Agricultural Development and Policy in China

Dr. Laping WuProfessor, College of Economics and Management

China Agricultural UniversityMarch 13, 2008

2

Outline

• Basic data and facts on agricultural sector in China

• Agricultural production and trade of China

• Current agricultural policy• New orientation of agricultural policy in

China

Basic data and facts on agricultural sector in China

4

Basic data• Agricultural population: 750-900 million,

depending on definition (about 150 million migrants)

• Agricultural households: 200 million• Average farm size: 0.6 ha• Most of the agricultural activities take

place in eastern half of the country

5

Population distribution in China

6

Grain Production in China

7

Meat production in China

8

Cotton Production in China

9

Sugar crop production in China

10

Structure of agriculture in Chinain % of production value

Croppi ng54%Li vestock

35%

Fi shery11%

11

Cropping structure in China

Ri ce18%

Wheat14%

Corn16%

Rapeseeds5%

Others27%

Peanut3%

Cotton3%

Roots6%

Beans8%

12

Meat production structure in China

Pork65%

Beef9%

Mutton5%

Poul try21%

13

Agriculture in national economy　 　 1980 2006

GDP % 30 12

Population % 81 57/73

Employment % 69 43

Export % 20 3

Import % 15 4

Food expenditure, urban % 57 36

Food expenditure, rural % 62 43

14

Agricultural production and trade of China

15

Grain balance• Continued demand for grain due to growth

of population, income and other sectors: about 485 million tons per year

• Stagnated production due to resource constraints

• Reduction of arable land due to urbanization• Degradation of land quality • Shortage of irrigation water

16

China’s Cultivated Land

130.

0

129.

9

129.

6

129.

2

128.

2

127.

6

125.

9

123.

4

122.

4

122.

1

121.

8

120

122

124

126

128

130

13219

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Mill

ion

Ha

17

Declining grain cropping area

14. 014. 515. 015. 516. 016. 517. 017. 518. 018. 5

1978

1981

1984

1987

1990

1993

1996

1999

2002

100m

illi

on M

u

18

Grain areas by crop in China

150

200

250

300

350

40019

78

1980

1985

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

mill

ion

hect

ares

Rice Wheat Corn

19

Stagnated yields of China, kg/mu

20

Grain yields, by product

0.10

0.20

0.30

0.40

0.50

0.60

0.7019

78

1980

1985

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

ton

per

ha

Rice Wheat Corn

21

Grain production in China，100 million tons

305 32

137

944

643

544

3 456

445 46

750

549

4 512

508

462

453

457

431

469 48

4 497

300

350

400

450

500

55019

7819

8019

8519

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

06

Mill

ion

ton

22

Grain production in China, by commodity

50

70

90

110

130

150

170

190

210

1978

1980

1985

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Mil

lion

ton

Corn Rice Wheat

23

Regional Structure of Wheat Production of China (2006)

Region Output %

Total 104.46

Henan 28.2327.0

%

Shandong 18.9018.1

%

Hebei 11.5011.0

%

Anhui 9.66 9.3%

Jiangsu 8.18 7.8%

Sichuan 5.14 4.9%

Shaanxi 4.16 4.0%

Unit: million ton

24

• Due to the constraints of resources, especially land resource, China must import certain grain or other crop products

• Net importer: additional 13% cropping areas would be needed if import of soybean, cereals and cotton should be produced domestically in 2005 (Ke, 2006).

25

Agricultural and food trade in China, 100 million US$

26

Agricultural and food import by commodities in China, %, 2005

27

Agricultural and food export by commodities in China, %,2005

28

Wheat trade in China million tons

0

2

4

6

8

10

12

14

1619

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Mil

lion

ton

Import Export

29

Major source of wheat import of China in 2007, Unit: ton, 10000 USDNo. Source Quantity Value % in total

　 Total 100517.43 2871.07 　1 Canada 45025.58 1097.02 38.21

2 Australia 26846.56 690.03 24.03

3 USA 17400.84 531.12 18.504 Japan 5869.5 295.85 10.305 Korea 2527.98 144.68 5.046 Thailand 877.41 46.92 1.637 Holland 525 21.08 0.738 China 470.73 14.31 0.509 Vietnam 400 12.74 0.4410 Russia 306.32 6.39 0.22

30

Major destination of wheat export of China, Unit: ton, 10000 USD

No. Destination Quantity Value % in total

　 Total 3072683 69140.48 　1 Corea 1014670 19992.4 28.922 Indonesia 619317 14476.2 20.943 Philippines 539167 11415.34 16.514 Vietnam 281186 6628.65 9.595 Hongkong 118002 4147.11 6.006 DPR Korea 143681 3527.01 5.107 Thailand 109319 2941.19 4.258 Malaysia 80638 1894.34 2.749 Burma 25537 660.8 0.96

