china's quiet agricultural revolution: policy and programs of the new millennium

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China's Quiet Agricultural Revolution:Policy and Programs of the NewMillenniumGregory Veeck a & Wei Shui ba Western Michigan Universityb Sichuan Agricultural UniversityPublished online: 15 May 2013.

To cite this article: Gregory Veeck & Wei Shui (2011) China's Quiet Agricultural Revolution: Policyand Programs of the New Millennium, Eurasian Geography and Economics, 52:2, 242-263

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Eurasian Geography and Economics, 2011, 52, No. 2, pp. 242–263. DOI: 10.2747/1539-7216.52.2.242Copyright © 2011 by Bellwether Publishing, Ltd. All rights reserved.

China’s Quiet Agricultural Revolution: Policy and Programs of the New Millennium

Gregory Veeck and Wei Shui1

Abstract: Two specialists on China’s agricultural sector review the recent course of agrar-ian reform in the country since the year 2000. More specifically, they summarize the more significant policy changes occurring during the period 2000–2009 (including the rollout of major new programs and agricultural tax relief) while simultaneously tracking impressive improvements in a variety of standard indicators of agricultural performance and rural per capita incomes across China’s province-level units. Among other things, the authors draw contrasts between the current (post–WTO accession) and earlier reform period (1980–1985) in agriculture in terms of level of government direction and commitment to develop the sec-tor for its own sake, outline measures undertaken to address problems with the production of tainted and/or adulterated food products, trace significant spatial “reshufflings” of rice and corn production at the provincial level, and offer possible explanations for the outwardly con-founding lack of positive relationships between aggregate value of field crops/total value of all agricultural activities and rural incomes at the provincial level. They argue that renewed (yet underpublicized) government attention to the farm sector since 2000 has helped promote social stability in China by increasing food supplies (thus reducing food price effects on infla-tion), encouraging more sustainable farming practices, and improving rural environmental quality in many areas. Journal of Economic Literature, Classification Numbers: O130, O180, P320, Q100. 7 figures, 2 tables, 51 references. Key words: China, agriculture, agricultural reform, food security, rural income, WTO, subsidies, agricultural trilemma.

Wide-ranging reforms of China’s agricultural sector over the course of the past decade are bringing about dramatic transformations in how and where field crops are being

sown, cultivated, harvested, and processed. Unprecedented levels of investment by national and provincial government agencies, matched with new laws and programs dedicated to a complete overhaul of production, processing, transport, and marketing systems are converg-ing to create a modern farm sector vastly different from that of the early reform era or any period that preceded it. Concurrent steady improvements to irrigation, drainage, transporta-tion, storage, and post-harvest processing infrastructure made possible through massive loans and subsidies from the central government (or backed by the central government) mean that improved crop production starting on a field-by-field basis will eventually assure more stable domestic food and feed stocks throughout much of the nation (Gale et al., 2005; Yu and Jensen, 2010). Of course, farming is uncertain work, and natural disasters will still occur somewhere in China every year, but because of the new efforts and investments, farmers are increasingly less hostage than any time in the past to the floods, droughts, and famines that so plagued the nation for the previous forty centuries.

1Respectively, Professor, Department of Geography, Western Michigan University, Kalamazoo, MI 49008-5424 ([email protected]) and Department of Eco-agriculture and Rural Development, Sichuan Agricultural University, No. 555, Northeast Road, Wenjiang District, Chengdu, 611130, China ([email protected]).

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In turn, this most recent round of reconstituted or new laws and policies has resulted in unprecedented increases in agricultural output, including grains, fruit, vegetables, seafood, and meat (Fan et al., 2007; Deng, 2009; NSB, 2010, Table 13-15). In 2009, China produced 21 percent of global cereal output (481.56 million tons), ranking first in cereal production as well as for meat, cotton, peanuts, rape, tea, and aggregate estimates for fruits and vegetables (McKeown, 2009; USDA-FAS, 2009; NBS, 2010, Appendix 2-6). Per capita grain output was over 406 kilograms in 2009 as compared to a global average of 339 kilograms per person in 2008 (McKeown, 2009). As importantly, in 2010, China was not only essentially self-supporting in agriculture, but the nation was also a major agricultural exporter of thousands of processed and semi-processed farm products as well (Lohmar et al., 2009).2 While the value of agricultural exports are minuscule vis-à-vis the total value of Chinese exports, agricultural and forestry exports combined accounted for 4.8 percent of total agricultural/ forestry produc-tion value in 2009 (NBS, 2010, Tables 6-4 and 13-4). This level of agricultural trade, signifi-cantly greater since entry into the WTO in 2001, provides significant dividends to the sector in many ways beyond the balance sheet, including technology transfers, improved product quality, and the development or introduction of many new products for the domestic Chinese market (Dong et al., 2006). Related processing of these agricultural products also employs millions, further raising rural incomes and diversifying local economies (Sato, 2003; Whyte, 2010). Farm incomes are once again rising, although indisputably problems remain in this regard (Anderson et al., 2004; Chen et al., 2010).

