Rural developments versus agricultural modernization in China: some preliminary thinking

1. Rural developments versus agricultural modernization in China: some preliminary thinking Thomas M. H. Chan China Business Centre Hong Kong Polytechnic University, Beijing, June 2007

2. Industrialization and globalization creating their own antithesis 1. Industrialization in the 20th Century had spread mass industrial production with its inherent chase for technical & economic efficiency to the majority areas in the world through economic deregulation, trade liberalization and outsourcing & offshoring; 2. Globalization since the 1970s through financialization of national and inter-national economic exchanges has facilitated the global industrialization resulting in global commodification & the rise of global value chains/systems both extensively and intensively for industries, services and agriculture.

3. 3. Mass production with ever improving technical & economic efficiency & productivity has created over-supplies of cheap (at the lowest production costs), standardized products for a world population of increasing improvisation as wage labour (in whatever branches of productive economy) – profit squeeze (ever intensifying competition that obliges producers to find innovations in production/technology and breaks in institutional regulations) and - political reaction from producers (competing for governance controls over the global value system, or for alternative modes of production) and consumers (exercise of choice in purchasing – shifting fashion & personalized consumption (not complying with imposing product standardization), demand for quality products & willing to pay higher prices, concerns more for food safety & other non-product factors (ecological & cultural/local conservation, animal welfare, etc.)

4. Global responses 1. Socialism & other forms of post-colonial revolution– disengagement from the global value chain/systems and thus the short-circuiting of the industrialization and globalization logics – transforming them into national value chain/systems. 2. Toyotaism, Italian industrial districts, and other forms of post-Fordism in industrial production mostly after 1970s – modifying the logic of industrialization (with mass customization and even in combination with some elements of artisanal production). 3. A new rural development paradigm that goes beyond agriculture since the 1990s – alternative food networks (organic food, local/localized food system, various types of short food (supply) chains, multi-functionality/pluri-activity of agriculture, fair trade in food products, etc.)

5. Shift in European agricultural policy – setting the trend? From productivist to post-productivist paradigm from the late 1990s: 1. Original purposes of the post-war Common Agricultural Policy–financial subsidies to expand production plus support for processing and marketing to help integration of the food chain. A first territorial element was added in the 1970s to designate less favourable areas eligible for special measures. 2. Agenda 2000 (approved in 1999) – add a 2nd pillar of rural development (- to support agriculture as a provider of public goods in its environmental and rural functions and rural areas in their development) to the CAP to accompany the further reform of the market policy (the 1st pillar – providing a basic income support to farmers who are free to produce in response to market demand). i

6. Reform of the Common Agriculture Policy of the EU Source: EU Director-General for Agriculture and Rural Development, EU Rural Development Policy 2007-2013, Fact Sheet, Luxemburg, 2006, p.5.

7. 3. CAP reform in 2003 for implementation after 2005 – transfer of funds from the 1st pillar to the 2nd – a strengthening of rural development policy via the introduction of new measures (to promote quality & animal welfare, and help for farmers to meet new EU standards) and a provision of more EU money for rural development through a reduction in direct payments for bigger firms.(1) 4. New rural policy set in 2005 for 2007-2013 - improving the competitiveness of agriculture and forestry; - supporting land management and improving the environment; and - improving the quality of life and encouraging diversification of economic activities. - building local capacity for employment and diversification (1) For the 1st pillar subsidies has been replaced by the Single Farm Payments, which do not require farm outputs or even specific farm input use. But it is said that funds for the 2nd pillar is limited Funds for SFPs and remaining 1st pillar payments would be 43 billion Euro from 2007 -2013 versus 14 billion for the 2nd pillar plus LEADER scheme. Kenneth J. Thomson, Agricultural multifunctionality and EU policies: some cautious remarks, presentation at European Network of Agricultural and Rural Policy Research Institutes seminar, Andros, Greece, 1 October 2004.

8. New rural policy for EU Source: EU Director-General for Agriculture and Rural Development, EU Rural Development Policy 2007-2013, Fact Sheet, Luxemburg, 2006, p.7.

