Agriculture by India China Chronicle

INFOCUS|CHINA|AGRICULTURE

Sowing New Seeds of Reform In China, the ‘liuzhuan’ scheme gives farmers land- use rights that can be transferred to others in exchange for a rental fee. Is this ‘de facto land privatization’ scheme helpful in boosting agricultural productivity? The article explores China’s third wave of land reforms in addition to other challenges bogging the sector.

|52| India-China Chronicle  January–February 2015

Jayshree Sengupta

t is time for China to gear up for fresh reform measures in its agricultural sector. When Mao’s land reform experiments with community based/collectivized farming failed, China realized that different type of reforms is necessitated. The year 1978 marked the beginning of looking at agricultural reform under the Household Responsibility System in which households were required to provide to their collective units, quotas of food grains in return for tools, draft animals, seeds and other essentials. Ownership of land lay with the communes but the user and production rights were decentralized. In effect, Deng Xiaoping moved agriculture towards a market economy. Further reforms were introduced in 1993. The grain rationing system was abolished and 90 per cent of all annual production was allowed to sell at market determined prices. There was an increase in public investment in agriculture as the government engaged in irrigation projects, larger state farms and encouraged mechanization and intensive fertilizer use. Agrarian sector spearheaded reforms in the rest of the economy. It catalyzed growth in the wider rural economy and Chinese population grew richer and moved to towns and cities. Agricultural growth fuelled rapid urbanization and industralisation. Challenges in Agriculture Today, rapid industrialization and urbanization has claimed large portions of arable land. Combined with huge population, China needs to increase food supply by 40 per cent to meet the increase in food demand by 2030. In 1995, per capita land area was 0.08 hectares but it is likely to go down to 0.05 hectare by 2030. China has to feed three times the number of people per unit area of land than the rest of the world. In addition, the growing middle class is consuming more protein diet, but feeding that demand may be difficult with increasing land and

water constraints. It has 1.4 million square kilometers of arable land and only 1.3 per cent of land permanently supports crops. The size of the farms is small and is divided into 200 million households where average allocation is just 0.65 hectares. The root of China’s problems is the limited availability of arable land. In addition, farmland quality in China is facing degradation and 2.9 per cent of farmland has medium to serious pollution levels. China uses 7 per cent of world’s farmland to produce but is able to feed 22 per cent of the global population. The country has reached self-sufficiency in food production but imports soybean and cotton. Recently, however, China has been importing food grains and imported 2.6 million tons of rice, 5.5 million tons of corn and 4 per cent of global grain production in 2012. On the whole it imported more than $46 billion in food grains in 2013.

The rise in producTion is due To an increase in yield as opposed To increase in planTed area. china boosTed iTs grain producTion by more Than 50 per cenT during The 1980s and 1990s when agriculTure grew aT 5.3 per cenT per year Lately, the government’s policy seems to be geared towards reducing the number of people dependent on agriculture. But people want to stay in the rural areas tied to land because it offers a form of social security for millions of registered rural residents. An increase in China’s agricultural productivity has been achieved through vigorous application of mechanical power and fertilizers. In 2012, for the total sown area of 163 million hectares, 583 tons of chemical fertilizers and 750,846 million kwh of electric power was used. About 63 million hectares were irrigated from

January–February 2015  India-China Chronicle |53|

INFOCUS|CHINA|AGRICULTURE

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farming due to increase in meat consumption owing to rise in urban incomes. It takes 16000 liters of water to produce 1 kg of beef as opposed to 2000 liters of water to produce 1 kg of wheat. By the end of 2014, roughly 170 million cubic meters per year of saved water is likely to be transferred from irrigation to industries’. The government declared

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Agriculture Woes Intensive fertilizer use has led to severe land contamination. Almost one tenth of China’s farmland is highly contaminated with heavy metals. Water scarcity is a problem. Agriculture uses 76 per cent of China’s water and it has only 7 per cent of world water availability. To combat the problem China recently embarked on a water demand management scheme “Crop per drop”. This scheme has been the key in the water conservation drive. Instead of implementing stricter water pricing-hurting farmers- saving water for downstream industry is being encouraged. However, much of the water is directed towards cattle-

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a total of 89,221 small medium and large reservoirs. Other inputs like machinery and tractors have increased over the past few years.

