CULTIVATING PROSPERITY

Enhancing the lure of the land creates new opportunities in agricultural areas, and more efficient farms are taking root

China’s farmlands and small towns are luring small businesses and professional farmers, after lagging behind urban areas during the decades of high-growthrate industrialization. New legal structures, institutions and policies are designed to raise rural incomes and encourage returned city migrants to use their savings and talents to start businesses in their home areas.

By the end of this year, the central government plans to complete the process of giving farmers certificates that delineate their plots. They will not be able to sell their property rights, but they will be able to lease the land to bigger or more efficient farmers for long periods. This protects a rural safety net, while allowing the creation of larger, more efficient farms.

In a discussion with lawmakers from Southwest China’s Sichuan province on March 8 during the annual session of the National People’s Congress, President Xi Jinping reiterated the need to raise rural incomes in order to keep the country’s promise to meet the goal of eradicating poverty, defined as incomes below 2,300 yuan ($333) per year, by 2020. Chinese rural incomes have been rising faster than urban average incomes for the past five years, but still remain at only 37 percent of the urban level, according to the National Bureau of Statistics.

The 2017 No 1 Central Document, issued in February by the State Council, China’s cabinet, and the Central Committee of the Communist Party of China, focuses on “deepening supply-side reform in agriculture and accelerating the cultivation of new growth engines in agriculture and rural areas” by offering favorable taxation policies for business start-ups in rural areas, stepping up training of professional managers, and providing technical and financial support.

“We will incubate new industries, new formats and new models in rural areas. We will push to integrate the industries of recreational farming, rural tourism, e-commerce and the food industry to bring more benefits to farmers,” said Tang Renjian, deputy head of China’s Central Rural Work Leading Group, at a news conference following the release of the document.

Regions that can provide highvalue-added, safe, high-quality products to middle-class urban consumers are making rapid strides in building a new agricultural economy based on e-commerce and entrepreneurship.

The country has seen more than 5.7 million people, including 4.5 million migrant workers, move to rural areas to start new businesses in recent years, according to Chen Xiaohua, vice-minister of agriculture.

“This new document recognizes returning entrepreneurs as a resource. We have seen it happening for the past two to three years in our rural development project areas,” says Paavo Eliste, lead agriculture economist at the World Bank office in Beijing. “This will give it more impetus and resources.”

He adds: “We are seeing lots of apps developed in the food and local tourism sector. Technology makes direct two-way contracting possible. For example, a city business can contract with farmers to produce green and pollution-free specialty products.”

Vegetable and fruit farmers in coastal Shandong province are able to take advantage of easy access to consumers in both Shanghai and Beijing. And, walnut growers in Central China’s Shanxi province now have the infrastructure and technology needed to make higher incomes by selling throughout the country, says Suzanne Robertson, a natural resources and agriculture specialist with the Asian Development Bank.

Some farmers in Southwest China’s Yunnan province have started to use e-commerce to sell flowers, specialty meats and vegetables to major cities — though only a small portion have now started such businesses.

A group of farmers in a village near the city of Yuxi, who preferred not to be named, say they have developed outside businesses, mostly in construction or logistics, and raised their incomes dramatically. In 2010, the collective decided to lease out its land to a big commercial operator, so they have already implemented many of the goals of the reform. They say the combined land is more productive than the earlier individual plots.

In the village, the certification is just getting started and will be implemented this year, so there is uncertainty about the process. However, they would prefer that they be allowed to convert the land to nonagricultural uses.

They are very pleased with the new health insurance plans available for farmers. They pay 150 yuan ($21) per year and receive 95 percent coverage for healthcare. Some poor families receive 100 percent. Since 2011, they have also been covered by old age insurance.

China’s farms are very small, even compared with other densely populated Asian countries. They average about 0.65 hectares versus 1.3 in India and 0.97 in Indonesia. However, Chinese farms are about twice as productive as Indian farms, though significantly less so than European or US farms. Structural reforms now focus on providing institutional and legal support for the creation of larger, more efficient farms while providing stability, fairness and security to rural residents.

During a 2016 visit to Xiaogang village in East China’s Anhui province, where a group of farmers kicked off China’s reforms in 1978 by dividing communal land into better managed family plots, President Xi said that the key to agricultural reform is “to respect the wishes of farmers, protect their interests and ensure grain production”.

As reported by Xinhua, he stressed that the reform should stick to the collective ownership of land, adhere to the fundamental status of household management and keep the land-contract relationship stable.