It is important to note, however, that this success has not come cheaply. Government investments in agriculture and direct subsidy payments to farmers annually set new records—with much of the cost born by the central government (Gale et al., 2005; Yu and Jensen, 2010). Still, we believe the most recent round of policy adjustments and capital investments to China’s farm sector offers an important model of agricultural development for other nations and should be recognized as such (Lohmar et al., 2009; Oi et al., 2010). There is much to admire in the systematic way that these most recent innovations in policy and practice are moving the sector to sounder footing.

In this paper, we summarize the most important recent policies and programs to a broader English-language audience, while linking this review to simple statistical analyses that track concurrent changes in production and mean rural per capita incomes at the provincial scale. Specifically, after introducing the most influential new policies, we compare changes in a variety of standard indicators of agricultural production (gross production of major crops, change in input use, changes in yield for major crops) with per capita rural incomes and other measures of economic change, by province or other first-order units including provincial-level cities and ethnic autonomous regions, for rural China for the years 2000 and 2009 (n = 31). The analysis concentrates on the post-2000 (WTO) era for a number of reasons. First, much has already been written about the early reform era (e.g., Rozelle and Sumner, 2003; Ho et al., 2004; OECD, 2005). Second, these contemporary changes in the farm sector are most pertinent to China’s current efforts to achieve grain self-sufficiency and the promotion of a harmonious society. Third, growing dependence on the use of subsidies to “engineer” farm policy and production targets, while far below similar levels in developed nations, remain controversial, if in the short run, effective (Yu and Jensen, 2010).

2See the website Made-in-china.com (Agriculture and Food, 2011) for a surprising list of many hundreds of these products ranging from horticultural products to horse hair, natural sausage casings, fox skins, processed manures, rabbit intestines, and faux fish and meats for vegetarians. The opportunities are apparently endless.

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244 EURASIAN GEOGRAPHY AND ECONOMICS

Finally, the policies developed in this recent period contrast sharply in a number of interesting ways with those of the early reform period from 1980 to 1985, when production also shot up quickly as the introduction of the “Responsibility System” and related policies returned control of the means of production to farm households (Lohmar et al., 2009). In retrospect, the laws that dismantled the “Commune System” and started the rural reforms pro-mulgated in December of 1978 were far less detailed than their post-2000 counterparts, and actually most of the decisions taken in the early reform era were made locally, with limited guidance (and interference) from the central government. Perhaps, the destructive meddling of the “Great Leap Forward” (1958–1960) and to some extent for the entire commune era (1953–1978) served as fresh reminders of the havoc that could be wrought by a detached bureaucracy operating from above in an extremely politicized environment (Kueh, 1995). At any rate, the hallmark of the early years of the Responsibility System era might best be sum-marized as a central government “hands-off” approach, where farm households and township governments, many making significant investments in agro-processing operations, resolved their problems locally and were directed largely by very general (some critics might say vague) national or provincial initiatives interpreted quite liberally by pragmatic provincial-, county-, and township-level extension personnel (Edin, 2004).

In contrast, the post-WTO era reflects significantly greater government involvement at all levels, but particularly by the central government, reflecting new ideas and perspectives regarding the role of the farm sector and farming families in rural economic development strategies (Chung, 2000; Duan and Dwyer, 2008). This is an interesting turn for China’s state corporatist model, in which programs and legislation have once again been devised largely by central government bureaus and institutions, although admittedly they are dependent on local implementation (Sato, 2003, Chapter 3).

Further, this largesse represents, to some extent, a reversal of fortunes for rural China. For much of the history of the People’s Republic of China, controlled crop prices under a wide variety of programs and policies resulted in a farm sector that subsidized urban/indus-trial growth (Tao et al., 2009). In the past decade, the direction of these subsidies has suddenly “flipped” to intentionally benefit farming and rural areas for the promotion of a “harmonious society,” in part through efforts to reduce income gaps between urban and rural areas and families (Gale et al., 2005; Lohmar et al., 2009).

CHINA’S AGRICULTURAL POLICY “TRILEMMA”

Summarizing the challenges currently facing China’s agricultural sector, Ilan Solot (2006) refers to China’s “Agricultural Policy Trilemma.”3 This unique choice of words effec-tively illustrates the potential conflicts that emerge among the three ongoing major issues that China’s rural and agricultural planners must concurrently address if a sustainable agricultural sector is to be “engineered.” These include commitments of the Chinese Communist Party (CCP) to: (1) food security and grain near self-sufficiency (>95 percent of demand year-on-year); (2) improvements to farmer’s incomes and quality of life, including a reduction in the politically charged rural-urban income gap; and (3) the continuance of reforms necessitated by trade expansion and liberalization or mandated by international trade agreements and trading

3In the Chinese literature, this conundrum is referred to as the San Nong (“three agriculture”) Problem—related issues including the need to improve agricultural production, improve agricultural incomes/living conditions, and improve rural (agricultural) areas. See Yu and Jensen (2010) for a clear summary. Two issues (production, incomes/living conditions) are identical to those of Solot’s Trilemma, but he replaces “the development of rural areas” (in his design subsumed under income/ living conditions) with trade issues.

