decline

Corporate farms Large farms: owned by processor; hiredmanagers + hired labour

The strategy of only few processors: not a core capacityof enterprises

Household producers Small, independent commodity producers: owner–worker households + occasional hired labour

Problem of scale (land and money constraint), access totechnology: need for state or corporate support. Thelargest sector, still competitive

Capitalist farms Large farms: owner–managers + hired labour Nonagricultural capital sources; access to technology;still growing

728 M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734

agricultural equivalent of the SOEs. These, too, are indecline (there are none in Helingeer county, for exam-ple), because of the high social obligations that theyare constrained to carry. Another form of large farmis the corporate farm, that is, operated by a milk pro-cessing company as a capitalist operation, with hiredmanagers and hired labour. Beijing SanYuan Foodand Shanghai Bright provide two examples: BeijingSanYuan Food owns about 90 farms with 30000 cowsin total and Shanghai Bright owns some 19% of the58000 dairy cows in the Shanghai area. Likewise, HebeiLongfei Group, based in Baoding, runs an operationthat integrates the raising of cattle through to process-ing, distribution and marketing. It milks 500 cows andachieves average yields of 6800 kg/cow/year, severaltimes those achieved by independent commodity pro-ducers (on these choices, see Qi, 2001). Notwithstandingthese large and famous examples, this form of produc-tion is not common: many Chinese companies are shortof managerial expertise and such processors as YiLi feelthat farming is not one of their core capacities. Theremaining two means of organizing dairy farming arefar more common.

6.1. Household production

The households that engage in dairy farming areindependent commodity producers (Friedmann, 1986;this is in distinction to the position taken by Goodmanand Redclift, 1985 , who argued that family farms com-monly employ wage labour and accumulate some capi-tal, and so cannot be simple commodity producers).Unlike capitalist producers, the functions of ownership,management and work are combined into a single indi-vidual or, more commonly, household. These farmersearn an income, rather than a profit or a wage, and inprinciple at least they can decide what to produce,how to produce it and with what degree of effort. How-ever, they do produce for the market, and so their pro-duction decisions are evaluated by purchasers.

The farmers ‘‘own’’ their resources that they need inorder to produce. They have use rights over their house-

hold land; they control their own labour; and in placeslike Beidaolaban, the cows that produce milk belongto the farmers. However, lack of finance and the con-straint on farm area mean that virtually all farmersown no more than three cows (see Fig. 4). In Inner Mon-golia a producing dairy cow may cost RMB 30000(Zhan, 2002) and a female calf RMB 3000 (Cui, 2003),in a region where household annual net farming incomeis only RMB 12000 (Table 3). The farm economy in Bei-daolaban is: farmers grow corn (for fodder) and vegeta-bles (for home consumption), while cattle are largelykept within the household compound. Virtually all thefeed is fodder; there is some pasturing of cattle on road-side verges.

Small scale production means that the farmers cannotjustify investing in machines to milk their cows. Further-more, milk produced in such a way would not be ofsufficiently high or controlled quality, so dairy corpora-tions typically have to invest in communal collection sta-tions and milking machines within individual villages.Such a collection station could serve 200–300 cows. InBeidaolaban there are three milking stations, operatedby two different dairy corporations (the technology ofone such station is illustrated in Fig. 5). Each collection

Table 3Indicators of well being, Beidaolaban, 1997–2002

Indicator Mean 2002 Mean 1997 Number ofobservations

T

Income 1 12688 5525 8 3.42*

Grain 2 0.1911 0.5250 28 �4.92**

Animal 3 0.7982 0.3750 28 5.60**

Assets 4 38494 4700 17 5.20**

Livestock 5 30765 2376 17 4.21**

Rooms 6 9.57 7.29 28 2.41*

Area 7 191.07 145.71 28 2.45*

Notes:

1 Net household income, annual in RMB2 Proportion of agricultural income from grain production3 Proportion of agricultural income from sale of animal products4 Value of productive assets, RMB5 (Of which) value of livestock, RMB6 Number of rooms in household residence7 Area of household residence, sq.m.

