China’s reform was initiated in the agricultural sector 40 years ago through introduction of the family production responsibility system, which led to division of the collective owned farming land to every rural family through long lease contract over 30 years (renewable).
Peasants can decide what to grow in their leased land, even release it to others for a rental profit. Such freedom is a key contributing factor to China’s rapid economic expansion as it frees hundreds of millions of peasants from agriculture to export orientated processing industries.
However 40 years on the Chinese agriculture faces a set of different problems.
Primarily Chinese rural sector suffers from a widespread rundown due to lack of energetic working population.
A report by National Economic Data Centre, Tsinghua University released in 2017 cited that 21.6% of migrant families left countryside had bought houses in towns and cities. Up to 80% of the young children of rural residents would have their life relocated to cities and towns in a foreseen future. The report commented that if this trend continue the Chinese rural sector would experience dramatic reduction in population in 15-20 years.
Desertification of houses and farming lands, rundown of public sanitation and wide spread pollution are common scenario in Chinese rural communities. A report by Liu Yanwu published in “China Youth Daily” in 2008 revealed that the suicide rate of the elderly people in rural areas has risen sharply since 1990 and remained at an alarming level due to sickness, lack of basic care and poverty.
On the other hand, maintaining employment to migrant workers in their millions in cities has increasingly become an acute problem due to sharp rise of labour and environmental cost in China’s costal regions.
China has two choices: First, it might continue with the existing approach of pooling resources into major cities, in anticipation that flourish of service industries in mega cities would gradually absorb the labour force.
But the critics say in such a way, in addition to widened gap between urban and rural sector, China is likely to encounter the same problems troubling mega cities in other countries such as New Deli, Mexico City, San Paulo and to a less extent New York. There are modern and affluent communities on one hand but slums, congestions and crimes on the other.
Chen Xiouwen, one of the top level government officials overseeing agriculture commented in an official TV programme that even if China’s urbanisation climbs to 70% by 2030, there will be still 450-500 million people living in rural sector. It will be impossible to secure national stability if such a large rural population living in a poor and polluted environment.
It is in such a background that revitalization of China’s rural sector has been set as a key national strategy in the 19th congress of Chinese communist party.
To a great extent, such aspiration is feasible thanks to China’s efforts in two aspects:
First, rapid upgrade of infrastructures
The expansion of coal fired power stations and establishment of solar, wind, hydraulic and nuclear facilities have made power supply readily available in most rural communities.
The transportation systems including high-speed rail, railway and highway networks have made China’s inland provinces closer to the advanced coastal regions and new trade routes to Central Asia, Europe, Southeast and south Asia.
The extensive coverage of 4G telecommunication, development of clouding computing and big data analysis offer new opportunities for agricultural businesses accessing to E-commerce and advanced technologies online. In Nov11, 2017 only ( a date dedicated to E-Commerce in China) processed agricultural products valued at 4.5 billion yuan ( Roughly U$600 million) were sold on line. Some of the products were transported out from mountain area by drones.
Second, innovations in the legal frameworks overseeing transfer of rural land
It has been a norm for those migrant workers working in cities to release their leased land to others to grow crops for a rental profit. Such transfer has proven to be productive as concentration of farming land to families capable of conducting profitable farming improves the efficiency in the use of farming land.
In addition to improvement in agricultural efficiency, the government is increasingly attaching importance to the function of this transfer of farming land in poverty reduction. It is found that by investing their leased land into agricultural businesses, poor families not only have gained income through wages but also the return on their land.
It has become a trend for local governments to support agricultural businesses through financial, managerial and technological support. Many of these agricultural businesses are collectively owned with heavy involvement of local government officials. Nowadays, there are 2.8 million agricultural businesses operating in China covering a population of 12.8 million rural residents.
However in comparison with the farms in west countries, the size of Chinese agricultural businesses is far small. Many of them cover an area less than 10 hectares. Most of the farming production is done on family basis.
Obviously, the agriculture alone is insufficient to accommodate existing rural population. The logical solution for China to preserve population in rural area and offer them a decent living standard is to develop agriculture related service and processing industries and tourist industries.
The achievement of mechanisation of the Chinese agriculture is a good example. Nowadays there are many agricultural businesses in China offering agricultural machinery services. The flourish of such businesses has avoided every rural family to have a whole range of agricultural machines but through their services 66% of agricultural production in China is carried out by machines.
The government aims to extend this pattern to a wide range of agricultural activities ranging from seeds, animal feed, fertiliser, technical consulting, transportation, storage, processing, and marketing.
The development of these agricultural businesses require land and investment. Now the government is developing policies to allow rural residents capitalise on their homesteads.
In the past, defined as collective owned property, homesteads of rural families could not be traded. Now the government is testing polices separating the right of using homesteads from the property right. Rural families are allowed to lease or invest their right on the use of homesteads in agricultural businesses.
It is reported that in Yiwu, Zhejiang province, 3,160 rural families have withdrawn from their homesteads covering an area of 276,600 square meters. Based on this amount of land 24 financial institutions have issued 6,763 mortgage loans to these families valued at 3.223 billion yuan total for various proposes.
The “land ticket” system which originated from Sichuan province several years ago has been a vigorous try in the management of homesteads. Basically when rural families return their homesteads into arable land by demolishing their houses, they are entitled to list the land in the land market in cities. The developers in cities can access to a piece of land of equal size after purchased the listed land in the land market. In such a way, the returning of homesteads into arable land in remote countryside is linked to land market in cities. It not only preserves the balance of the land for agricultural and commercial usage, which is important to China where arable land is very limited, but also benefits rural residents with the capital gain on land.
The overall situation of the Chinese rural sector is very complicated. While rundown is obvious in some areas and aspects, there are hope and achievements on the other. In accordance with World Bank data on China, “the share of the population living in poverty fell from 88.3% in 1981 to 66.6% in 1990 and 1.9% in 2013.”
The Chinese economy is undergoing a major transition. Revitalization of agriculture is one of the key characteristics of this process. The formation of the agricultural production and rural societies in China will have fundamental changes. Some commentators predict that the total investment to rural sector will reach 40-50 trillion yuan in the foreseeing future.