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partners (Tian, 2004; Solot, 2006). The conundrum is that while advances in all three are critical, there is no doubt that policy which successfully addresses one of these issues may sometimes confound efforts to achieve progress in one or both of the others. For example, while grain self-sufficiency has essentially been achieved, it has been accomplished in part due to a string of ever-expensive subsidy programs and tax cuts. Not only are the programs costly for the government but their association with strategic crops including grains, oil crops, and cotton may well deter farmers from growing other more lucrative horticultural and spe-cialty crops such as fruits, vegetables, essential oils, fungi, and flowers (Anderson et al., 2008; Veeck, 2009; Yu and Jensen, 2010). Production of labor-intensive crops, where China enjoys comparative advantage, will promote the growth of open competitive markets while having the greatest long-term potential to raise incomes (Zhang, 2000; Rozelle and Huang, 2010). On the other hand, the subsidies paid to farmers to cultivate enthusiasm for grain production in light of lower returns vis-à-vis fruits, vegetables, and specialty crops distort the relative condi-tions between grain and these alternate crops (Anderson et al., 2008; Lohmar et al., 2009). As in many other nations, the use of China’s arable land, labor, and capital from non-farm sources for subsidized grain production reflects the fact that national concerns related to food security take precedence over market development (Yang and Tian, 2000; Chen and Findlay, 2004).4

There is no doubt demand for grain is great and growing. Current total grain demand esti-mates range from 540 to 650 million tons in 2020, possibly rising to 700 million tons in 2050, so there are clear reasons to continue to actively promote grain production now and in the future (Zhou et al., 2008). By the late 1990s, it was clear that coordinated efforts joining new technologies and better extension efforts with innovations in rural finance and infrastructure could result in greater more secure production (OECD, 2005). Further, farmers were increas-ingly vocal and demonstrative regarding the levels and types of taxes levied upon them. As a consequence, high-level meetings beginning in the mid-1990s resulted in a national commit-ment to improve the farm sector in more systematic fashion (Yang and Tian, 2000). There are opportunities in such periods of economic and policy re-orientation, as well as the challenges easily anticipated (Dong et al., 2006; Oi et al., 2010). As a measure of its ongoing support, the Chinese government raised its agricultural budget by 30.3 percent in 2007, 37.9 percent in 2008, and another 20.2 percent in 2009.5 In three short years, total government investment in agriculture increased by 88.4 percent over 2006 levels. In the next section, we detail how the money is being spent.

AGRICULTURAL POLICIES AND PROGRAMS6

There are a great many programs that could be included in this summary, but we have chosen only those programs that would appear most influential while also representing the greatest departure from early reform policies. These include the greater development and promotion of Comprehensive Agriculture Development (CAD) Programs, the greater use of subsidies and tax relief, directly benefiting farm households, and a range of grassroots pro-grams intended to systematically improve crop land quality, infrastructure, and marketing options (Gale et al., 2009).

4On the current salience of the food security issue in Russian agriculture, see Wegren (2011).5The 2010 actual budget is not available at this time.6Much of the information in this section was collected while the first author served as a consultant to Asian Devel-

opment Bank Projects TA7170 and TA7311 with a team from SINOC (Beijing) from 2008 to 2010. This provided an excellent opportunity to learn about these programs in some detail, and I am grateful for the assistance, knowledge, and professionalism of my team members on these projects.

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Comprehensive Agricultural Development (CAD)

CAD, the earliest and most “comprehensive” of all of the policy innovations, was devel-oped and introduced in 1988 in response to specific conditions facing the PRC’s agricultural sector in the early to mid-1980s (Lin, 2009). The program languished for more than a decade, however, as funding prior to 1998 was limited. Twenty years ago, low-yielding crop land accounted for more than 1 billion mu of a total land area of under 2 billion mu.7 At the same time, disaster-affected crop land annually accounted for about 20 percent of total national sown area. Further, a high proportion of arable land was degraded, and soil erosion was unchecked in many areas. In addition, agricultural technology and farm extension services and outreach lagged behind technology and information services in other sectors. Finally, agricultural infrastructure was aging, often of low quality, and farmers had little incentive and less capacity for effecting changes to these conditions.

Specific tasks for CAD programs include: (a) converting low-yielding fields to high-yield fields; (b) improving irrigation systems and introduction of water-saving technology; (c) improving agricultural production capacity, especially the grain production capacity within the main producing areas; (d) promoting regional agricultural comparative advantage in crop selection and post-harvest processing; (e) promoting agricultural and rural economic restruc-turing; (f) improving the organization level of farmers (expanded access to markets); (g) reducing soil erosion and water loss; (h) improving the agricultural ecological environment and promoting sustainable agricultural development; (i) promoting agricultural industrializa-tion, including infrastructure construction of agricultural product storage and transportation, preservation, processing, and wholesale markets; and (j) supporting agricultural science and technology demonstration and extension, including technology demonstration and technol-ogy promotion.