9. Leading by the EU, the OECD has also begun to adopt a new rural paradigm in place of the old industrialization and modernization approach in the 2000s Source: OECD, The New Rural Paradigm: Policies and Governance, June 2006

10. Different mechanism for extending short food supply chains in time and space Source: H. Renting, T.K. Marsden & J. Banks, Understanding alternative food networks: exploring the role of short food supply chains in rural development, Environment and Planning A, vol. 35 (2003), pp.393-411, (p.399, figure 2)

11. Different quality definitions & conventions employed within short food supply chains Source: H. Renting, T.K. Marsden & J. Banks, Understanding alternative food networks: exploring the role of short food supply chains in rural development, Environment and Planning A, vol. 35 (2003), pp.393-411, (p.401, figure 3)

12. Scale of alternative food system in Europe 1. A 1998 market survey data indicate that organic products, including imports, account fro less than 2% of total food sales in the EU, with projections of 6~7% by 2005. (1) 2. A 1998 study of the socioeconomic impact of short food supply chain in EU 15 show: - German, Italy, France – organic farming, quality production & direct selling add 7~10% to the total net value added realized in agriculture; - The Netherlands, UK & Spain – 2~4%; - Ireland – less than 1%; - Italy – total net value added (including primary production) of SFSC at 29% of total NVA of the agricultural sector.(2) (1) Quoted in David Goodman, Rural Europe Redux? Reflections on alternative agro-food networks and paradigm change, Sociologia Ruralis, 44:1 (January 2004), pp.3-16, (p.13) (2) Quoted in H. Renting, T.K. Marsden & J. Banks, Understanding alternative food networks: exploring the role of short food supply chains in rural development, Environment and Planning A, vol. 35 (2003), pp.393-411, (p.407)

13. Some projections/agruments 1. Because of uneven spatial and temporal intensity, there is the possibility of change that may not engender convergence, but rather accentuate existing dualism, as between highly intensive industrial agriculture in East Anglia and the Paris Basin, for example, and other rural areas of more regionally-embedded, multi-functional agriculture. 2. At least, it might create ‘new spaces of possibility’ for farm reproduction and rural livelihoods, building on the heterogeneity and polyvalence that are such distinctive features of contemporary European food practices. (David Goodman, Rural Europe Redux? Reflections on alternative agro-food networks and paradigm change, Sociologia Ruralis, 44:1 (January 2004), pp.3-16) 3. Rural development has created an important, if not decisive, line of defense for European agriculture against the vagaries and growing instability of globalized commodity markets. The creation of this defense line is, in practice, identical to the transformation of agriculture towards new, multifunctional constellations. (Jan Douwe wan der Ploeg & Henk Renting, Behind the ‘Redux’: a rejoinder to David Goodman, Sociologia Ruralis, 44:2 (April 2004), pp. 233-242, (0.235)

14. The Chinese experience from 1949 1. Collectivization under a national redistributive system of planning controls since the mid 1950s – forced industrialization of agriculture to increase scale and technical/economic efficiency but with expropriation of agricultural surplus by and for the urban and industrial sector (socialist primitive accumulation or the usual capitalist urban and industry biased economic development strategy?) 2. Decollectivization reform from 1979 – restoration of the peasant economy (minus private land ownership and the inevitable land concentration that devastate & destabilize rural economy) with a gradual relaxation of state redistributive planning controls over sales of food grains and other major agricultural products (market liberalization in the trade of agricultural products has not yet completed while an increasing domination of distribution by urban corporations has already begun)

15. 3. National food security. Several factors like the bitter experiences of over a century of wars, the large population increase (a consequence of political, economic and social stability), and the desire to attain a high degree of self sufficiency (for surplus transfer and for food security) have led the state agricultural policy to put high priority on production increase by expanding cultivated land and raising yield. Quantity increase has taken precedence over other considerations, including even the welfare of peasant families, ecological and cultural preservation. The fall in cultivated land since the mid 1990s due to urbanization and industrialization has put further emphasis on productivity enhanced production increase. Nevertheless, in the 1990s China has achieved self sufficiency in food supplies at a high level of calorie intake for its population, but which is also founded upon ever increasing inputs of chemical fertilizers, insecticides, use of water, etc. with heavy burden on land and ecology. 4. Rural development in terms of per capita incomes growth of peasant families has been lagging behind urban development. To overcome this gap, the state has resorted to rural industrialization, further aggravating ecological problems by industrial pollution especially with lax environmental regulations, and individual peasant families have relied on off farm employment, especially as migrant workers in urban industries and services (with migrant workers reaching over 100 million).