T is the test statistic, used to assess the difference in mean values of thevariables indicated; tests are paired sample.Source: sample survey of 28 households, September 2002.* The difference in means is significant at p < 0.05.

** Significant at p < 0.001.

Fig. 5. Milking in a milking station, Beidaolaban. Photo by BrianFinlayson, July 2002.

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 729

station has a tank and cooling systems, and milk is col-lected daily by company drivers in company trucks. Themilk is trucked up to 35 km to Hohhot (YiLi) or Helin(MengNiu) for processing. (There are some differencesin policy between the two large milk processors in InnerMongolia: YiLi owns and operates 300 collection sta-tions within the Hohhot region, representing an invest-ment of over RMB 100 million; MengNiu contractsindependent operators to build and operate stations.In addition some local governments have invested inmilk stations, in order to stimulate the dairy industry.)Since there is a minimum scale of milk production (typ-ically 3000 litres per day) before a company will invest ina milking station, local governments also play a role in

coordinating groups of farmers to begin to raise dairycows.

The dairy corporations make contracts with the farm-ers, who become simply suppliers. To assist in expand-ing the supply of fresh milk, milk companies providefinance to help farmers buy cows, in return for whichthe farmers are contracted to the company. There aremedical services for the cows, advice on feeding andon embryo technologies. The contracts with the farmersare often guaranteed by the local governments. Dairyingis popular, but farmers need money to buy the cattle andconstruct sheds: finance comes from the company, localgovernments and the farmers themselves; loans are oftenguaranteed by the local government, too. Contracts arefor five years. For MengNiu, contracts are directly withthe farmers. For YiLi, in some villages, contracts aredirectly with the farmers; in others the contracts are withfarmers and local governments.

Farmers agree to supply milk to the corporation andnot to supply milk to competing companies. The com-pany agrees to buy all the milk produced by the farmers,at a minimum price, but increased quality implies higherprices. Some collection stations contain modern milkingmachines, that allow the identity of each farmer�s cowsto be identified, but in most stations, the milk producedby each household is weighed and only periodicallysampled for quality.

The result has been a rapid transformation of agricul-ture within the village of Beidaolaban. Five years ago,the farmers in the village were predominantly grainand vegetable producers, with only a minority earningmost of their income from dairying (see Fig. 6). By2002, 85% of the households earned at least 80% of theirannual income from milk production. On average, theproportion of net household income derived from thesale of animal products rose from a third to 80%. Manyoffspring of the farmers work in Hohhot, either in a con-struction team (owned by ‘‘rich Wang’’) or in otheroccupations. However, apart from a few people workingfor the local government, for the Party, in the milkingstations, or as drivers, virtually everyone else is a dairyfarmer. Of course, the change to a dairy economy withinthe village has meant that farmers are buying more ofsuch inputs as fuel, electricity and fertiliser. However,the social organisation of agriculture within Beidao-laban has changed little. Farm holdings have not beenconsolidated, nor are famers tending to lease land fromtheir neighbours; there is little increase in expenditure onhired labour.

As rapid as was the transformation of agriculturalpractices, so also has been the growth of income. ForInner Mongolia, Beidaolaban is now a well-off village.Of the 28 farmers interviewed, 25 possessed a colourTV, 19 a telephone, 17 a sewing machine, 15 a motor-cycle, 13 a refrigerator, and 10 a washing machine. Inthe five years between 1997 and 2002, net household

02

468

101214

1618

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Proportion of income

Num

ber o

f hou

seho

lds

Grain 2002Grain 1997

0

2

4

6

8

10

12

14

Proportion of income

Num

ber o

f hou

seho

lds

Animals 2002Animals 1997

Fig. 6. Frequency distribution of households, by proportion of nethousehold agricultural income derived from grain production (uppergraph) and animal production (lower graph). Source: sample survey of28 households, September 2002.

730 M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734

incomes more than doubled (Table 3) and the value ofhousehold productive assets multiplied nearly ten times,due largely to an increase in the value of household live-stock assets. There was a substantial investment in hous-ing, with both house area and the number of roomsincreasing significantly.

