A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
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Agriculture, Key to the Chinese economic and social future

In China, agriculture is at the crossroads

by Marie-Aude Even
Center for Studies and outlook, French Ministry of Agriculture

Agriculture has always been a strategic sector for the Chinese economy. Since the end of the late 1970s "Great Leap Forward", whose goal was to stimulate production in record time through agricultural collectivization and planning, the successive governments have posted new priorities for agriculture: Supporting growth, curbing poverty and ensuring food self-sufficiency.

Today, Chinese agriculture must be reformed once again. Faced with its own limitations, it stands at the crossroads. Three major uncertainties remain: Which will be the consequences of the depletion of an abundant agricultural workforce, the end of small family farming and grain self-sufficiency? More global issues are being raised out of these uncertainties: What new model is China going to follow? Will the country be able to feed 20 percent of the world population with only 10 percent of the land? What future for the grain sector, long considered to be strategic? Marie-Aude Even, an agricultural expert at the French Ministry of Agriculture, addresses these issues in a survey, whose excerpts we are publishing below 1.

momagri Editorial Board

Chinese agriculture at the crossroads


The depletion of an abundant workforce and the improvement of lifestyles for the rural population?

The most developed regions are struggling to hire agricultural labor and are facing more heated salary demands. Considering the positive evolution of urban and rural wages since 2005, labor is becoming rare and thus calls the shots, even in the most remote provinces.

The population ageing, stagnation and then decline in a strong economic growth environment should emphasize this phenomenon after a certain length of time. A rapid enhancement of rural lifestyles could then result, thus contributing to the development of the domestic market and allowing the restructuring of Chinese agriculture without rural unemployment. But this phenomenon carries a major risk: The end of China's competitive advantage in terms of labor costs and rising production costs––thus higher prices for food and manufactured goods. This could lead to lessened competitiveness as well as shrinkage and relocation of activities.

We are therefore observing an up selling of Chinese products that attests to a search for new sources of competitiveness. Nevertheless, that demographic and social change remains controversial and its scope is based on the positive evolution of wages. Yet, the Government undoubtedly plays a noteworthy role by backing these evolutions.

The persuasive restructuring of agriculture––currently delayed through various means (see following section)––could also "free" again more labor and partly stymie that phenomenon. Besides, such change is probably very uneven according to regions. A more advanced knowledge of rural realities remains indispensable to better grasp and anticipate these evolutions and their consequences.

Lastly, the consequences of rising wages on rural poverty could be partly strained by the impact of the ageing of the population. The rate of dependence of seniors is estimated to reach 23.9 percent in 2030, and 34.1 percent in rural areas. Yet, social benefits currently represent less than 10 percent of seniors' income in rural areas, and less than 60 percent in urban areas. A stronger social policy that includes the rural population is needed, but will have sizeable costs.

The end of small family farming?

The end of small family farming?2concerns the structural reforms to be adopted by China, and their consequences on production structures, and more widely on rural poverty and social inequalities.

Initiated in 2008, the reform of the land property system represents the first major project liable to profoundly alter current structures, and thus farmers' income. The measures announced are maintaining the system of usage rights––officially recognized in the form of 30-year leases––and supervise their transfers, which were informally organized up to now. Farmers giving up their usage rights become some kinds of shareholders and can work in the cities, while receiving a stipend. Such reform is intended to improve the expansion of structures and the access to credit. However, selling and modifying usage rights remain prohibited.

These changes entail different pitfalls. On one hand, there is a genuine gap between the laws and their implementation by local authorities. The success of the reform thus seems to be tied to improving the ability of the rural population to stick up for itself. The steps to strengthen the organization of the civil society are heading in this direction, but progress remains moderate.

On the other hand, the implementation of potential "structure controls" remains very vague, whereas the law seems to be intended to encourage rural development based on large farms, or even agribusiness systems.

In addition, the payments of usage right transfers might currently be under-evaluated and might not guarantee the role of "minimal income" previously provided by the land plot. This reform should therefore go hand in hand with a reform of social safety nets and especially the Hukou system3. However, the authorities worry about the size of expenditures to be undertaken and the massive influx of migrants that could follow, resulting in the formation of shantytowns they have been successful in avoiding up to now. Better salaries and the addition of social charges could produce a partial loss of industrial competitiveness. The issue thus remains untouchable, even if the above-mentioned demographic changes could hasten the needed transformations.

Lastly, the sanitary scandals and the emergence of a food demand focused on quality and safety require the implementation of standards and traceability systems that are liable to exclude a share of small scantily organized producers. For now, reforming the land property system is in line with the emergence of large agribusiness companies that establish integrated operations with the hiring of both workforce and farmland.

Another model is based on contract agreements between producers and a processing entity, thus insuring traceability at a lesser cost. Agribusiness clusters are already operating for milk and barley for instance.

A third path infers the promotion of producer organizations that could fill these duties. Maintaining "rustic" structures is therefore possible, but infers strong land and structure control policies, as well as supporting the organization of integrated operations. For now, the choice does not seem very clear for the Government, which seems to be experimenting with the various possibilities. It is probable that the three models will more or less cohabit according the targeted zones and products.

Towards the end of national grain self-sufficiency?

A final major uncertainty involves the paths that China will follow to ensure its food security. Either the nation will decide to cast off its objective of grain self-sufficiency and focus more on its comparative advantages (fruit and vegetables for instance), hence relying on the market for its basic supplies, or it will maintain the existing system, eventually at the price of protectionist measures, a direction that was adopted during the food crisis and the drop in prices that followed. Undeniably, China stabilized domestic grain prices in 2008 by implementing temporary measures, without concerning themselves with their compatibility with WTO rules. It has therefore backed positions that were sometimes close to French ones regarding the strategic nature of agriculture in terms of food sovereignty and economic growth. However, these two avenues seem to be hardly long lasting or plausible, in view of the limitations already discussed. Nevertheless, China is massively investing in agricultural research and biotechnologies, in particular GMOs with a recent $3.8 billion program. The country also has the means to uphold the economic interests of farmers, while making other needed investments.

However, a third option seem to be opening up towards a partly "off shored" food securization through investment in agricultural assets located abroad and using Chinese labor. China thus invested $30 billion in soybean farming in Argentina since 2005, thus largely contributing to its economic expansion and at the same time securing its supply. China already has 30 agricultural cooperation agreements involving 2.2 million hectares (5.4 million acres) at the regional level, in The Philippines (1.2 million or close to 3 million acres), in Laos, in Kazakhstan and in Russia.

1 The complete document is available at: http://www.agreste.agriculture.gouv.fr/IMG/pdf_analyse241010.pdf
2 The first two uncertainties affect the choice of an agriculture that respects sustainable development and the depletion of an abundant workforce.
3 A system to control the place of residency (internal passport) aiming to curb the strong internal migrations in the 1990s.
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Paris, 25 June 2019