16. Food grain production in China Source: Chinese Statistics Yearbook, 2006

17. International trade in food grain Source: Chinese Ministry of Agriculture, China Agricultural Development Report, Beijing, 2006, p.145, Table 18.

18. Agricultural production (in 10,000 tons) Source: Chinese Ministry of Agriculture, China Agricultural Development Report, Beijing, 2006, p.139, Table 12.

19. Agricultural land (1,000 hectares) Source: Chinese Ministry of Agriculture, China Agricultural Development Report, Beijing, 2006, p.134, Table 7.

20. Use of chemical fertilizers & insecticide in China’s agriculture (in 10,000 tons) Source: Chinese Ministry of Agriculture, China Agricultural Development Report, Beijing, 2006, p.131, Table 4.

21. Demand for food in China in the 2000s 1. With rising living standard and especially the improvement in calorie intake and food composition, the demand for agricultural products in China has experienced a structural transformation: - a decline in food grain consumption (almost half in 15 years by 2005 for urban residents & decline began in 2000 with a drop of 20% in 5 years for rural residents) - stabilization of meat consumption (but with a large increase in poultry & egg consumption) in the urban sector since the late 1980s and fast increase for rural residents since the late 1990s (meat consumption in the rural sector is about ¾ of urban consumption in 2005) - acceleration in the demand for seafood and fruits, but a negative growth for vegetables. 2. Spending on food in consumption expenditures has declined to less than 20% for urban families and 45.5% for rural families in 2005.

22. Food consumption in China and other countries, 2002 Source: FAO, quoted in Ivan Roberts & Neil Andrews, Developments in Chinese Agriculture, ABARE, eReport, July 2005, p.5, Table 2.

23. Food consumption in China (kg/person) Source: Chinese Ministry of Agriculture, China Agricultural Development Report, Beijing, 2006, p.151, Table 24.

24. Challenges for China’s rural development in the 21st Century 1. How to internalize external costs of industrialized agricultural production (e.g. agriculture-related pollution especially through intensive use of chemical inputs– air, water, solid wastes, & impact on biodiversity, deterioration in product quality because of standardization & excessive priority on quantity increase, problems of food safety & its consequence for public health, rapid increase in energy consumption, etc. – agricultural pollution in some coastal areas has exceeded industrial pollution; wastes from rural enterprises has exceeded 50% of total industrial wastes of the nation; 120 million tons of rubbish & 25 million tons of waste water from rural households per year totally untreated ); 2. How to raise peasant incomes and revitalize rural economy with a better chance of sustainability (governance issue and thus competition over value added created in increasingly extensive & globalized food supply chains, public finance issue - equal provision of public infrastructural facilities, services and other public & semi public goods); and

25. 3. How to achieve/maintain social stability, ecological balance and cultural continuity of rural communities (ageing – natural & out-migration of the young, & family problems from migrant workers’ families)

26. Shift in Chinese agricultural policy after 2005 1. Direct reaction to rural development crisis of the late 1990s (continuous decline in rural incomes from 1997 – 2000 amidst a long-term decline in relative growth of the rural sector versus the urban sector since 1985) & the challenges of WTO liberalization of imports of agricultural products after 2003 – a) a new priority of national policy (with increases in budgetary spending) on peasants, agriculture & rural villages in 2002; b) No. 1 Central Policy Document in every year since 2003 for more aggressive agricultural policy but up to 2005 focusing on conventional development strategy of intensive, industrialized agriculture for higher output increase for raising rural incomes plus some new measures of tax reduction, grain production subsidies & protection of welfare of migrant workers in the urban sector – not yet any qualitative change in policy.

