China’s economic transformation was initiated in the rural sector nearly 40 years ago through the reform of the system overseeing the right of using arable land.

The key to this reform is that while the land is still legally state or collectively owned, its usage is contracted to every rural family through rental agreements for as long as 50 years. Such a system turns the collective land ownership effectively into a family ownership as peasants can decide what to grow on their land or lease it out for a rental profit.

As individual family has the right over the use of their land, the boundary between peasants and their land has changed. Consequently hundreds of millions of peasants are able to becoming workers for the export orientated processing industries in cities.

Basically the rural reform has been positive to the expansion of Chinese economy and rise of income to rural residents; however its impact to the Chinese agriculture and rural communities is far diverse and complicated.

  1. Lack of arable land and running down of rural communities

Despite of being one of the biggest countries in the world, China only has 13% of its territory arable, which is about 1.8 billion mu (0.067 hectare).

Within this total arable land, there are 490 million mu “water-paddies” and 430 million mu irrigation available paddies, which can guarantee a good harvest in normal circumstance. The rest half arable land are distributed on mountainous hills of which heaviest is really a matter of “dependent on heaven”: if it rains favorably the yield will be okay, otherwise expectation should not be any good. To those peasants living in mountainous regions to feed themselves will be the biggest contribution to the nation.

Obviously it is absolutely important for China to preserve its quality arable lands, which produce 70% of grain and 90% of agricultural products ranging from vegetable to fruits of the nation.

However these quality arable lands that share 7%of China’s territory have been very venerable to the threats ranging from pollution, desertification, running down of rural communities and acquirement for industrial and housing purposes.

An investigation cover a period between 2005 and 2013 by the Environmental Protection Ministry found that 16.1% of China’s soil and 19.4% of its arable land showed contamination. It is a major concern that rapid industrialization could cause irreparable damage to China’s environment.

According to the China State Forestry Administration, the desert areas are still expanding very rapidly threatening livelihood of 400 million people.

Running down of rural communities has become a widespread problem in China as the young and strong all went to cities for better paid jobs. In accordance with China’s official paper “People’s Daily” about thirty thousands of villages are disappearing every year. From 1990 to 2010 half of China’s villages with administrative functions have disappeared.

Traditionally Chinese peasants always do every thing possible to maintain their land in good condition. However such a way of living is no longer feasible in many rural communities where only old and children are left. Lack of manpower which encourages excessive use of fertilizer and chemicals has resulted in deterioration to much of good fields. In addition detergent and rubbishes such as plastic and glass bottles are thrown every where in those running down villages causing damage to the land nearby.

2. If China should stick to self sufficient in grain supply

Since 2012, there has been a continuous surge of agricultural cost in China due to a number of domestic and international factors:

Domestically, the scarcity of arable land; continuous and massive shift of agricultural labor to processing industries in cites and increased usage of fertilizer and chemicals have set up a high cost platform for the Chinese agriculture.

Internationally the collapse of the grain price on the global market after 2012 due to sluggish demand from a weak world economy has widened the gap of agricultural cost between China and the world average.

Reduction of oil price is another major factor as it discourages the transformation of corn into petrol and result in an oversupply of corn in the international markets.

Furthermore slash of the oil price has dramatically affected the shipping cost of grain. When the oil price was US$140, it cost US$120 to send one ton of corn from Maceio Bay to China; now it only costs US$40 thanks to reduced oil price.

In 2014 one fifth of the total consumption of grain in China which was 250 billion kg was imported, the only major economy in the world with such a great amount of grain importation. The total export of soybean in the world is about 100 million ton while two third is purchased by China.

Given agricultural cost in China is higher and many types of gain products are cheaper in the international markets than that of in China, question is repeatedly raised if China should expand its grain importation and cut its heavy subsidies on grain production.

Really the question is about if China should maintain self-sufficient on grain supply. By arguing on following grounds the Chinese authority emphasized the importance of self- sufficient:

If China to rely a great portion of its grain consumption on imported, its huge demand would send the price of grain products skyrocketed in the international market.

In addition, the low price of grain will not be a norm due to fluctuations of the oil price, global warming effects and rapid growth in population in parts of the world.

If China should abolish its position of self-sufficient in grain production, China would find itself a victim of fluctuation of the grain price.

In order to maintain grain supply basically self-sufficient, it is necessary for China to keep related subsidies in place. In fact this is a matter of national stability as hundred millions of Chinese peasants are still dependent on grain production. Without subsidies the wellbeing of this huge population and the social stability will be under threat.

3. Urbanization and rural population

The Chinese authority might have an unrealistic expectation on urbanization as a way for the transformation of the Chinese rural society. The latest data show that Chinese cities are no longer able to absorb migrants like in the past. The increase of migrant workers was only 0.4% of 630 thousands in 2015 and dropped down to 0.3% of 500 thousands in 2016. Given the total size of Chinese migrant worker is about 170 million; increase by a few hundreds of thousands is negligible.

Such a significant slowdown indicates that the reduced international demand for the Chinese labour-intensive products and the restructure of economy in Chinese cities as a result has reduced the demand for more migrant workers. To a degree the flow of migrant workers from countryside to cities has been stopped.

4. Concentration of land and agricultural businesses

Because of relocation of hundreds of millions migrants to cities, 70 million rural families have transferred their land to other parties in accordance with the latest report. The total land transferred equals to one third of the total land under rental contract to individual family.

Much of the land has been transferred to families that have accumulated advantages in agricultural production in terms of technology, equipment, capital and manpower. there are also resurgence of collective agricultural communities that peasants invest their land, money, technology and manpower into agricultural businesses.  .

Currently there are 3.5 million families and entities in control of 350 million mou arable land, which is equivalent to 100 mou per family and 10 times of the average of Chimes rural family.

Though this is very limited in comparison with the average size of farmers in west countries, it is a big step in the concentration of arable land to families that are capable of taking care of the land and having good heaviest.

Another outstanding characteristic of Chinese agriculture is the emergence of   large scale agricultural businesses specialized in providing services to individual families ranging from technology support, provision of machinery services and processing. For instance 92% of the wheat in China is harvested by machinery. This does not mean that 92% of the wheat growers have bought the machinery instead it is those agricultural businesses provide such services in a market environment. During harvest season, those combine-tractors   are busy with jobs across different provinces with government support such as transportation, storage and weather report. Furthermore the use of drone in China for agriculture is far superior to the world average both in terms of quantity and application.

It will be improper to say that the technology and equipment used by farmers in South Korea, Japan and other countries is of low level, however the services to agriculture are normally limited to families in those advanced economies. Limited economies of scale has prevented farmers in west countries from  deploying machinery and technology in a cost effective way and large scale.

Therefore, concentration of arable land to capable families and collective entities and growth of large scale agricultural services are the two most positive aspects that indicate the way-out to the Chinese agriculture.