Wei Houkaiand Han Lei
Institute of Rural Development, Chinese Academy of Social Sciences(CASS), Beijing, China
Abstract:Remarkable achievements have been made in China’s agricultural development since the late 1970s. Nevertheless, deep-rooted problems are arisingfrom inefficient farming practices. From mid- and long-term perspectives, migration of China’s agricultural labor will slow and large-scale operation of farmland will accelerate. Although grain supply and demand have maintained a tight balance, new potentials still exist in improving grain production. Under the pressures of resource and environmental constraints, advancing the green and efficient transition of agriculture will become a new trend in China’s agricultural development. In this context, the treatment of agricultural pollution, supply-side structural reform and innovation ofagricultural subsidy policy areof strategic significance to the transition and upgrade of China’s agriculture.
Keywords:agricultural development, mid- and long-term prospects, supply-side structural reforms, transition and upgrade
JEL: Q10, Q16, Q17
Since the early 1980s, China has introduced a host of policies to develop agriculture and improve the structure of the agricultural economy. With 7.6% of the world’s arable land, China has provided food to 19.2% of the world’s population, a major contribution to global food security and agricultural development. Nevertheless, China’s agriculture is confronted with unprecedented challenges arising from a changing economic environment and inefficientfarming practices. From a mid- and long-term perspective, by supply-side structural reform, developing a modern agriculture and creating a competitiveness-oriented policy support system, China is entirely capable of “keeping the rice bowls of itspeople in their own hands”, ensuring national food security and increasing agricultural efficiency, international competitiveness and sustainability.
1. Achievements of China’s Agricultural Development
Over the years, the Chinese government has attached great importance and enhanced financial support to agriculture. Between 2007 and 2014, national spending on agriculture, forestry and water affairs increased from 340.47 billion yuan to 1,417.383 billion yuan, up 22.6% onan annual average basis, higher than the annual average growth rate of national fiscal spending by 5.3 percentage points. Meanwhile, the share of agriculture, forestry and water affairs in national fiscal spending increased from 6.84% to 9.34%, up 2.5 percentage points. Under vigorous pro-agriculture fiscal spending and policy support, China’s agricultural development achieved remarkable progress.
1.1Food Security Further Enhanced
For a populous developing country with scarce arable land, grain has always been considered a fundamental strategic resource. With the start of market-based reform of the grain distribution system in 2004, China initially created a pro-agriculture policy system based on price support and dominated by direct subsidies. After2004, China successively implemented direct subsidy for grain producers, subsidy for the purchase of superior crop species, subsidy for the purchase of agricultural machinery and tools and general subsidy for the purchase of agricultural supplies. Total spending on agricultural subsidiesjumpedfrom 14.52 billion yuan in 2004 to 165.15 billion yuan in 2015, up 24.7% on an annual average basis (Cheng Guoqiang, 2013; Wei Houkai et al., 2016). At the same time, China implemented grain minimum purchase price policy and raised grain purchase price with considerations given to production cost, market supply and demand and efficiency.
Obviously, China’s policy shiftfrom “negative protection” to “positive protection” in tax imposition onagriculture increased return to agriculture, stabilizedexpectations and greatly enhanced the enthusiasm of farmers. Thanks to pro-agriculture policy, technology progress and favorable climate, China’s food production steadily increased. Between 2004 and 2015, China’s total sown area of farm crops increased by 11.734 million hectares, yield of grain grew by 152 million tons, and yield per unit area and per capita yield increased by 18.7% and 24.8% respectively, achieving the 12thconsecutive yearly increase in the total yield of grain (see Figure 1), which further enhanced China’s food security. In 2015, China’s per capita grain production reached 452.08 kilograms, which was above the international safety line of 400 kilograms for six conecutive years since 2010.
1.2 Agricultural Production Continuously Developed
Before 2003, China’s agricultural growth was unstable with wild swings. In particular, between 1985 and 2003 agricultural growth was unstable and slow. During this period, the growth rate of value-added for China’s agriculture, forestry, livestock and fishery sectors fell in the range between 1.8% and 7.3%, averaging a mere 3.57%. However, since 2004 China’s agriculture has embarked upon a fast track of steady development owing to vigorous support by pro-agriculture policies, with the growth rate of value-added in agriculture, forestry, livestock and fishery in the range between 3.7% and 6.3%, averaging 4.65% (see Figure 2).
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