27. 2. New initiatives after October 2005 that introduced the 11th Five-year Programme: a) the no. 1 central policy document of 2006: - a broader conception of rural development including agriculture, rural enterprises (labour intensive manufacturing & services), and migrant workers on one hand, and government sponsored & financed development of rural infrastructure (farming, ecological & everyday life infrastructural facilities, village planning & governance of human settlement environment), and rural public goods (education, training, culture, health, social welfare & civic morale); - a new production strategy/regime of high production, high quality, high efficiency, ecological balanced & safety by structural optimization of agriculture, promotion of specialty agriculture, green food & ecological farming, maintenance of famous brand-names of agricultural products & a healthy husbandry; - a new ecological approach of recycling & resource-saving farming (saving of land, water, fertilizers, seeds & insecticides), using energy saving equipment & machinery and raising input-output efficiency and with a stepped efforts against agricultural pollution.

28. b) the no. 1 central policy document of 2007 - direct state financial subsidies for agriculture to be established and increased; - promote the development of specialized cooperatives of peasants; - develop rural clean energy with extension to all types of rural waste treatment; - raise sustainability capability of agriculture including organic farming, ecological farming, recycling agriculture and covers policy areas of rural environmental protection, and treatments of agricultural pollution and water pollution in streams, rivers, lakes, and sea; - develop multifunctions of agriculture including safe & healthy husbandry & poultry farming (with labeling and traceability systems), specialty agriculture, garden farming, agro-tourism, bio-energy & bio-products, product safety & quality standard system (certification, geographical indication, labeling & traceability procedures, etc.)

29. c. A new conception of food safety & standards proposed by President Hu in late April 2007 – ‘from farm to dining table’ whole-process quality control and monitoring of food chain, which seems to follow the same policy of the EU (From Farm to Fork: Safe Food for Europe’s Consumers, Directorate-General for Communication, European Commission, 2005) and has the possibility of moving towards a more integrative policy perspective of agriculture, food safety & regulations, environmental preservation and conservation, and public health (ecological public health) (1) (1) Tin Lang, David Barling & Martin Caraher, Food, social policy and the environment: towards a new model, Social Policy and Administration, 35:5 (Dec. 2001), pp.538-558; Tim Lang and Geof Rayner, Food and Health Strategy with UK: A policy impact analysis, The Political Quarterly, 2003, pp.66-75; Tim Lang, Food control or food democracy? Re-engaging nutrition with society and the environment, Public Health Nutrition, 8(6A), 2005 and Overcoming public cacophony on obesity: an ecological public health framework for policy markers, Obesity Review, 8 (suppl. 1), 2007, pp.165-181。

30. The future of conflicting or complementary dualism for China’s agriculture? 1. Would Chinese people change their diet from a catching up with the meat & dairy product-dominated diet of developed countries of USA & Western Europe to return to a much healthier traditional food of better quality & nutrition? If so, China would continue the conventional strategy of intensive, industrial agriculture to increase grain imports and suffer an ever increasing deficit in grain trade. It would also repeat all problems of rural deprivation, quality deterioration, and public health issues of food safety associated with global food supply chain. Agricultural & rural pollution would accelerated. All these would come at a much larger scale than most developed countries because of the scale of population & economy of China. 2. Would the alternative food system introduced as new measures in the current central policy be able to develop in China in competition with the global food supply chains and the industrial agriculture logic embraced by the Chinese bureaucracy to achieve a dualism, or be incorporated as supplementary to the conventional system?

31. Agricultural & non-agricultural labour in China’s rural sector ( in 10,000 persons) Source: Chinese Ministry of Agriculture, China Agricultural Development Report, Beijing, 2006, p.129, Table 2.

32. Composition of peasant per capita income, 2005 Source: 69,000 peasant household sample survey study quoted in Ministry of Agriculture, China Agricultural Development Report, 2006, Beijing, pp.28-29.