From 1998 to 2007, total funding for CAD programs was 320.3 billion yuan ($48.18 billion U.S.).8 Of this, 99.2 billion yuan came from the central government, 76.8 billion from participating provincial and local governments, 34.3 billion from bank loans (much of them guaranteed by Beijing, not the provinces), and 110 billion yuan from farmers and other minor sources (Lin, 2009). Many leading researchers have advocated even greater investments in this successful program (Lin, 2009; Huang and Rozelle, n.d.). Since inception, more than 520 million mu of low-yielding land has been improved. In recent years, average annual grain output increased by 100–150 kg/mu (1.5–2.25 t/ha) through this critical transformation of low-yielding farmland. To 2009, through the CAD program, new and upgraded irrigated farmland increased by 480 million mu (32 million ha). As a consequence of these improve-ments, grain, cotton, and oil production in CAD areas increased by 89.3, 1.7, and 4.4 million tons, respectively (Li, 2009).

Production and Input Subsidies

There are currently numerous types of government subsidies directly paid to farmers who produce grain. The largest in terms of value/mu are those providing payments to grain farmers based on their area sown to grains. Payments are not tied to yield targets. These range from around 45 to 65 yuan ($6.77–$9.78) per mu sourced from provincial or central government funds (Veeck, 2010). Local governments may add to this sum to help meet targets. In addition,

71 mu is equivalent to 1/15 ha, or 0.165 acres.8On December 6, 2010, the yuan was trading at 6.647 yuan to $1.00 US.

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for grain crops, and some economic crops (i.e., cotton), there are also additional subsidies that cover part (or all) of the costs for the use of “improved” inputs such as high-quality seeds, compound (N-P-K) fertilizer, and the purchase or rent of agricultural machinery for harvest and post-harvest activities (Table 1). Gale et al. (2005) report additional subsidies for breed-ing sows and to large-scale breeding farms for hogs, dairy cattle, and poultry.

Agricultural Tax Relief

In a bold move that we believe is unprecedented in scope in the history of rural tax issues worldwide, China completely abolished the agricultural tax levied on farm households as of January 2006 (see Xinhua, 2005). The nationwide exemption of the agricultural tax reduced government revenues by 23.3 billion yuan/year ($3.5 billion U.S.). For years, the tax burden on farmers was increasing, and after study, the decision was made to remove all taxes, and levy heavy fines on local governments found not in compliance (Tao et al., 2009). The actual fiscal impact was actually greater than this, as the agricultural special product tax, which generated 6.8 billion yuan/year, also was eliminated at the same time for a total “tax relief” of 30.1 billion yuan/year ($4.53 billion)—essentially eliminating the tax burden on farmers, beyond consumption taxes. This program resulted in farm households having more dispos-able income, potentially to invest in agricultural technologies, and has narrowed the income gap between farm families and their urban counterparts (Chan, 2006).

New Socialist Countryside Policy

Closely related to both subsidies and tax relief, the New Socialist Countryside Policy was introduced in February 2006 with the objective of improving the livelihood of the rural population, which has been lagging increasingly behind that of urban residents. The pack-age involves multiple initiatives geared toward rural livelihoods and infrastructure, in which budgets allocated to the different rural economic sectors have been increased substantially. Specific policies related to crop production that have been introduced under the New Socialist Countryside Policy include: (a) a comprehensive set of policies to upgrade grain produc-tion, including the promotion of high-quality seed production and use, along with balanced fertilization (less N and P, typically more K), and improvements to irrigated area; and (b) a comprehensive infrastructure package supported with funds that can be used to upgrade

Table 1. Agricultural Subsidies by Value in China, 2004–2009, in million yuan

Year Grain-growing subsidy

Quality seed subsidy CAD subsidy Farm equipment

purchase subsidy Total

2004 11,600 2,850 – 70 14,5202005 13,200 3,870 – 300 17,370

2006 14,200 4,150 12,000 600 30,9502007 15,100 5,190 27,600 1,200 49,0902008 15,100 12,160 48,200 4,000 79,4602009 15,100 23,300 71,600 13,000 123,000

Source: Compiled by the author from data provided by Li Zhou, Vice-Director, Rural Development Institute, Chinese Academy of Social Sciences, 2009.

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rural infrastructure including irrigation systems, rural roads, and village roads (including farm field access roads of sufficient quality to allow mechanized equipment access to fields in wet weather). Other components of the law, but beyond the scope of this brief summary, address social service access, rural insurance, and banking and loan policy reforms.

