china's agricultural and rural development: implications for africa

China’s Agricultural and Rural Development

Implications for Africa

Shenggen FanDirector General

China DAC Study Group on Agriculture, Food Security and Rural Development, Bamako, April 27, 2010

Shenggen Fan, IFPRI, April 2010

Key messages

· Different strategies and pathways have led to different development outcomes

· There are important lessons to be learnt, but with caution

· There are opportunities for win-wins


Growth is higher in China, but picking up in Africa

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

-4

0

4

8

12

16 Agric. growth

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

-4

0

4

8

12

16Agric. growth

%

Source: World Bank 2009.

%CHINA SSA


The share of agriculture in GDP has shrunk

1980 20080

5

10

15

20

25

30 ChinaSSA

Source: World Bank 2009.

Agriculture, value added (% of GDP)

But it continues to employ a large share of the workforce (44% in China, 86% in Ethiopia, 82% in Madagascar, 76% in Tanzania)


Poverty remains entrenched in Africa

1981

1984

1987

1990

1993

1996

1999

2002

2005

0

30

60

90 ChinaSSA

Source: Chen and Ravallion 2008.

Share of people living below $1.25 a day, %

Poverty is even higher in rural areas


Hunger is on the rise in Africa

1990-92 1995-97 2000-02 2004-06 20090

50

100

150

200

250

300China

Number of undernourished people, millions

Source: FAO 2009.


China: Major reforms

· Improved smallholder incentives for production

· Liberalized and reformed agricultural markets

· Liberalized trade

· Created a robust rural non-farm sector

· Initiated programs targeted at the poor


China: “Firing from the bottom”

Growth in agriculture contributed 4 times more to poverty reduction than growth in manufacturing and services

(Ravallion and Chen 2007)

So

urce: G

ulati an

d F

an 2007.


China: Gradual, trial-and-error approach

· Experimentation with new policies in isolated areas

· Scaling-up based on evidence from experiments

· Heterodox policies as a result (e.g. two-track reform and gradual trade liberalization)


Africa: Donor-influenced reforms

· Adopted WB/IMF structural adjustment programs

· Improved incentives for agricultural production through market liberalization

· Did not correct for market failures in some cases (e.g. lack of access to key inputs and services)

· Implemented reforms incompletely, in a “stop-and-go” manner


Africa: New Africa-owned framework

Comprehensive Africa Agriculture Development Program (CAADP) endorsed in 2003

• Target of 6% annual agricultural growth by 2015

• Commitment to allocating 10% of national public budgets to agriculture

• Focus on sustainable land and water management

market access

food supply and hunger

agricultural research


China-Africa trade in agriculture is rising

0

400,000

800,000

1,200,000

1,600,000FoodAgricultural raw ma-terials

0

400,000

800,000

1,200,000

1,600,000Food

Agricultural raw ma-terials

SSA exports to China, US$ mil. SSA imports from China, US$ mil.

Source: UNCTAD 2009.

Exports dominated by raw materials Imports dominated by food


But the share of agriculture trade is small

Agriculture (3%)

Ores, metals, precious stones

Fuels Machinery and

transport equipment

Other manufac-tured goods

Other

Source: UNCTAD 2009.

Note: Agriculture = agricultural raw materials + food.

China-Africa trade by product group in 2008, %


Possible trade and FDI impacts on Africa

Trade FDI

Complementary Growth of exports to China

Increased inflows from China

Competitive Displacement of local producers by imports from China

“Crowding out” of domestic investment by FDI from China

Source: Adapted from Jenkins and Edwards 2006.

There are also indirect impacts through trade in third markets, Chinese impact on world prices, etc.


New approach of Chinese aid

· Market-based framework

· Innovative delivery methods: joint ventures, cooperation contracts, public-private partnerships

· Switch from support for large-scale state-owned farms to smallholder farmers


China’s aid to Africa is rising

2001 2002 2003 2004 2005 2006 2007 2008 20090

500

1,000

1,500

2,000

2,500Debt relief

Eximbank

MOF aid budget

US

$ m

illio

ns

Source: Brautigam 2009.


2006 FOCAC plan for Chinese assistance to Africa

· Double assistance by 2009

· Set-up $5 bil. development fund for firms investing in Africa

· Send 100 senior Chineseexperts in agriculture

· Set-up 10 agricultural demonstration centers


Implementation is on track and exceeding some FOCAC plans

• Mozambique• Sudan• Tanzania• Ethiopia• Cameroon

• Uganda• Rwanda• Congo, Rep.• Zimbabwe

Sources: FOCAC 2009 and Brautigam and Li 2009.

· China-Africa development fund established in June 2007, with initial capital of US$1 billion

· 104 senior agric. experts sent to 33 African countries

· 14 agricultural demonstration centers established in:

• Togo• Zambia• Liberia• Benin• South Africa


Benefits have come with challenges

· Weak links with domestic markets

· Concerns about labor practices (e.g. workers from China often work on aid projects)

· Failure to raise local environmental standards

· Low transparency of aid and coordination with other donors

· Poor not necessarily benefit


Lessons need to be drawn with caution

· Different initial conditions in Africa compared to China (e.g. rural infrastructure, institutional capacity, agric. research and extension)

· Different external conditions

· Different economic, political, ecological, and social environments in different African countries

Reforms need to be tailored accordingly


Main lessons Accelerate agriculture and rural growth

• Improve incentives for smallholders• Invest in agricultural R&D and rural infrastructure

Adopt evidence-based policy-making• Test policy experiments on the field• Invest in information and monitoring

Establish social protection system• Target vulnerable people, rural and urban• Use productive safety nets

Strengthen institutions and capacity


Achieving win-win outcomes (1)

China-Africa cooperation needed to ensure

• Fair competition

• Stronger linkages with domestic markets

• Greater engagement of the local workforce

• Adoption of higher environmental standards

• Greater transparency and cooperation with other donors in aid delivery


Achieving win-win outcomes (2)

China-Africa cooperation needed in agriculture to:

• Diversify trade towards agriculture

• Increase FDI in agriculture

• Build up agricultural research and extension systems in African countries

• Continue investment in infrastructure and policymaking capacity

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