BUILDING A MODERATELY PROSPEROUS SOCIETY IN ALL RESPECTS - Revitalizing the Countryside

- Revitalizing the Countryside*

全面建成小康社会：乡村振兴

Abstract:

The problem of China’s uneven and insufficient development is the most striking in the countryside. Countryside rejuvenation is of historical significance to building a moderately prosperous society in all respects and turning China into a modernized socialist country. The reform of rural land system is vital to integrating urban and rural development. We must allow farmers to gain their due share of value-added revenues from land, and share in the dividends of urbanization. Based on household operations, we should enhance the basic rural operation system, foster new agricultural operators, and develop modern agriculture as the foundation for revitalizing countryside industries. We must deepen agricultural supply-side structural reforms to ensure sufficient supply and security of main agricultural products. We must reform the rural collective ownership system to implement property rights to farmers and protect their interests in the context of urban and rural integration. We must promote green development and revitalize countryside ecological environment. We must enhance rural governance to revitalize rural organizations.

Keywords:

countryside revitalization, a moderately prosperous society in an all respects, revitalizing rural industries, talents, organizations, ecological environment

JEL classification code: P25; H75; P23P21

DOI: 1 0.19602/j .chinaeconomist.2020.01.02

1. Introduction

At the dawn of the 21st century, insufficient domestic demand and uneven urban-rural development weighed on China’s economy. In 2002, the Report to the 16th CPC National Congress stated that the “urban-rural economic divide remains.” Since then, the CPC Central Committee has identified the issues concerning farmers, the countryside, and agriculture as the top priorities on the Party’s agenda. Despite changing relations between agriculture and industry and between cities and the countryside, the rural divide is yet to be bridged. The Report to the 19th CPC National Congress identifies the issues concerning farmers, agriculture, and the countryside as the top priority of work for the whole Party, calling for revitalizing the countryside. These policy initiatives have significant theoretical and practical relevance. Problems of China’s uneven and inadequate development are the most striking in the countryside. Countryside revitalization is of historical importance in achieving the goal of building a moderately prosperous society in all respects.

2. Deepening Rural Land Reforms

According to the historical experience of rural reform in Xiaogang Village, Anhui Province, we must reform the rural land system to revitalize the countryside, modernize agriculture, and integrate urban and rural development.

2.1 Rural Land Plots Are Farmers’ Biggest Assets

Farmers’ biggest assets are rural land plots whose ownership is shared among members of a collective. According to the Second National Land Survey and other relevant data, out of China’s land area of 960 million hectares, there are 446 million hectares of rural collective land, including 368.6 million hectares of agricultural land and 20.67 million hectares of construction land. Rural collective land makes up some 46% of China’s total land area (Table 1 and 2). The realization of land property rights for farmers marks a substantial adjustment to China’s national income distribution. It is also a process towards market-based allocation of land as an essential step in removing the urban-rural divide and integrating urban-rural social and economic development.

2.2 Substantial Shift of Rural Land Policy

Creating an integrated urban and rural construction land market is receiving more and more attention. Wen ( 2012) also stressed that “We should cease to make farmers bear the costs of industrialization and urbanization by depriving them of their land property rights. It is both necessary and feasible to substantially raise farmers’ share in the distribution of value-added gains from land”. The No.1 Central Document of 2018 not only identifies an important source of financing for revitalizing the countryside, but unequivocally permits the inter-provincial assignment of arable land quotas, which had been prohibited under the Decisions of the Third Plenum of the 17th CPC Central Committee in 2008. Therefore, the No.8 Central Document of 2018 marks a substantial adjustment to China’s land policy.

Under the current division of fiscal powers between the central and local governments, local governments are heavily dependent on transfer payments from the central government and revenues from land sales. In 2018, China’s local general public budget revenues amounted to 16,757.85 billion yuan. Local government non-fiscal revenues reached 8,580.41 billion yuan. Revenues from the transfer of state-owned land-use rights, i.e. land sales revenues as more commonly known, totaled 6,509.59 billion yuan, up 25%, accounting for 66% of local general budget revenues. Local general public budget spending stood at 18,819.83 billion yuan, up 8.7%. Expenditures related to the transfer of state-owned land-use rights reached 6,994.10 billion yuan, up 34.2% 1, accounting for 37% of local general public budget expenditures.

