“Contribution of Farmers and

Agriculture to Chinese Economy”

January 14
Course:
China
Overview 2015
This document gives an insight into agricultural
reforms made by Chinese Government from Chinese
time to time about agriculture and farm lands.
How farmers and agriculture contribute to Economy
Chinese economy.
 Course: China Overview
Professor: Xu Qin

Title Assignment:

“Contribution of Farmers and

Agriculture to Chinese Economy”

Name: JEHANZEB KHAN

Student ID: 11416090

Email: jehan8bio@yahoo.com

Mob No: 131 2390 1752

PhD Scholar

Major: Olericulture

Project Supervisor: Professor Ming Fang Zhang

Laboratory of Germplasm Innovation and Molecular Breeding
College of Agriculture and Biotechnology
Zhejiang University
 Table of contents
1. Introduction
2. Worldwide ranking of China in Agriculture Production
3. Cooperative organization approach
4. The household responsibility system (HRS) and rural reform in China
5. China’s economic reform about agriculture
6. Inefficiencies in the agricultural market in China
7. Farmer professional cooperatives (or FPCs)
8. Academic studies on farming profession
9. Transportation of agricultural products
10. Transportation of agricultural products
11. Conclusion and suggestions
12. References
 1. Introduction:
Agriculture is a vital industry around the world because more than 80% of the
population is living in the rural area working in farms. In China, agriculture was
employing over 300 million farmers but the farming development was and it is still
the latest profession. Following the Communist Party of China's victory in the
Chinese Civil War, control of the farmlands was taken away from landlords and
redistributed to the 300 million peasant farmers [3]. The failure of the communes, the
system imposed on agriculture and farmer by Mao Tze-Tung in 1958 to expand food
production at a rate greater than population growth was due to the unorganized
resistance of farmer people and may be also because of the less profit they made
about farming profession. In many developing countries, cooperatives have been
shown to help farm households access inputs at lower prices, sell their output and
improve production efficiency [8; 9].

2. Worldwide ranking of China in Agriculture Production:

China ranks first in worldwide farm output, primarily producing rice, wheat,
potatoes, sorghum, peanuts, tea, millet, barley, cotton, oilseed, pork, and fish.
Although accounting for only 10 percent of arable land worldwide and producing
food for 20 percent of the world's population, farming development in china remain
less attractive for many younger Chinese who still dream to improve their lives by
working for a company in the urban area [2].

3. Cooperative organization approach:

How cooperative organization of farmer could be one of the useful approaches
used in china for the above issue since rapid growth in output, Chinese agricultural
sector still faces several challenges? Farmers in several provinces, such as Shandong,
Zhejiang, Anhui, Liaoning, and Xinjiang often have a hard time selling their
agricultural products to customers due to a lack of information about current market
conditions. The resulting small profit margin does not allow them to invest in the
necessary agricultural inputs (machinery, seeds, fertilizers, etc.) to raise productivity
and improve their standards of living, from which the whole of the Chinese economy
would benefit. This in turn increases the mass departure of people from the
countryside to the cities, which already face urbanization issues. There is a need of
studying how the development of agriculture should trigger the development of
farming profession. Although china occupies the first place on exporting food
worldwide, life style in his rural area should be enhanced and farming profession
should be more interesting than tedious if good strategies are finding out. The
household responsibility system and organization of farmers within cooperative for
market efficiency may be the main key.
 4. The household responsibility system (HRS) and rural reform in China:
In 1952, gradually consolidating its power following the civil war, the
government began organizing the peasants into teams. Three years later, these teams
were combined into producer cooperatives, enacting the Socialist goal of collective
land ownership. In the following year 1956, the government formally took control of
the land, further structuring the farmland into large government-operated collective
farms.

Private farming was prohibited, and those engaged in it were labeled as counter
revolutionaries and persecuted. Restrictions on rural people were enforced through
public struggle sessions, and social pressure, although people also experienced forced
labor. Rural industrialization, officially a priority of the campaign, saw "its
development aborted by the mistakes of the Great Leap Forward [4].

Farmers were given the land in late 1940s and early in 1950s in recognition of
their support to the communist Party. But they never receive title, and by 1958, all
their productive property and all the land have been socialized, without any
compensation. Under communes every aspect of the lives of farmers was controlled.
The farmers were told when to go to work and how to do, nonfarm work of any kind
was severely limited, rural market were greatly restricted, and due controls on
migration, the farmer was no more free than serf. Real incomes hardly increased
during the commune period. On the other hand, farmers, especially very poor, evolved
much efforts to break away from the rigidity of the communes. After Mao’s death in
1976, a number of experiments that assigned land to individual households or small
groups of households began. Experiment has shown that when land was assigned to
households, output increased greatly [1].