This is a model of dairy farming that is emulated bysome other dairy companies, such as Sanlu Corporationin Shijiazhuang (Hebei); we have also seen the samemodel working in Shaanxi province. The forms of con-tract and linkages between YiLi, MengNiu and thefarmers of Beidaolaban represent important strategicchoices:

• on the part of the corporations, to expand the supplyof milk through biotechnology (compare Goodman,1991), to gain secure access to milk supplies and toprevent competitors from expanding within its supplyareas, in an environment characterised by competi-tion over access to raw material as well as to market;

• on the part of farmers, to gain access to credit, tech-nical advice, milk markets, and some security ofprice, in an environment characterised by constraintson availability of finance and land.

Rural households may have been economicallyenfranchised by the reforms of the late 1970s, but thedecisions of dairy farmers like those in Beidaolabanhave become increasingly interdependent with those of

large, urban corporations. However, these contractsare relatively benign compared to the forms of contractfarming that have been reported in Africa and SouthAmerica (for example in Little and Watts, 1994; Ray-nolds, 1997), for prices are not (yet) being driven down,nor are farmers� production decisions being dictated bythe company. These farmers remain independent com-modity producers rather than disguised wage labourers(compare Little, 1994; Watts, 1994).

6.2. Capitalist farms

However, even within Helingeer county there existother ways of organising milk production, that involvelarge scale dairy farming. In Beidaolaban, as in othernearby parts of Helingeer county, the large farms areprivate investments. We describe two models, the firstinvolving a small farmer becoming large, and the othera large corporation investing in dairying.

Zhao Jun farm is located in Xin Sheng village, Hel-ingeer county. On 15 mu of land (about 1 ha), Cui ZhiGang raises about 180 Friesian cows, about one thirdof which are active milk producers. (The others areeither pregnant or immature.) Like the smaller farmersin the region, he grows some of his own feed, notablyclover, but buys about two-thirds of the fodder requiredby the animals. With that density of cows, there is alarge infrastructure of buildings, including a milking sta-tion that can milk all of the cows simultaneously, threetimes a day. His yields are about 6000 kg/cow/year,about three times the Inner Mongolian average and ona par with yields in Beijing and Shanghai (Du, 2001).He transports the milk to the MengNiu factory, some20 km away, in his own tanker.

This is a private operation. Mr. Cui�s parents werelocal government officials in Helingeer county, urbanresidents rather than peasants. On leaving school, helived in Japan in 1986 and 1987, to earn money andsee the world. There, he learnt about the techniques ofdairying and saw the opportunities for expanding thescale of production. On his return, he permanently con-tracted the land from the village and bought nine cows.The capital came from his earnings in Japan, RMB30000 from a bank and his parents. Since then, he haslearnt about artificial insemination (buying the semenfrom the USA via Shanghai) and about the value of clo-ver as feed (the seeds for which came from the USA).

Since 1992, the prices received for milk have risenfrom RMB 1.2/kg to RMB 1.73/kg, an increase that,together with his expansion, has seen his operatingprofit rise to perhaps RMB 300000/year. Now, MrCui employs some 15 workers, including a full timesupervisor and a full time college-educated vetinarian.These workers are on contracts that average aboutRMB 700/month, plus accommodation and board. Hehas a house in Hohhot, a car and several mobile tele-

Fig. 7. The HeHua development plan. Source: photo by BrianFinlayson, July 2003, of the wall at the main site office, HeHuaCorporation, Beidaolaban.

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 731

phones. Mr. Cui has evidently risen from the lowerranks of government officialdom to become a small cap-italist: he is advancing money to buy means of produc-tion and hire labour to produce milk for sale in themarket. There are, Mr. Cui says, a few other farmersin the district who are beginning to expand in this fash-ion, but none have yet more than 50 cows.