10 United Arab Emirates 26834 647.72 0.94

31

Rice trade in China, million tons

0. 0

0. 5

1. 0

1. 5

2. 0

2. 5

3. 0

3. 5

4. 019

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

I mport

Export

32

0

2

4

6

8

10

12

14

16

1819

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Mill

ion

ton

Import

Export

Corn trade in China, million tons

33

Soybean trade in Chinamillion tons

0

5

10

15

20

2519

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Product i on

I mport

Export

34

Soybean production and import10 000 tons

35

Cotton trade in China 1000 tons

0

400

800

1200

1600

2000

2400I mport

Export

36

Cotton production and import10 000 tons

37

Edible oil import in China

0

100

200

300

400

500

600

700

2001 2002 2003 2004 2005

Total pal m oi lsoy oi l rapeseed oi l

Current agricultural policies in China

• Grain market policy• Subsidies and Support Price• Rural infrastructure• Rural public services

Grain market policy• 2001: beginning to liberalize grain

market reform

• 2004: Fully liberalizing grain market + launching grain direct subsidy

• 2006: abolishing agri-taxation system

• 2004-2008: 5 No.1 Document to improve agricultural and rural development

40

Govn’t expenditure in rural area and its share in total

262.

6

297.

5

339.

7

431.

8 562.

5

0

100

200

300

400

500

600

2004 2005 2006 2007 2008

Bill

ion

RM

B

7.8%

8.0%

8.2%

8.4%

8.6%

8.8%

9.0%

9.2%

9.4%

41

Four subsidies• Grain Direct Subsidy• Seed Subsidy (RMB 4.55 billion in 2006)• Machinery Subsidy• Agri-input Subsidy (RMB 12 billion in

2006) Total subsidies of above: 2006: RMB 30.95 billion 2007: RMB 51.40 billion, increase by 66%• Support price

42

Rural Infrastructure• Rural water supply

– Irrigation: total 9.27 billion during 1990-1995

– Drinking: more than 10 billion during 1990-1995; 6 billion each year in next 5 year

• Rural electricity – total 160 billion during 1990-1995– covering 80% of rural population

43

• Rural transportation – 2006: RMB 43 billion by central and local gov– 2006-2010: total RMB 100 billion by central

gov• Rural methane project

– 2.5 billion every year– Covering 25 million households

44

Rural public services

• Education– 2006: 12 western and 10 central provinces– Free textbook, free tuition and living subsidy– Elementary school student: saving 140 per

year per student– High school student: saving 180 yuan per

year per student

45

• Hospital– Rural cooperative medical care system – 41 thousand farmers in 1400 countries join

the program

New orientation of agricultural policy in China

47

High priority to agricultural & rural development

2004 No. 1 document: Boost growth in farmers’ incomes

2005 No. 1 document: Improve overall production capacity of agriculture

2006 No. 1 document: Building a new socialist countryside

2007 No. 1 document: Developing modern agriculture

2008 No. 1 document: Strengthening the foundation of agriculture-infrastructure

48

Building “a new socialist countryside”

• Goals:– Increase production capacity (national food

security, raw material needs)– Improve farmers living standards– Strengthen rural infrastructure (road, drinking

water, electricity, biogas, cable TV, living environment…)

– Enhance rural education, healthcare and cultural life

– Advance democratic governance in rural areas

49

New measures

• Deepening comprehensive reforms• Shift the focus of governmental

expenditure to rural areas: a higher share, especially in the budget of central government

50

To improve agricultural productivity• Stricter control on taking farmland for non-farm

purposes• Increased public funding on improving irrigation

systems and other infrastructure • Increased public funding on agricultural

technical extension• Increased funding for agricultural research:

– Agricultural research to be granted high priority in the public investment;

– The share of agricultural research on the total national research budget to be increased; the total research budge itself will increase significantly.

51

To increase farmers’ income• Increasing agricultural income:

– Reducing cost– Increase production– Stabilizing prices– Restructuring

• promoting off-farm employment in and out of rural areas– Better policy framework for rural workers in

cities• Direct subsidy

52

To improve rural infrastructure• Public investment in rural road, drinking

water etc. • Village renovation:

– To and in village road– Draining system– New toilets – Garbage collection and disposal– New housing (design and blueprints)

53

To enhance rural education, health care and social security

• More support to implementing 9 year basic education: – Tuition free – Free textbook and subsidy to boarding fees– Improving teaching facilities and teachers salary

• More support to rural health care:– New medical insurance system for serious illness– More investment in rural hospitals

• Social security:– More money for poverty reduction – Pilot projects for rural pension

54