Previous policies imposed strict restrictions on the inter-provincial transfer of surplus construction land quotas arising from land consolidation to subdue local government impulse to raise funds from excessive land sales. Another reason is that local governments had used land transfer revenues to build cities and industrial parks but returned a paltry amount of funds to support agriculture and the countryside (Zhang, 2018). In December 2017, General Secretary Xi Jinping said that “We should refrain from using land revenues from the countryside to support cities and avoid the dilemma that the

countryside cannot use or properly use its own land” (page 40). 2This argument is echoed by the findings from our analysis of previous data (see Table 3). It is worth noting that the progress of an integrated urban and rural construction land market has been slow over the years mainly because local governments and real estate developers will gain less under this market. Therefore, for the land policy to be revamped in earnest, we must deepen reforms on all fronts and redistribute resources between central and local governments (Zhang, 2019a).

In the coming decade, the distribution of rural land capital will largely determine the process of urban-rural integration. Rural land resources, if properly capitalized, distributed, and used, will allow farmers to gain their due share of land revenues and urban development. Benefits to farmers will cover the costs of removing the urban-rural divide, revitalizing the countryside, and building a moderately prosperous society in all respects. In this sense, the strategy of countryside revitalization must give prominence to reforming the rural land system.

3. Improving Agricultural Operations to Revitalize Rural Industries

In April 2016, General Secretary Xi Jinping said that “Raising farmers’ income is central to our work on agriculture, farmers, and the countryside. Farmers must earn sufficient incomes to lead a moderately prosperous life” (page 146). Farmers’ income primarily consists of operating income and wage income, whose growth depends on modern agriculture and rural industries. Therefore, we must improve agricultural operations and foster new farm operators.

3.1 Diverse Agricultural Operation Modes and Entities Coexist with Smallholders

According to the Third National Agricultural Survey, the large farming households account of 1.9% of the total of farming households in China. According to the Ministry of Agriculture and Rural Affairs, there were 26 million hog farming households in China in 2018, most of which were small and scattered; among them, 187,000 households slaughtered over 500 head, and about 4,000 households slaughtered over 10,000 head each year. There has been an emergence of new farm operators, including large professional farmers, family farm owners, professional farmers’ cooperatives, and agribusinesses. New farm operators, which are more productive than traditional farmers, are the leading suppliers of agricultural goods, and coexist with smallholders. Given China’s large population, scarce land, and rapid urbanization, diverse agricultural operation modes and entities will coexist for a long time.

By the end of 2016, over 70 million rural households had partially or fully transferred their land contract rights to new farm operators, involving a total transferred land area of 31.33 million hectares, or 35.1% of farmers’ total contract land area. About 160 million farming households, or 70% of total farming households, did not transfer their land operation rights. Most of such households who operate their contract land plots are elderly and uneducated first-generation migrant workers, and some are second-generation migrant workers. After they moved to cities for jobs, they found it hard to settle in cities and had to move back to the countryside when they were too old for unskilled urban jobs. It is hard for such smallholders to escape agriculture and the countryside once and for all. While smallholders will reduce in number over time, they will continue to stay active in agricultural production for a long time. We must protect their interests and bring their farming practice in line with modern agriculture (Zhang, 2019b).

3.2 Developing Family Farms and Farmers’ Cooperatives

Family farms are not confined to the contract land plots of individual households, and able to be

vehicles of modern agriculture and large-scale farming. We should further separate the ownership, contract, and operation rights of rural contract land plots. We should adhere to collective ownership, protect farmers’ contract rights, and increase the flexibility of land operation rights. By lawfully leasing land operation rights from farmers who have left the countryside, skilled farmers should be able to scale up farm work and develop family farms. As an upgraded version of the household contract responsibility system, family farms have become a vital force for modern agriculture. We should encourage all sorts of family farms to spearhead modern agriculture for better performance and efficiency.

