Structural Transformation and Agricultural Development

Chief, Training ProgramInternational Poverty Reduction Center in China

Dr. Zhang Huidong

Outline

I. Importance of structural transformation in agricultural development

II. Where does structural transformation take place

III. The factors determine structural transformation

IV. Policy framework for agricultural structural transformation

V. Conclusions and implications

VI. China’s practice

I. Importance of structural transformation in agricultural development

The concept and contents of structural transformation:The evolvement of growth and development patterns, promoting

increasing economic gains in the relatively limited endowments. ---productive resources allocation: natural, economic and human

resources ---institutional evolvement---technology innovation: expanding production possibility and

improving efficiency of resources allocation ---industrial restructuring: ---employment restructuringDifferent stages needs different structure during the development

process

I. Importance of structural transformation in agricultural development

Inter-linkage between structural transformation and agricultural development

---resources reallocation from low productivity sector to the high one: land, labor, financial resources

---promote agricultural sustainable growth: diversification, efficient factor and commodity market

---substantial increase of farmers’ income: higher returns and diversified income resources

---upgrading of agricultural sector: specialization and modernization

--- structural optimization in the areas of production, investment and employment, etc.

I. Importance of structural transformation in agricultural development

for developing countries, there need a comprehensive agricultural structural transformation:

---assets distribution: initiative condition for sustainable growth ---institutional innovation: incentives ---economic structural adjustments ---technology innovation ---employment structural changes ---public goods and service delivery

II. Where does structural transformation take place

1. Structural changes within agricultural sector ---staple crops and cash crops ---farming and forestry, animal husbandry, fishery, etc. ---extensive cultivation and intensive cultivation ---operational organization’s diversification: household,

cooperative and specialized agricultural firms2. Structural changes in rural areas ---agricultural sector and non-farm sector ---rural industrialization and urbanization ---capital flows and labor, land reallocation

II. Where does structural transformation take place

3. Structural transformation in country-level ---balanced development between primary, secondary and tertiary

industries ---transformation from traditional agricultural economy to modern

one ---market system transition ---regional economic structural transformation ---the changes of terms of trade between different sectors and

domestic and external market --- Dual economy

III. The factors determine structural transformation

---Factor endowment and its distribution---Relative price changes of factors and

commodities---Economic and social Infrastructures---Economic incentives and policy inducement---Comparative advantages at household-, regional-

and country- levels and its changes---Efficiency of market: transaction costs; access to

market; market segments.

IV. Policy framework for agricultural structural transformation

1. Productive assets redistribution:---land reform---human resource development2. Institutional arrangement---property right---market system---price---eliminate the constraints on smallholders---develop rural organization system which could provide service

s for smallholders, strengthen their negotiation capacity and overcome constraints of capital-intensive inverstment.

IV. Policy framework for agricultural structural transformation

3. Technique policies--- R&D---technical extension---upgrading agricultural production Design and encourage adaption of new technology is the

responsibility of public sectors 4. Public goods and service---Physical infrastructure construction: road, irrigation and

market ---vocational education and skill training

IV. Policy framework for agricultural structural transformation

5. Eliminate market imperfection---credit market---factor market---commodity market---employment market6. Industrial policy--- adjust based on the comparative advantages

V. Conclusions and implications

--- Structural transformation is very important to agricultural sustainable and inclusive growth

--- For developing countries, it need to carry out a comprehensive policy framework on realizing structural transformation for agricultural modernization

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

China has started the agricultural structural transformation and made great achievements, but the process still is far away from completion.

---establishment and improvement of socialist market economic system

---constant transformation and upgrading of the economic structure

China’s agricultural structural transformation is the result of a comprehensive strategy covering a wide range of domains including institutional reform, economic growth, structure optimization, development of public services, construction of social security system, and special interventions.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

1. Policies for Improving the Factor Endowment(1) Rural land policy The land in rural areas which is collectively owned and uniformly managed

in the period of planned economy is transformed into the land collectively owned and independently managed by farmer households;

The period of land contract and management right of farmer households has been continuously prolonged, and the frequency of land readjustment has been gradually lowered;

In accordance with the requirement of improving land use efficiency, the restriction on land transfer has been relieved and land subcontract and sublease has been allowed on the basis of safeguarding the contract and management right of rural residents without prejudice to collective ownership and changing the land use for agriculture.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

1. Policies for Improving the Factor Endowment

(2) Development and utilization policies of rural human capital

Firstly, provide basic education, vocational education and workforce skills training services for rural residents;

Secondly, reduce the human resource development burden imposed upon rural households;

Thirdly, advance the appropriate allocation of rural labor forces between agriculture and non-farm sectors and urban and rural areas in accordance with market supply and demand.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

2. Policies for Optimizing Rural Transaction Modes

Firstly, establish, consolidate and improve the household contract responsibility system.

Secondly, encourage and support industrialized agricultural business operation, and tackle the contradiction between small-holder farmers and modern market.

Thirdly, vigorously develop agricultural cooperative economy.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

3. Policies for Improving Rural Transaction Conditions and Environment

(1) Policies for adjusting the rural economic structure

Firstly, constantly optimize the agricultural structure

Secondly, develop rural non-farm sectors

Thirdly, vigorously advance the rural urbanization and strive to narrow the gap between urban and rural areas

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

3. Policies for Improving Rural Transaction Conditions and Environment

(2) Policies for agricultural product price and market construction

Firstly, steadily push forward the price reform of agricultural productsSecondly, carry out the distribution system reform of agricultural products in a

comprehensive wayThirdly, adapt to the increasing demands of market integration both at home

and abroad, establish a modern market system of agricultural products

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

3. Policies for Improving Rural Transaction Conditions and Environment

(3) Rural Fiscal Policies

Firstly, conduct rural tax and fee reform and ease the burden of public goods on rural residents.

Secondly, step up fiscal support in agriculture, improve the rural production

and living conditions and build up the development capacity of rural areas.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

4. Social Security Polices in Rural Areas

Firstly, continuously improve the rural pension insurance;Secondly, develop and improve a new cooperative medical care system

and initiate the rural medical assistance system; Thirdly, consolidate and improve the rural “Five Guarantees System”, i.e.

providing food, clothing, medical care, housing and burial care for childless and helpless old folks, and;

Fourthly, establish the basic subsistence allowance system for rural residents or families.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

4. The efforts need to be strengthened in the new era

Firstly, continue to promote the rural economic institutional reform, improving the conditions and environment of rural residents’ production and employment, further explore the potential of improving the rural allocation efficiency of production factors, and create new revenue growth.

Secondly, continue to enhance the guidance to the improvement of rural management system, strengthen the rural household contract management system, and support the marketing operations of the non-public economic entities.

Thirdly, continue to promote the transformation of rural economic structure.

VI. China’s practice: Sustainable agricultural structural transformation in the context of economic transition.

Fourthly, continue to speed up the integration of urban and rural public services and social security system.

Fifthly, continue to intensify the efforts of implementing the rural poverty reduction and development according to the needs of developing the production and employment in rural areas and improving the living standards of the poverty-stricken people.

Sixthly, continue to strengthen the reform and improvement of the government’s public policy implementation mechanism, enhance the efficiency and effects of the policies, and effectively suppress the adverse adjustment trend of public policies to income distribution and social development.