Rural land rights are divisible into three: Basic ownership rights will continue to be collectively held. Contract rights, held by families or individuals, will be strengthened by giving the farmers certified and documented contracts that can be continued by their heirs. Finally, operational rights can be leased by other farmers or by corporations.

Professor Huang Jikun, director of the China Center for Agricultural Policy at Peking University,

We will incubate new industries, new formats and new models in rural areas. We will push to integrate the industries of recreational farming, rural tourism, e-commerce and the food industry to bring more benefits to farmers”

says: “This system of three kinds of rights is the best way for China to achieve both equity and efficiency. We don’t want complete property rights because we need a social safety net. We don’t want people out on the street with no job. But contract rights are, from the farmers’ view, almost equal to ownership.” Key to this is the process of providing certificates to give legal certainty to farmers’ rights.

“At the same time,” he continues, “renting out land allows the more efficient farmers to put together larger farms.”

Towns and counties have established leasing centers that stamp documents that formalize the contract, giving security to both sides. This sets a transparent market price, compared with the previous informal leasing arrangements.

Improving rights certainty obviously increases the willingness to invest. According to a 2011 survey by Landesa, Renmin University of China and Michigan State University, 76.5 percent of farmers say they are more likely to make investments if they have all law-compliant certificates. Around 80 percent of investments were made in the year after the farmer received the needed documents.

Eliste, of the World Bank, says: “Maintaining control of their plots has been less of a concern for the farmers since the start of formal registration, so farmers feel more secure in their user rights. China’s 2015 fiscal reform removed pressure on local governments to raise income by selling land.”

According to Zheng Fengtian, professor of agricultural economics at Renmin University of China: “It is not so hard for farmers to enlarge their farms. The question can solve itself. They rent their neighbors’ land. More than 30 percent, almost 40 percent, of the land is now rented. In the next two years this may reach 50 percent.”

Specialized products and e-commerce are not possible for all farmers, especially in the grain growing areas of northern China. Huang, of Peking University, says that a survey of northern provinces showed only about 2 percent of farmers in those areas now creating this kind of business. So, government policy is encouraging the growth of larger, higher-tech “modern” agriculture while still protecting the interests of small farmers. Entrepreneurial opportunities in these areas focus on providing better logistics and services to farmers and building large professional farms.

In addition to encouraging the rise of modern farming, grain price controls will be loosened to prevent surplus supply of certain grains — corn is currently overproduced. But, some grain price supports will be kept to increase farmers’ incomes and to ensure food security. A December meeting of the Standing Committee of the Political Bureau of the Communist Party of China Central Committee laid out plans for supply-side reform.

“China will rationalize the relationship between the government and the market. Efforts will also be made to promote reforms in pricing and reserves systems of major farm produce, rural property rights and financial innovation in rural areas,” reported Xinhua.

China has set a red line that arable land should never sink below 120 million hectares. This year’s No 1 central document said “arable land needs to be protected, the way we protect pandas”. However, the document for the first time did not talk about the need for self-sufficiency — opening the possibility of achieving efficient allocation by international trade.

The 13th Five-Year-Plan (201620) supports using big data to improve the efficiency of China’s farms. Analytical tools not only allow professional farmers, who manage larger farms assembled from leased land, to use precision agriculture to raise yields and profits, but also allow them to provide real-time data to reassure customers about quality and safety.

The 2017 Government Work Report of the State Council announced the creation of crop

deputy head of China’s Central Rural Work Leading Group

insurance, which will largely be paid for by the central government, in the 13 large grain producing provinces. Huang Shouhong, spokesperson of the State Council Information Office, says: “The diversified forms of farming, at appropriably large scale, face the risk of market volatility and, worst of all, natural disasters…. If there is a disaster, the investment amassed throughout the years will be gone.”

Premier Li Keqiang stressed the links between raising farmers’ incomes and improving the productivity and quality of China’s agriculture. Writing in the Communist Party journal Qiushi, he said: “Although the country is selfsufficient in its most important crops, it has paid a huge price for its intensive farming with excessive use of fertilizers, pesticides and plastic sheeting, causing environmental damage and threatening food safety.”

Completing agricultural reform will be a decades-long project. But, the recent changes set forth guiding principles. The report of the Central Rural Work Leading Group said: “Continuous income increases, like ensuring food security, are a must during the reform.”