5. China’s economic reform about agriculture:

China’s economic reform from 1978-1984 was initiated within its agricultural
sector through the implementation of a household responsibility system (HRS). This
reform equally allocated collectively owned (or village-controlled) land to individual
households in each village. Households had land-use rights for 15 years. In the
mid-1990s land-use contracts were renewed for another 30 years and in 2008 China’s
leadership announced that these user rights would be indefinitely valid [5].

Previous studies have shown that HRS significantly improved China’s

agricultural productivity and increased farmer income in the early reform period
(1978-1984). The annual growth rate of grain production was nearly 5 percent
between 1978 and 1984 (NBSC, 2009). The production of cash crop increased even
more quickly (e.g., oil crops grew by 14.9 percent annually; cotton by 19.3 percent
annually), and meat production grew by 9.1 percent annually [2].
 6. Inefficiencies in the agricultural market in China:
Increasing productivity and rising agricultural prices led improved farmer income
and reduced levels of rural poverty. Per capital income in real terms increased 150%
between 1978 and 1984. The incidence of rural poverty fell from 30.7 percent in 1978
to 14.8 percent in 1984 [2].

HRS also facilitated China’s market expansion in the later reform periods (after
1984). China’s rural developments helped many farmers make planting and marketing
decisions based upon market prices, which led many farmers shift into the production
of higher valued crops [6].

Internationally, although there are active debates in the literature regarding farmer
cooperatives and agricultural development, most developmental economists believe
that cooperative arrangements play an important role for emerging economies
especially when production systems are atomistic, infrastructure and information
networks tend to be poor, this can limit the income earning possibilities of farming
households [7].

Although HRS contributed to the outstanding performance of China’s agriculture

in the early reform period and facilitated many of the following economic reforms, the
nature of China’s demographic organization, in fact, created a set of challenges to
those charged with transforming agriculture into a modern sector in the 1980s. Given
the large rural population (more than 800 million in the early 1980s residing in
approximately 200 million households), the average size of a farm in China was only
about 0.73 hectares in 1984. Furthermore, the typical farm in the early 2000s in China
had productive assets valued at less than US$700, or 5600 Yuan [6].

7. Farmer professional cooperatives (or FPCs):

Cooperative organizations in China have different names and acronyms. To
simplify, people use the term of farmer professional cooperatives (or FPCs). Most
farms in China are small and susceptible to the forces of powerful markets.
Recognizing the challenges of small farming, China has promoted Farmer
Professional Cooperatives (FPCs) during the past two decades. Based on a unique
panel data from two rounds of national representative surveys of 380 villages in 2003
and 2009, research shows that while there was nearly no FPC in late 1990s, there
were FPCs in 21 percent of China’s villages and these FPCs provided services to
about 24 million farm households in 2008. The determinants of FPCs analysis show
that the role of the government is of primary important. Policy support measures and,
most likely, the new legal setting in China after the passage of the 2006 FPC law,
account for most of the growth of FPCs. Today, most farms in China are small,
labor-intensive units that are vulnerable to the forces of powerful markets [6].
 Surprisingly, although the promotion of farmer professional cooperatives in rural
China has been one of major rural policies in recent years (State Council, 2009), such
institutions are still relatively low profile. There has been little written about their
emergence and development that is based on carefully collected field survey data
from samples that cover large areas of China. Because of this lack of information, it is
difficult to answer the questions raised about the poverty of farming work. The
Ministry of Agriculture claims that the number of farmer professional cooperatives
reached 180 thousand in 2008. The same source states that 9.7 percent of farmers
belong to at least one farmer professional cooperative (which would mean that China
has 24.6 million farmer cooperative members) [10].

Yuan (2008) states (without documentation/attribution) that there were 150

thousand farmer professional cooperatives with 35 million members (accounting for
13.8 percent of farm households). Are these numbers accurate? The source of these
numbers is typically not clear [11].

8. Academic studies on farming profession:

Of the academic studies of farmer professional cooperatives in the literature
inside China, most of the papers/articles are based on individual case studies or small
local investigations (e.g., Kong, et al., 2006; Huang et al.,2007; Han, 2007; Xu et al.,
2009; Zhao et al.,2009). Rarely do the studies seek to document trends over time.
With the exception of Shen et al. (2006) and Han (2007), no study has tried to
estimate the route of the emergence of farmer professional cooperatives. Shen et al
(2006) reports on a data collection effort from six provinces and shows that about 10
percent of villages in China had farmer professional associations by 2003, rising from
almost none in the early 1990s. Han (2007) estimates that there had been an
increasing trend of farmer professional associations, and by 2004 there were about 22
percent villages in China that had farmer professional associations [6].