Agricultural Policy Analysis Laboratory

The National Agricultural Policy Analysis and Decision Support Systems Laboratory is a joint project presided over by the Ministry of Agriculture, the Ministry of Finance,and consultants from the World Bank. The work of the laboratory is directed by the Institute of Agricultural Economics and Development of the Chinese Academy of Agricultural Sciences. The project was officially launched in October 2003 with the goal of providing a “point agency” for the study of the newly implemented policies while guiding subsequent adjust-ments. Specifically, the National Agricultural Policy Analysis and Decision Support Systems Laboratory is an open public platform for agricultural policy evaluation and analysis. Research and assessment of polices includes both qualitative and quantitative approaches that combine macro-policy research with micro-economic research, economic analysis with social analy-sis, and qualitative research with quantitative research.

Rapid Development of Farmers’ Associations

The development of more responsive and effective Farmers’ Associations has been a stated goal of rural development planners in China for decades. Surveys showed that earlier cooperative programs resulted in organizations that did not meet farmer’s needs and interests. To integrate new and existing associations into Comprehensive Agricultural Development programs, new initiatives promoting these organizations were passed into law on July 1, 2007.

Specialized farmers’ cooperatives aid members in a variety of ways, including: (a) offer-ing services such as purchasing inputs in bulk at reduced prices to members; (b) providing each other with assistance in processing, transporting, storing, and marketing farm products; and (c) as a point of information distribution—i.e., to provide new information related to agricultural production, innovations in appropriate farm equipment and other technologies, and advice on operation and farming methods. By law, farmers must account for at least 80 percent of the membership of a specialized farmers’ cooperative to keep local governments from co-opting farmers’ interests. Reflecting priorities in government funding and regional concerns, fiscal support directed at developing the co-ops is first to be given to specialized farmers’ cooperatives in ethnic areas, outlying areas (Western China), poverty-stricken areas, and to farmers’ associations producing products such as food and feed grains deemed essen-tial by the government.

Improved Cultivation Techniques

In addition to the “income equity” programs summarized above, there are many new or reconstituted programs related to improving field crop cultivation to both raise incomes and assure more reliable and greater grain production that may, or may not, be linked directly to CAD programs, depending on location. The first of these is a greater commitment to the pro-motion of conservation tillage. In order to expedite the dissemination of conservation tillage ideas and technologies, in 2008, the Ministry of Agriculture and the National Development

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and Reform Commission jointly issued “The Conservation Tillage Construction Plan (2009–2015).” The Plan has already been adopted throughout China’s 15 northern provinces (and autonomous regions and municipalities) as well as in northern Jiangsu and Anhui provinces. By the end of 2015, the country hopes to introduce conservation tillage methods on an addi-tional 11.33 million hectares of farm land. The promotion program for conservation tillage technologies is divided into six regions, and new conservation tillage techniques are being developed and promoted for each region.

Crop Residue Mulching to Improve Soil Fertility and Drainage

Chopped straw mulching—from previous season residue—is often promoted in con-junction with minimum tillage systems. To date, 16.67 million hectares have been included in assessment and treatment programs. It is estimated that additional grain production from this land could reach 560,000–1,680,000 tons. By applying straw/stalk mulches, fluvial soil erosion is also reduced significantly so there are ecological benefits related to regional water quality as well.

National Program for Balanced Fertilization

There are few programs initiated by the Ministry of Agriculture that have had as imme-diate an impact as the “balanced fertilization” program. The program recognizes the cost savings and ecological benefits that can be derived from conducting soil tests on every single field, and uses “famer experts” to help all farmers in participating areas assess their own fields by providing the test kits needed for the work while paying the farmers for conducting the soil assays. The testing allows farmers to reduce application rates—significantly saving money—while maintaining or raising yields (Jin et al., 2002).

“Best Practice” Agricultural Mechanization

On November 1, 2004, the Law of the People’s Republic of China on Promotion of Agricultural Mechanization was adopted with the goal of significantly increasing the role of mechanized production systems and post-harvest systems within the agricultural sector. Above all, the law underscores the important role of governments at all levels in the promo-tion of a modern mechanized farm sector. Perhaps most importantly from the vantage point of farmers, there are numerous subsidies associated with increasing levels of mechanization in any given location. Subsidies are to be provided to reduce the total cost of equipment to farming households. In addition, tax relief is provided to promote farm mechanization in a number of other ways. Firms specializing in agricultural machinery production in accordance with the state provisions are eligible for tax breaks or temporary tax “holidays” for some period after the plant begins operation. Secondly, the state will provide financial subsidies directly to farmers for the fuel used for the operation of (or sometimes even the production of) agricultural machinery.

Integrated Pest Management

Even since 1980, various forms of comprehensive or integrated pest management (IPM) targeting China’s most important crops have been included in many national “key technol-ogy” research programs, but with limited funding, these programs could not be implemented

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in systematic fashion. IPM has received increasing financial support from the central govern-ment since 2000, with the greatest research funding coming in the last five years. Efforts to date have resulted in numerous IPM programs that seek to combine “natural” control efforts (pheromones, predator/prey relationships) with more conventional disease and infestation mitigation or prevention methods, emphasizing three main goals: more effective pest and disease control, lower production costs resulting from lower farm chemical costs, and health dividends for consumers (including the export market). These programs are linked to signifi-cantly greater investments in research, development, and promotion of organic agriculture, which have considerable potential to create income-generating opportunities for the nation’s farmers.