Since the implementation of the Law on Farmers’ Professional Cooperatives in 2007, farmers took the initiative to form various types of farmers’ professional cooperatives based on the principles of democratic management. According to the Third National Agricultural Survey, at the end of July 2019, over 2.2 million farmers’ cooperatives were lawfully registered nationwide. Modern agriculture cannot thrive without farmers’ professional cooperatives, including those specialized in the supply of agricultural means of production, the processing and sales of agricultural products, and agricultural producer services. The goal is to turn farmers’ cooperatives into equal partners with agribusinesses. Farmers’ cooperatives are expected to play a critical role in stabilizing agricultural supply and demand, protecting smallholders, and developing modern agriculture. They compete in domestic and international markets, bring farmers to the market, and contribute to poverty reduction and rural prosperity.

Along with rural collective economic organizations, agricultural service organizations, and agribusinesses, farmers’ professional cooperatives represent a vital part of the diverse and multi-tier service system for agricultural production. By offering all-round services to smallholders and family farms, farmers’ cooperatives strengthen the agricultural operation system and contribute to China’s food security. We should encourage farmers to form cooperatives to extend the industrial chain, broaden service areas, and involve more farmers in the integrated development of primary, secondary, and tertiary industries in rural areas.

3.3 Fostering Highly Qualified Farmers

In 2018, there were a total of 288.36 million farmer-turned migrant workers in China, including 172.66 million seeking jobs outside their hometowns. While some migrant workers have returned to the countryside in search of opportunities, they may not naturally become qualified farmers with the right skills. Apart from labor compensation, a professional farmer should also be rewarded for his business decisions, investment, and risk assumption. Therefore, his income should be higher than what he could expect from a migrant job. Professional farmers should have farming skills and business know-how, be prepared for a few years of investment payback period, and stay resilient against the market and natural risks. Very few of them may succeed as agricultural entrepreneurs.

Alongside the older-generation farmers, a new generation of farmers has thrived on or returned to agriculture. Family inheritance, improving infrastructure, and access to finance, information, and sales channels have made it possible for the younger generation of farmers to succeed. Some of them have even created their agribusiness brands. The younger generation of farmers are well-positioned to apply agricultural technology and innovate. They play an indispensable role in the countryside revitalization and agricultural supply-side structural reforms.

4. Deepening Agricultural Supply-Side Structural Reforms for the Effective Supply of Agricultural Goods

In attending the deliberations of Shandong delegation during China’s annual legislative sessions on March 8, 2018, General Secretary Xi Jinping said that “We should develop modern agriculture, ensure national grain security, boost agricultural quality, efficiency, and overall performance.”

4.1 Current Status of China’s Food Security

4.1.1 China’s food supply is not self-sufficient

China’s water resources account for about 7% of the world total. Over half of China’s land area is arid or semiarid. China’s water resources per unit of arable land are 1/5 the world average. The distribution of water resources is highly uneven; 81% of China’s water resources are located in the Yangtze River Basin and the south, which are home to 36% of China’s total arable land. The Huaihe River Basin and the north, which account for 64% of total arable land area, only have 19% of China’s total water resources. In December 2013, Comrade Xi Jinping said that “In the past, we called for selfsufficiency for all crops, which was the only option under the historical circumstances back then, and this goal has been generally achieved. China still relies on overseas arable land and water resources in supplying agricultural produce to urban and rural consumers.

4.1.2 Ensuring basic self-sufficiency of grain and absolute security of staple food

The National Planning on Agriculture Modernization (2016-2020) identifies two binding targets: First, the production capacity of grains, including wheat, paddy rice, corn, and cereals, must reach 550 million tons by 2020 following international standards. Second, the self-sufficiency of wheat and paddy rice should reach 100% by 2020. The document also explains that the self-sufficiency of wheat and paddy rice refers to the extent to which domestic production capacity meets demand. In 2017, General Secretary Xi Jinping indicated that “The key is to ensure grain production capacity and be able to supply sufficient grain when demand rises. We must have land and technology to produce sufficient grain when necessary” (page 87).