Between the producing farmer in the countryside and the end-consumer in the
cities there is a chain of mediators. Because of a lack of information flows through
them, farmers find it difficult to foresee the demand for different types of fruits and
vegetables. In order to maximize their profits they therefore opt to produce those
fruits and vegetables that created the highest revenues for farmers in the region in the
previous year. If, however, most farmers do so, this causes the supply of fresh
products to fluctuate substantially year on year [12].

9. Transportation of agricultural products:

 Efficiency is further impaired in the transportation of agricultural products from
the farms to the actual markets. According to figures from the Commerce Department
up to 25% of fruits and vegetables rot before being sold, compared to around 5% in a
typical developed country. As mediators cannot sell these rotten fruits they pay
farmers less than they would if able to sell all or most of the fruits and vegetables.
This reduces farmer’s revenues although the problem is caused by post-production
inefficiencies, which they are not themselves aware of during price negotiations with
intermediaries. These information and transportation problems highlight inefficiencies
in the market mechanisms between farmers and end consumers, impeding farmers
from taking advantage of the fast development of the rest of the Chinese economy. In
Tieshiya village, farming is mostly left to the over 60’s as about a third of its
population have gone to work in towns or cities. Villagers are worried, very worried
about who will plant the crops in the future because farmers make little profits from
their land. Most villagers under 40 have left for other jobs or for pursuing education.

10. Conclusion and suggestions:

The worry about the life quality of famers around the world is that they are the
most poor although they are producing foods for people. Nowadays, many people are
not interested by the farmer profession because most of the farmers make little profits
from their land and the inefficiency in the market mechanisms between farmers and
the end consumers. In china, this farming work is left to the over 60’s and the younger
of the population have gone to work in towns or cities. Its turns out that the farming
profession keep the same feature around world, being the latest profession. In Europe,
America or Africa, when a younger man go to school or university, a majority of them
have less willing of becoming a farmer although everybody can agree with agriculture
as the most important job in a country. We notice that increasing productivity and
rising agricultural prices led improved farmer income and reduced levels of rural
poverty. Research needs in order to solve the inefficiency of market and further
knowledge on cooperatives approaches about financing household responsibility and
credit programs should be welcome in aim to improve the life quality of farming work
by a rural area development with younger people and solve migration from rural to
urban area. We really appreciate the actual answer to that question by the fact that
china government will train new type professional farmers as part of rural reform and
agricultural modernization. The training will be included into the practical talent
training project. New measures will be made to attract agricultural colleague
graduates to the countryside [13].

11. References:
[1]. Zhou xiao kate, 1996. How farmers changed China. Power of the People. Boulder,
Colo.: West View Press, Cato Journal, 265pp.
[2]. National Bureau of Statistics of China (NBSC), 2008. Communiqué on Major
Data of the Second National Agricultural Census of China (No.1)
[3]. Ashok Gulati and Shenggen Fan, 2007. The Dragon and the Elephant:
Agricultural and Rural Reforms in China and India, Johns Hopkins University Press,
p. 367
[4]. Perkins, Dwight, 1991. "China's Economic Policy and Performance". Chapter 6 in
The Cambridge History of China, volume 15, ed. by Roderick Mac Farquhar, John K.
Fairbank and Denis Twitchett. Cambridge University Press.
[5]. State Council, 2008.
[6]. Huang and Rozelle, 2010. Policy support and emerging farmer professional
cooperatives in rural China. Article provided by Elsevier in its journal China
Economic Review
[7] Mendoza and Rosegrant, 1995. Principe behavior in Philippine corn market:
implication for market efficiency. International food policy research institute.
Washington, D.C.
[8] Fulton, 1995. The future of Canada agricultural cooperatives: A property right
approach. America journal of agricultural Economics, 77(5), 1144-1152.
[9] Lele U, 1981. Co-operatives and the poor: A comparative perspective. World
development, 9(1), 55-72.
[10] M.O.A, 2009. Ministry of agriculture of the people’s republic of China.
[11] Yuan P., 2008. New direction after decree of farmer’s professional cooperative
and policy recommendations. China economic trade Herald, 1, 37-38(in Chinese).
[12] Ministry of finance of the people’s republic of china, 2012. Vegetable circulation
will be exempt from VAT.
[13] M.O.A, 2013, Dec. 26 (Xinhua).China expects professional farmers to modernize
agriculture