In Beidaolaban itself, large scale production is beingdeveloped by HeHua Agricultural/Forestry/AnimalHusbandry Comprehensive Development Limited Com-pany, a division of the Inner Mongolia JuHua Group.JuHua is a development company, owned by the Wangbrothers (‘‘rich Wang’’). The Wangs were peasants fromBeidaolaban who rode on the back of construction con-tracts from a Hohhot developer (La Fu, who in turn hadmade his money in Shenzhen). According to companybrochures, by 2001, JuHua Group had nearly RMB100 million of registered capital, RMB 50 million offixed assets and RMB 160 million of circulating capital.On average it employed about 2600 workers (includingsome from virtually every family in Beidaolaban) andanother 300 management staff and technicians.

In 1995, La Fu and his friends the Wang brothers‘‘bought’’ (i.e., contracted for permanent rent) 5000mu (more than 300 ha) of sandy waste land along a riveron the border of Beidaolaban and a neighbouring vil-lage. Later, La Fu sold his share to the Wangs andmigrated to New Zealand. They paid: a second-handJeep (local government officials, for the use of), one elec-tricity transformer and grid connection for each village,and one primary school (built by JuHua). The marketvalue of these items was said to be about RMB200000 (about AUD 120/ha). For years, little was donewith the land, until in April 2002, the State Governmentpromulgated its Few Ideas On Further Betterment For

The Policy Of �Returning The Grain Plots to Forestry�.These few ideas included subsidies for returning grain-producing land to forest and reafforestation of otherdamaged lands.

The current plan is illustrated in Fig. 7. It involves:

1. Reclaiming farmland, by converting waste into arableland, to access funding and loans from the Ministryof Land and Resources.

2. Planting trees and developing a tree nursery—greenimage building—to attract funds from the centralgovernment�s Environmental Protection Bureau andthe Western Development Office.

3. A fish pond and eco-tourism, to provide a diversifiedsource of income; and

4. Up to 1500 dairy cows, some of which will be fedfrom the produce of the reclaimed farm.

The productivity of the farming operation on this sandyland depends on manure from the cows and legumes(from Canadian seeds). The operation will also provide

stock for the local farmers (the price of milk cows hasincreased at least five times over the past five years inInner Mongolia: Zhan, 2002).

Such operations are replicated in other parts ofChina, often involving urban dwellers who have accu-mulated some money and can invest it in large scalefarming. Such farms afford a view of the way in whichthe policy changes of the last 25 years, growing affluenceand links to the global economy (commonly as a sourceof finance) are empowering corporations to transformsocial relations within the countryside even in such smalland isolated places as Beidaolaban. The farmers withinvillages where such farms are located lose at least someof their responsibility land and thus become labourers,either on the capitalist farm or in a nearby city. Suchlabourers may retain a little land and their village mayrequire that they be preferentially hired by the largefarm; but the budget constraint is hard: they do notyet comprise an incipient proletariat of agriculturallabourers, but the process seems to be underway. TheZhao Jun farm on a small scale and the larger JuHuadevelopment offer the prospect of capitalist formsof enterprise within dairy farming that compete withindependent commodity producers (and their links tocapitalist dairy corporations).

7. Conclusions

China�s dairy economy, and the peasants, capitalistfarms and urban enterprises that work within it, have

732 M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734

witnessed a variety of forms of market-oriented develop-ment. At one level, the global economy has penetratedthis form of rural economy through imports: to a limitedextent of milk products; more significantly as capital forfarms or enterprises, or as biotechnology embodied insuch inputs as semen, seeds and embryos. But marketsalso emerge as different systems of valuation competeto occupy wider and wider areas of life. This competi-tion occurs both between regional models of productionand within regions, between different ways of producingmilk and its products.

The contractual relationship between peasant dairyfarmers and corporate processors is a distinctive formof rural economy. It is based on independent commodityproduction, on small farms run by the peasants whohave the responsibility rights to land that they manageand work; there is virtually no hired labour. The pro-duction is, though, market oriented, for it is largelyorganised by and contracted to large, urban corpora-tions. The system also relies on crucial state supports.Not only is this model of economy locally dominantaround Hohhot and other parts of the country, it is alsodynamic: it is expanding both internally (as increasingproportions of farmers become dairy farmers) and exter-nally (as the farmers in the southern hills and the north-ern grasslands of Inner Mongolia are brought into theproduction system).