4.1.3 Impacts of China-US trade frictions of China’s agriculture and food security

China is the world’s largest importer of soybeans and edible vegetable oil with soybean import accounting for more than half of the world’s total soybean trade. China’s total import of soybean oil, palm oil, and rapeseed oil represent about 18% of the world’s total trade of edible vegetable oil. In 2017, 50.93 million tons of China’s soybean imports were from Brazil, accounting for 53.3% of China’s total soybean imports. China imported 32.85 million tons of soybean worth 12 billion US dollars from the United States, or 34.4% of total soybean imports - the lowest percentage since 2006 (Wei & Huang, 2018). In 2018, China imported 88.03 million tons of soybean, down about 7.50 million tons compared with the previous year. China’s soybean imports were about five times higher than domestic production in the same year (16 million tons), and mainly came from Brazil (75.1%), the United States (18.9%), Argentina (1.7%), and Russia (0.9%).

Most of China’s soybean imports were used for oil extraction. As a byproduct of soybean extraction, bean pulp contains a variety of amino acids and proteins, making it a good source of fodder. In 2016 and 2017, China’s bean pulp consumption reached 67.26 million tons, ranking the first in the world, of which fodder consumption accounted for over 90% (Wu & Qin, 2018). China’s close to 100 million tons of soybean imports has satisfied its demand for vegetable oil and livestock fodder.

In the context of China-US trade spat, we must bear in mind the new situations and challenges of globalization in formulating our food security strategy. China must ensure the supply of domestically produced GM-free high-protein edible soybeans. Based on the absolute security of staple food and basic self-sufficiency of grain, we should scientifically estimate domestic demand for high-protein edible soybeans. Domestic soybean industry must maintain an appropriate scale of production, taking into account such factors as returning farmland to forest, ecological remediation, and avoidance of continuous and alternate cropping of soybean. In preparing for future trade frictions, we should seek diverse and stable sources of imported GM soybean supply or alternative edible oil supply and fodder protein supply (Zhang, 2019c).

4.2 Adjusting Agricultural Structure and Deepen Supply-Side Structural Reforms

We should reduce ineffective supply and increase effective supply as the priority of agricultural supply-side structural reforms. By abolishing corn temporary purchase and storage system (TPSS) and adjusting the paddy rice minimum purchase price (MPP), China has continuously reformed the price mechanism for main agricultural products to protect its food security while minimizing losses to farm operators. This reform aims to restore the basic attribute of agricultural prices as a market signal in regulating supply and demand. The government has made some progress in guiding farmers to adjust the structure of crop production according to price signal, resulting in less ineffective supply and more effective supply of some agricultural products. Regional and temporary oversupply of certain main agricultural products has abated. To successfully adjust and deepen our grain security policies, we must enact and implement detailed policy rules to protect grain farmers’ interests.

4.3 Agricultural Development Requires Policy Support

Under market-based resource allocation, production factors always flow to sectors and regions with higher productivity and return. As a vulnerable industry, agriculture offers a relatively low return on investment and requires the government to issue supporting policies and offer credit evaluation for new farm operators, as well as fiscal, tax, land, credit, and insurance policies. The government should also issue targeted supporting policies and carry out education and training to foster new types of farm operators as the key players of modern agriculture. New agricultural operators should develop side-byside with smallholders.

5. Protecting Farmers’ Interests and Fostering Rural Industries and Talents in the Context of Integrated Urban-Rural Development

Countryside revitalization requires elites and farmer entrepreneurs to thrive in the countryside. Cities and the countryside must stay interconnected and increase two-way factor flow. Most rural residents are unable to utilize land, labor, and other resources fully. Urban production factors like capital, technology, and human resources must be integrated with rural land and other resources to optimize rural resource allocation. In the reallocation of urban and rural factors, changes will also occur in the ownership of rural resource assets. In the context of urban-rural integration, we must grant farmers property rights in reforming the rural collective ownership system.