Revision of the PRC Water Law

The Water Law (revised in September 2002) remains the comprehensive document cov-ering all aspects of water resource management and is the key piece of legislation for water use and water conservation related to agriculture. The revised water law provides regula-tions for the allocation of water in accord with water quotas based on a long-term watershed and water supply plans for all river basins. The law also promotes and now funds improve-ments related to water conservation, such as construction of small check dams and reservoirs, promotion and adoption of new irrigation methods, studies for new ways of pricing water (extremely controversial), and the active promotion of water users associations that encour-age farmer-led self management of small-scale, well-operated irrigation systems, reservoirs, and irrigation canal systems. Few laws are as important as this, and yet given the law’s many complexities, it is too complicated to outline effectively in this summary. Suffice it to say, the 2002 revisions make the existing Water Law a far more effective and comprehensive law than any that preceded it.

Greater Inspection and Control of Pollution-Free and Organic Produce

No issue related to agriculture has received as much attention, domestic and international, as China’s very public battles with tainted and adulterated food and dairy products, produced by both small farmers and large nationally recognized firms alike. Perhaps most galling to Chinese consumers were reports that some of China’s leaders were provided with special places to shop with all certified organic products during the 2008–2009 “food scares” in rec-ognition of the health effects of many of these illegal activities (Cornucopia Institute, 2009). These are daunting problems ranging from (a) improperly applied pesticides, fungicides, and herbicides, to (b) illegal sales of genetically modified (GM) crops for human consumption, to (c) tainted seafood treated with antibiotics proscribed for humans, to (d) contaminants in grain and processed foods ranging from fecal material, bacteria, and industrial compounds, to (e) deliberate inclusions of high proportions of inert materials to lower costs. Resolution of all these problems will take decades, but there is no doubt that the government and agricultural bureau have heard the people’s concerns very clearly (Paull, 2008; Veeck et al., 2010).

New policies related to developing pollution-free, green, and organic produce were put into law on August 8, 2005. Since then, the Ministry of Agriculture has been working to establish a single set of certification and testing standards for organic and “green” agriculture. Due to interest in the consolidation of testing, certification, and control features, the administration of organic inspection and certification was shifted from the China’s State Environmental Protection Agency (SEPA) to the China National Certification Administration (CNCA) in

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2004. CNCA’s lead role in licensing organic certification entities and the China National Auditor and Training Accreditation Board’s responsibilities in accrediting such entities were codified in the 2005 Regulations on Certification and Accreditation. There are still many problems with organic produce production in China, including enforcement of regulations, testing of products, and assuring product quality, but to date this is the most systematic effort to manage this important growth area that has significant potential to raise incomes—even among organic grain producers (IFAD, n.d.; Paull, 2008).

Coping with the many issues related to food safety will be a challenge for many years to come, as recent reports on the widespread illegal sale of GM rice for human consumption in Hubei and Hunan provinces (Xie and Jiang, 2010) have shown. But it is clear that the development of systematic methods at the national level for identifying, prosecuting, and halting the sale of adulterated, tainted, and illegal products are under way.

POST-2000 GROWTH IN PRODUCTIVITY FOR CHINA’S FARM SECTOR

The investments and policy efforts discussed above, ultimately directed toward the cre-ation of a modern farm sector in China, have proven in the short run successful both in terms of increased gross production and yields for all major crops. Total grain (including soybeans and tubers converted to cereal equivalent) production increased for five consecutive years beginning in 2004, from 496.5 million tons to 530.8 million tons in 2009 (NBS, 2010, Table 13-15) (Fig. 1). Meat production, including 48.9 million tons of pork, reached 76.5 million tons—an eightfold increase over 1978 (Fig. 2). Growing demand for meat, made possible by higher incomes and exports, has fostered dramatic increases in corn production, although it appears that China will continue to import significant volumes of soybeans from international markets. Corn production increased 54.7 percent from 2000 to 2009. Over the same period,

Fig. 1. China’s increased grain production, 1978–2009.

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rice output expanded by only 3.8 percent, while wheat increased by 15.5 percent (NBS, 2010, Table 13-15). While soybean imports will continue for the foreseeable future, perhaps more than at any time in the nation’s long history, China’s long-term food supply seems reasonably secure. In 1978, despite a significantly lower population, per capita grain production was only 316.6 kg (NBS, 2009, pp. 89, 450). As noted earlier, in 2009, per capita output was over 406 kg. The stated goal of 500 kg/person by 2020 is ambitious, and only time will tell if this goal can be achieved, but there is every reason to believe that a figure close to 400–450 kg/person can be maintained for some time, especially as the spatial “reach” of the programs described above increases as they mature and are promoted more widely.