“We can’t change the price of water we charge to farmers—that’s fixed (at roughly 1 cent per cubic meter), but we can help farmers use less and make sure the water is transferred to those who really need it.” To ensure food security, the Agriculture Cultivation Bureau of the Ministry of Agriculture is integrating some of the 1700 state farms and

3200 companies it oversees, to build a stronger presence in sectors such as seeds and dairy. The Cultivation Bureau owns 6 million hectares of farmland, employing more than 13 million people. It produced 5 per cent of total grain output in 2013. The top leadership’s call for creating modern agricultural corporation is aimed at preempting the growing proclivity of the Chinese population to import food online from abroad. This is because the Chinese population is having less and less confidence in home grown products. The state agricultural corporation is aiming to produce products like baby milk formula to regain people’s confidence. The lack of mechanization in small farms is hindering increased productivity in small farms. Farmers lease land from the local government which owns the land– but farmers can sell the produce in the market. However, land leasing means lack of incentives for innovations in farming. Pooling of small farms for cultivation has been tried successfully to make mechanization possible. China maintains a firm baseline that arable land never shrinks to less than 120 million hectares. The recently introduced ‘liuzhuan’ scheme gives farmers land-use rights that can be transferred to others in exchange for a rental fee. The goal is to stimulate a private land market and allow China’s family run, labour intensive farms to change hands and get amalgamated into large scale industrialized businesses. In theory ‘liuzhuan’ allows this to happen without cutting ties between rural families and the land because they collect rental fees as a safety net. Cooperation with India in Agriculture Being members of the BRICS, China and India can cooperate in diverse areas of agriculture. Since the use of chemical fertilizers is causing serious problems of ground water pollution and other environmental concerns in both the countries, the two countries could cooperate in agricultural research in the use of more organic

|54| India-China Chronicle  January–February 2015

Agriculture in China China entered WTO in 2001. Since 2004, China is a net agricultural importing country. Its imports are mainly land- intensive agricultural products and it exports labour- intensive products. China imports 40 per cent of global cotton production and 60 per cent of global soybean production. China has relatively limited comparative advantage in grain production and hence it will have to step up productivity. Food safety is a becoming a major problem. Rising food prices due to rising labour costs is a cause of worry. As is known, food inflation affects poorer households as they spend a large proportion of their incomes on food. The government has urged farmers to undertake reforms and help curb inflation. Food accounts for one third of items in the basket of goods used in the calculation of consumer price index. China will remain a powerful agricultural producer and the largest producer of rice, pork, fruits and vegetables but the sustainability of agriculture is clearly under threat. It is very likely that China will remain a food-importer and will influence global food prices.

agriculTure uses 76 per cenT of china’s waTer and iT has only 7 per cenT of world waTer availabiliTy. shorTage of waTer for boTh agriculTure and indusTry is a major challenge. To Tackle The problem, china has embarked on a waTer demand managemenT scheme ‘crop per drop’ fertilizers. China’s agricultural research declined since early 1980s and reached quite low in 1999. Agricultural research has to be stepped up especially in raising productivity and in organic farming. Similarly, conservation of water is important for both countries and there could be joint ventures in water management programmes. Preservation of fruits and vegetables is another area for engagement to prevent wastage of fresh produce. India too is concerned with food security just as China. One way to ensure that is checking malpractices in food adulteration. In China, pork contaminated with Clenbuterol or from diseased pigs has been discovered. Fake mutton and beef from rat, fox and mink with chemicals like toxic gelatin have been found. With rapid urbanization both

countries are in need of feeding a big urban population. China is trying out urban farming and production of vegetables in vacant plots of land in urban areas. India too should devise ways of increasing supply of vegetables for the urban consumers. Best practices can be shared. Further, the issue of land degradation in rural areas is common to both where cooperation can be helpful. Collaborations on agricultural and research can be seriously looked into. Both countries require more people to move out of agriculture which means agricultural productivity has to rise. In the case of China, farmers are hard pressed due to small size of farms. Some farmers are employing methods to adulterate food products. Raising farm incomes has to be aimed at in both the countries. If the water, fertilizer and mechanization problems can be solved, farm incomes will rise. Greater mechanization would help improve agricultural production. In China, efforts are underway to consolidate small land holdings. Larger land holdings would give more access to credit and permit mechanization. Agricultural sector cannot be ignored by either China or India because of the size of the population and the need for food security. 

The author is Senior Fellow at Observer Research Foundation, New Delhi. Views expressed are her own.

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