5.1 Exploring Effective Forms of Realizing Rural Collective Ownership to Secure Farmers’ Property Rights

The greatest assets of farmers are the rural resources or assets jointly owned by them as members of a collective economy, the most important of which is rural land. At legal and realistic levels, rural collective economy is a tremendous presence in China. Once granted more property rights, farmers will see their property income rise significantly. However, the growth of farmers’ property income has been constrained by the lack of ownership over land and other assets.

From 2013 to 2018, the ratio between per capita property incomes of urban and rural residents dropped from 13.09 to 11.78, but was still 4.38 times the ratio between urban and rural household incomes and far above the ratios of the other three incomes (see Table 4). Farmers’ per capita property income as a share of their per capita disposable income was 2.07% in 2013 and grew slightly to 3.30% in 2018. As the table reveals, the property income gap is the most significant urban-rural income gap. However, the gap also means potentials to be released in further reforms. As General Secretary Xi Jinping said, “We should turn resources into assets, capital into equity, and farmers into shareholders, and establish new market-based mechanisms for the collective economy.” The question is how to turn this vision into reality. Farmers’ resources must be linked with capital in order to be turned into assets.

5.2 Creating Shared Interests between Farmers and Agribusinesses

In developing modern agriculture and revitalizing the countryside, we must create shared interests between farmers and agribusinesses. In formulating the strategy of revitalizing the countryside, we must ensure that smallholders participate in modern agriculture and benefit from the development of agribusinesses. In December 2017, President Xi remarked that “We should enhance shared interests between primary, secondary, and tertiary industries, instead of simply binding them together. We cannot enrich business people at the expense of farmers” (page 100).

Capital is a double-edged sword. We cannot let rural development turn into another round of land enclosures or a feast of capital owners. The benefits of rural revitalization must be shared by farmers. Changing allocation of resource factor must be accompanied by the relative equilibrium of interests. Against the backdrop of integrated urban- rural development, we must reform the rural collective ownership system, protect the lawful rights and interests of farmers in the free flow of factors, explore effective forms for the realization of the collective economy, secure the democratic political rights of farmers, and protect their property rights.

6. Promoting Green Countryside Development

Guided by the conviction that lucid waters and lush mountains are invaluable assets, we should properly handle the relationship between environment and economic growth, harmonious coexistence between humans and nature, and sticks to the path of green and sustainable development.

6.1 Promoting Sustainable Agricultural Development

The steady rise in grain output and sufficient supplies of agricultural products such as meat, poultry, eggs, and milk have satisfied consumers’ demand. Yet the resilience of agriculture remains weak due to the lack of agricultural infrastructure and overburden of debts left from history. Medium- and low-yield land still accounts for two-thirds of China’s total arable land. Agriculture suffers from environmental challenges and ecosystem degradation. Over the past three decades, Heilongjiang Province saw its grassland area diminish by two-thirds, and 90% of natural grassland in China experienced degradation by varying degrees. China’s use of chemical fertilizers and pesticides is 15 to 20 percentage points less efficient compared with developed countries in Europe and North

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Over the years, our agricultural production has not been carried out in a resource- efficient, environmentally friendly, and sustainable manner. We should upgrade agriculture and blaze a new trail of efficient and environmentally friendly modern agriculture that offers safe food products. In this process, we must supply more agricultural products with fewer chemical fertilizers and pesticides, and steadily raise farmers’ income.

6.2 Environmental Protection Must Benefit the People

We must promote green and sustainable development for the benefit of farmers and the masses. In order for the concept that “lucid water and lush mountains are invaluable assets” to take hold in people’s mind, we must ensure that environmental protection will lead to desirable economic results. Dirty industries should make way for clean industries such as tourism, which generate revenues and create jobs for laid-off workers. The government needs to build infrastructure to foster clean industries with public participation. Only when people benefit from environmental improvement will they take the initiative to protect the environment.

Less developed regions may take the opportunity to foster clean industries by introducing new technologies, platforms, and business modes. They may leapfrog other regions without developing polluting industries. However, the government should provide necessary infrastructure and public goods with externalities, and embrace institutional and organizational innovations; none of these tasks can be accomplished overnight.