Looking at these data at the provincial scale underscores the complexity of the national grain system. The changing “maps” of strategic grain production (rice, corn, and wheat) for the period from 2000 to 2009 offer some genuine surprises, and foreshadow even greater changes to come—probably reflecting increasing regional specialization in grain production. Given the slight increase in rice production (again only a 3.8 percent overall change from 2000 to 2009), it might initially appear that there has also been little movement in gross production at the provincial scale as well. In fact, this is one of the more surprising results of the analysis. Traditional high producers such as Jiangsu, Guangdong, Guangxi, and Sichuan all reported declines in gross production of rice despite higher yields, while the Northeast-ern Provinces—Liaoning (up 25.5 percent), Jilin (25.8 percent), and Heilongjiang (33.8 percent)—and historically poorly endowed Jiangxi (21.7 percent) and Anhui (13.1 percent) recorded significant increases by 2009 (Fig. 3). Importantly, some major producers, such as Hunan (ranked first in gross production in 2000 and 2009) and Hubei (ranked fourth in 2000 and 2009), increased production slightly. These central provinces are the “workhorses” of the rice trade and will remain so, but many other provinces have seen sown areas and/or produc-tion shift dramatically. Zhejiang ranked tenth among China’s 31 first-order administrative units in both 2000 and 2010, despite a decline of 48.5 percent in total output—largely due to mercurial shifts downward for some major production centers balanced by dramatic increases in a few provinces, particularly those of the Northeast.

This significant spatial “reshuffling” of rice production raises some important ecological implications for the northeastern provinces. Currently, the most popular rice varieties among

Fig. 2. China’s meat production by type, 1978–2009.

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VEECK AND SHUI 253

consumers are grown in the Northeast and command a premium price. Unfortunately, with annual rainfall ranging from 500 mm in much of Heilongjiang to approximately 750 mm for more southern portions of the Northeast, much of this rice is being irrigated with ground-water. Water consumption in much of Heilongjiang, Jilin, and northwestern Jilin provinces now exceeds replacement, and as sown area continues to increase given differences in net returns when water is not priced effectively, production will continue to increase. It is dif-ficult to promote grain production while revaluing water to promote sound practice, while also encouraging local governments to increase rural incomes (Solot, 2006). However, just as importantly from an ecological perspective, regardless of higher returns, rice is not a sus-tainable crop at least as it is currently cultivated in much of the Northeast. New production technologies and possibly new varieties are required.

The story for corn is quite different. In contrast to the slight national increase for rice production from 2000 to 2009, national corn production increased by 54.7 percent. Only there provinces reported declines in output, and all were minor producers (Jiangsu,Guangdong, and Shanghai). Many provinces doubled corn output in nine years, including traditional “power-houses” such as Jilin, Liaoning, Heilongjiang, and Inner Mongolia. Shandong, ranked first

Fig. 3. Changes in Chinese rice production by province, 2000–2009.

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in 2001, remained first in 2009 while increasing production by 31 percent. Two northeastern provinces, Heilingjiang and Jilin, now claim the second and third spots by increasing out-put by 143 percent and 82.2 percent, respectively (Fig. 4). Again, this reflects the massive increase in demand for feed for livestock production, but to more than double output in nine years is simply remarkable.

Wheat production, while up 15.5 percent in gross volume from 2000 to 2009, did not exhibit the spatial shifts in production characteristic of the other two main grain crops. Provincial share shifts were minimal, and greater production was based largely on increased yields in traditional wheat-growing areas. In secondary production areas, rapeseed is often substituted for wheat based on anticipated prices and late summer rainfall. There is a pos-sibility as well that area sown to rape will increase, as the seed cake is a popular fertilizer for organic farmers.

The impact of the nation’s many new agricultural programs and policies for less devel-oped interior provinces becomes even clearer when physical agricultural output is converted to the total value of agricultural production. In absolute terms, many of the coastal provinces tend to report higher values for total agricultural production given that more specialty crops are now produced there, and the agro-processing firms that use these products are at once more advanced and more connected to international exporting firms (Fig. 5). However, if

Fig. 4. Changes in Chinese corn (maize) production by province, 2000–2009.

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VEECK AND SHUI 255

the focus shifts to the growth of total agricultural value from 2000 to 2009 (Fig. 6), the interior provinces, including those of the northeast, are the clear if surprising pace-setters. Of China’s 31 provinces, autonomous regions or prefectural-level cities, 25 more than doubled production value in nine years, with the greatest increases credited to Heilongjiang, the Inner Mongolia Autonomous Region (A.R.), Shaanxi, Guangxi A.R., and Ningxia Hui A.R. With the exception of Heilongjiang, all of these provinces are historically included among China’s poorest—clear evidence of the efficacy of China’s most recent “agricultural revolution.” It is also useful to point out that three of the five fastest growing are autonomous regions with significant ethnic minority populations.

ASSOCIATIONS BETWEEN GRAIN PRODUCTION AND AGGREGATE VALUE OF PRODUCTION ON RURAL INCOMES

Remembering China’s “trilemma,” it is reasonable to study the effects of these increases in production (food security) and associated gross value of output (regional development) for 2000 and 2009 as they relate to rural incomes and rural income growth. Unfortunately, this

Fig. 5. China’s gross value of agricultural production (100 million yuan) by province, 2009.

