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Easing the transition to More Open Economy: China's Agricultural and Rural Policy

Easing the transition to More Open Economy: China's Agricultural and Rural Policy. Jikun Huang Center for Chinese Agricultural Policy Chinese Academy of Sciences. Growth of GDP and Ag GDP (%). Per capita rural real income. Number of population under poverty in China, 1978-2001 (million).

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Easing the transition to More Open Economy: China's Agricultural and Rural Policy

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  1. Easing the transition to More Open Economy:China's Agricultural and Rural Policy Jikun Huang Center for Chinese Agricultural Policy Chinese Academy of Sciences

  2. Growth of GDP and Ag GDP (%)

  3. Per capita rural real income

  4. Number of population under poverty in China, 1978-2001 (million)

  5. Rural poverty incidence in China, 1978-2001(%)

  6. Shares of agricultural and non-agricultural GDP in China, 1970-2001

  7. Share of non-agri employment of rural labor, 1981-2000(source: CCAP)

  8. Source (%) of farmer’s income

  9. Anti-Poverty Programs • During 1984-1996: US$ 1-1.5 billion annually • 1998: US$ 2 billion • 2000: exceeded US$ 3 billion • Poverty loans (52%), grants (17%) & FFW (26%) and other (5%).

  10. Challenges:Gini coefficient in rural China, 1980-2000

  11. Per capita income in ruralBottom 10%:180%; Top 10%:407%

  12. Farmers：full time farming % Human capital or education is key for farmers to access to non-agricultural employment

  13. Major policies affecting non-agricultural income growth • Rural enterprise development: • Promoting “TVE” development in 1980s • Credit and finance provided by local townships/ villages • Granted local land and low wage of rural labor • Promoting private enterprise development in 1990s • Rural infrastructure development since late 1980s • Privatizing rural TVEs since middle 1990s • Promoting rural small town development since late 1990s • Urban economic reform: • Reforming SOE in urban since early 1990s • Releasing migration constraints since middle 1990s • External economy: • Attracting FDI and trade liberalization • Pro-poor interventions • Agricultural development policies

  14. Agri diversification -- output shares (%)

  15. Output, input and TFP indexes: Rice (1979=100)

  16. Major agricultural development policies • Institutional reform: land (in early 1980s) • Allocated land equally to all households in the villages • Land use right: 15 years in 1980-95 and 30 years in 1995-2025 • After 2025: can be extended forever … • Irrigation improvement • Agricultural technology • Market reform since the late 1980s • Trade liberalization

  17. Government rice procurement as total production

  18. Rice price ratios: procurement vs market prices

  19. Implicit tax of grain (rice, wheat, maize) marketing (government procurement)

  20. Number of rural free market (10,000)

  21. Agri commodities traded in free market (%)

  22. Guangzhou (Shekou Port) Dalian Maize price

  23. Fujian Dalian

  24. Integration in Northeast China’s Markets(percent of markets that have integrated price series)

  25. WTO commitments: Market access Tariff 2001 2004 • Simple mean: • China: 21％ 17% • Developing countries 20-50% • Trade weighted: • China: 13％ • SE Asia 16% • Japan & Korea 53% • Other Asian countries 24% • EU 20% China’s tariff: one of the lowest in the world

  26. China’s agriculture:Tariff rate (%): 1992-2001  2004 Liberalization: Continuous of past trend, not just starting

  27. China’s Agriculture:Nominal Protection Rates (NPR,%) Policy distortions: declining significantly overtime

  28. NPRs (%):Soybean, rapeseed, sugar, and cotton in 2001

  29. NPRs (%):Japonica rice, Vegetable, Fruits and Meats in 2001

  30. Agricultural Trade Balance (million US$)

  31. Concluding Remarks • Productivity growth resulted from R&D investment is essential for the agriculture to be competitive and a precondition for a successful economic transition • Agricultural diversification contributes to farmers’ income, healthy diversification needs substantial domestic market reform • Agricultural growth is important for farmers’ income growth, but substantial growth has to come from non-agri sectors

  32. Concluding Remarks • Non-agri development needs significant public investment in rural infrastructure and education and government’s industrialization policies (i.e., migration/finance) in both rural and urban areas • Trade liberalization and FDI can facilitate the growth of and structural changes in economy • Growth is essential for poverty alleviation, but poverty alleviation and narrowing income disparity require more pro-poor interventions  A challenge that China is facing

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