6.3 Striking a Balance between Agricultural Supply, Livelihood and the Environment

The environment has strong externalities. When the upstream environment worsens, the downstream will suffer. When a region undertakes projects to improve the environment, it must consider the impact on the livelihoods of local residents, and compensate for their losses. When other regions benefit from an improving environment, they should also compensate for the loss of the region that undertook to improve the environment.

Apart from the African swine fever and cyclical factors, local restrictions on hog farming have also contributed to the recent shortage of hog supply in China. The central government’s environmental policies, however well-crafted, are not properly implemented at the local level. For such policies to work in the short run, local authorities find it simple to follow a one-size-fits-all approach and launch campaigns to clean up whatever stands in their way. The problem lies in the flaws of our administrative system and the appointment of officials. Environmental management should bring market mechanisms into play. The government should define its functions, abide by the law when enforcing administrative rules, and receive public supervision for checks and balances.

6.4 Promoting Balanced Urban-Rural Allocation of Public Resources, and Improving the Rural Living Environment

The Central No.1 Document of 2019 calls for fair distribution of public services. The government must strive to iron out the urban-rural divide and provide more infrastructures and public services in the countryside. Urban-rural gaps in China are manifested in the huge differences of public facilities and services. Infrastructure construction should focus on the countryside, and improve rural waste treatment, drinking water safety, road construction, logistics, power grid, and broadband access to villages. We should also improve rural social security and pension and integrate urban and rural social protection systems to raise rural social security standards and invest more in urban and rural basic public services.

7. Reforming Countryside Governance and Revitalizing Rural Organizations

According to the Third National Agriculture Survey, there are 596,450 villages in China, and out of 556,264 village committees, 40,186 are agriculture-related. There are 3.17 million natural villages and 150,000 rural settlements constructed after 2006, where 230 million farming households live. How are these villages governed? This question is of considerable significance to the prosperity and stability of rural society and the Party’s governance in the countryside. We should transform rural grassroots governance from top-down administrative management to self-governance with public participation and limit the functions of governance institutions.

7. 1 Reforming administrative and fiscal systems

Fiscal powers should match spending responsibilities, so that townships and village committees will have the resources and capabilities to offer services to the people. In June 2019, the General Office of the CPC Central Committee and the General Office of the State Council released the Guiding Opinions on Improving Rural Governance, which calls for “improving the finance system for village organizations with fiscal input as the main source of income.”

7.2 Defining the functions of rural collective economic organizations and recognize memberships

The definition of collective economic organizations and memberships are closely related to the reform of rural grassroots governance. We should clarify the roles and powers of collective economic organizations (community cooperatives or community equity cooperatives), and define the legal person status and type of rural collective economic organizations, as well as the rights, responsibilities, and obligations of members and rules on the entry and exit of members. Then, we should clarify the relationship between village committees and village collective economic organizations.

7. 3 Creating social organizations to take over certain functions from the township and village organizations

The self-governance of villagers requires farmers to organize themselves. We should encourage farmers to form community groups, cooperatives, and associations to increase the social and organizational capital of farmers as a rural vulnerable group.

7.4 Devolving self-governing functions to the level of villagers’ groups or natural villages

In natural villages or villagers’ groups under an administrative village, a few dozen households live within close proximity and may share kinship ties. In a natural village as a community, it is easy for villagers to participate in the decision-making of public affairs. As government functions are increasingly devolved to administrative villages, we should also devolve self-governing functions to villagers’ groups or natural villages, so that villagers’ self-governance may become a vibrant form of self-organization for social administration and social services.

7.5 Adoptting innovative self-governing systems by the law

Villagers must conduct self-governance by rules and regulations. Traditionally, rural communities followed the rules, whether implicit or explicit, in governing their ways of life and work. Making rules is the most efficient way of social governance. Village committees and villagers’ self-governing organizations must formulate rules and act by relevant laws and regulations. In addition, we must strengthen the ethics of rural governance to prevent anyone from exploiting loopholes in the institutional transition to seek self-interest.