The development of this model of production aroundHohhot over the last decade reflects the opportunitiesoffered by the market-oriented policies of the centralgovernment, pre-existing social conditions, and theforms of social and economic change that have occurredin China in the last quarter century. Critical market-ori-ented policies include the household responsibility sys-tem (through which farmers have the right to makeproduction decisions about land for which they havelong term responsibility) and the reforms to the urbanproduction system (that freed up commodity marketsand allowed various forms of profit-oriented enterprisesto emerge). Amongst the important pre-existing condi-tions are the harsh local environment (that precludesmany alternative forms of production) and the traditionof milk consumption in Inner Mongolia (YiLi was along-standing processor of milk and milk products forthe urban centres of Inner Mongolia). However, theseconditions and the policies have been in place for severaldecades; yet it is only in the last decade that this modelof rural development has emerged in places likeBeidaolaban.

That is, superimposed on these background condi-tions and policies have been trends that have themselvesbeen produced by the market-oriented policies of thecentral government. At a macro-scale have been theemergence of demands for western development amongthe inland provinces, including ecological restoration,and the rapidly growing market for milk products in

China (itself a reflection of growth in urban incomesand imitation of western consumption norms). Morelocal have been the effects in Inner Mongolia of thereform of state-owned enterprises. Both the largest citiesin the Autonomous Region—Hohhot and Baotou—arereplete with the skeletons of once active state-owned fac-tories that could not compete in the markets of modernChina. Unemployment rates are high and employment isnot booming as in the cities of the coast. Thus there islittle incentive for the farmers to migrate to the city,either giving up their household responsibility land orcontracting it to others (which have happened in thePearl River and lower Yangtze Deltas). Offspringmigrate, but that is because farm incomes can supportone household well but not several generations withina household. Nor has the industrial production systemof Hohhot been sufficiently dynamic to seek to tap intorural labour markets by subcontracting production intosuch villages as Beidaolaban (as has happened inJiangsu). In other parts of China, that is, the policy set-tings have interacted with the local social and environ-mental conditions to produce quite different models ofrural development: this is evidence of path dependence.And now, this model of production having emerged, it isreceiving active support from all levels of government,and from the urban corporations.

However, this model of regional production is notonly competing with other regional models, it is alsocompeting with other systems of valuation. Among theprocessors of milk, state-owned and petty capitalistforms of production hang on, but the market for milkis dominated by corporatised SOEs and private compa-nies both of which rely on capitalist models for theirinternal organisation and corporate values. Among thefarmers, there remains active competition, between theindependent commodity producers and the large scale,capitalist dairy farming that has emerged around Hoh-hot, as in some other parts of China. Significantly, cap-italist farming does not emerge from the local farmers;its represents infusions of capital and technology fromoutside the region—either urban property income orearnings from work overseas. The barriers to householdproducers who are seeking to become capitalist farmersseem large indeed.

For the present, the expansion of the market for milkis sufficient to ensure that both forms of farming cansurvive. In the future, competition between the twoforms of production may intensify. The outcome of thatcompetition will depend on the technologies that can bedeployed by the two kinds of farmers and the quality ofthe milk that they can produce; on future governmentpolicies towards household farming in the provinces;on the alternative crops that can be produced to com-pete with dairying for land and labour; and above allon the relative costs of hired labour as compared to indi-vidual household producers. It is likely that the trajecto-

M. Webber, M.Y.L. Wang / Geoforum 36 (2005) 720–734 733

ries of costs of labour and the alternatives for householdproducers will be different in different parts of the coun-try; and hence that the outcomes of the competition willbe different in different parts of the country.

Acknowledgments

Michael Webber acknowledges the support of ARCgrant DP0209563, which supported the field work onwhich this paper is largely based. We have both bene-fited from discussions with Brian Finlayson and withthree groups of students who have visited the villagewith us on some field trips. And we are, above all, grate-ful to the villagers of Beidaolaban for their hospitality:they were generous with their time and knowledge.

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