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relationship is far from clear, and at least at the provincial scale of analysis, the “disconnect” between grain production and farm incomes is quite apparent. While cereal yields (in kg/ha) are positively associated with rural per capita income in 2000 and 2009 at the provincial level (.597, p = .001 and .557, p = .002, respectively), neither the aggregate value of field crops or total value of all agricultural activities at the provincial scale are correlated with income for either of these years (Table 2). Aggregate value is the most appropriate indicator, as it allows the value of all farm products to be aggregated and standardized by value. Comparisons for additional years (1980, 1985, 2005, and 2008) conducted in the course of this project, but not reported here, suggest that the poor relationships between income and any aggregate measures of production will hold for any given year in the post-reform era. Underscoring the limited impact of agricultural-sourced incomes on per capita rural income is the fact that the percent-age change in the value of field crops from 2000 to 2009 and the percentage change in the gross value of all agricultural products from 2000 to 2009 are also both significantly and negatively associated with per capita income in 2009 as well r = –.556, p = .002; r = –.671, p = .0001, respectively) (Table 2). Put plainly, higher rural incomes are negatively associated with per-centage increases in either crop value or composite farm product value from 2000 to 2009.

Fig. 6. Changes in the gross value of agricultural production by province for China, 2000–2009.

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VEECK AND SHUI 257

Tabl

e 2.

Pea

rson

’s P

rodu

ct M

omen

t Cor

rela

tions

for

Sel

ecte

d In

dica

tors

with

Rur

al P

er C

apita

Inc

ome

for

Chi

na’s

31

Prov

ince

s/Fi

rst-O

rder

U

nits

, 200

0 an

d 20

09

Indi

cato

r20

00 ru

ral p

er

capi

ta in

com

e (r

)

Sig.

(p

-val

ue)

2009

rura

l per

ca

pita

inco

me

(r)

Sig.

(p

-val

ue)

Perc

ent c

hang

e in

inco

me,

20

00 to

200

9 (r

)

Sig.

(p

-val

ue)

Mea

n ce

real

yie

ld, 2

000

(kg/

mu)

.597

.0

01

Mea

n ce

real

yie

ld, 2

009

(kg/

mu)

.5

57

.002

.2

17

.242

(ns)

a

Yie

ld c

hang

e, 2

000–

2009

(%)

–.

319

.0

92 (n

s)

.270

.1

41 (n

s)

Gro

ss v

alue

of fi

eld

crop

s, 20

00 (y

uan)

.045

.8

2 (n

s)

Gro

ss v

alue

of fi

eld

crop

s, 20

09 (y

uan)

–.

066

.7

25 (n

s)

–.19

8

.286

(ns)

Cha

nge

in g

ross

val

ue o

f fiel

d cr

ops,

2000

–200

9 (%

) –

556

.0

02

–.11

3

.545

(ns)

Gro

ss v

alue

of a

gric

ultu

ral o

utpu

t, 20

00 (y

uan)

.122

.5

3 (n

s)

Gro

ss v

alue

of a

gric

ultu

ral o

utpu

t, 20

09 (y

uan)

–.

028

.8

81 (n

s)

–.20

1

.277

(ns)

Cha

nge

in g

ross

val

ue o

f agr

icul

tura

l out

put,

2000

–200

9 (%

)

–.67

1

.000

1

.092

.6

31 (n

s)

Cha

nge

in ri

ce p

rodu

ctio

n, 2

000–

2009

(%)

–.

249

.1

76 (n

s)

.401

.0

25

Cha

nge

in w

heat

pro

duct

ion,

200

0–20

09 (%

)

–.05

4

.773

(ns)

.0

88

.637

(ns)

Cha

nge

in c

orn

prod

uctio

n, 2

000

–200

9 (%

)

–.13

0

.484

(ns)

.3

45

.057

a ns =

not

stat

istic

ally

sign

ifica

nt a

t p =

.05

or b

ette

r.So

urce

: Cal

cula

ted

by a

utho

r fro

m N

BS,

200

1 an

d 20

10, C

hapt

er 1

2.

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These results are further supported by a Pearson’s product moment test of association for the potential relationships among changes in gross production of rice, wheat, and corn and rural per capita income. As with the previous results, increased production of rice, wheat and corn are not associated with increased rural per capita income in 2009 or increases in rural per capita income since 2000 (Table 2 and Fig. 7). On the other hand, increases in gross produc-tion of rice and corn are associated with increased incomes (in percent) from 2000 to 2009, possibly due to subsidies or post-harvest processing.

To summarize then, higher per capita rural incomes are associated with higher yields, reflecting the better yields associated with the coastal provinces armed with better technology and alluvial soils. Again, geography matters, and better endowed areas manifest as higher yields in both years are associated with higher incomes. Most importantly for our report, how-ever, is the fact that those locations that have shown the greatest improvements in the value of field crops (aggregated data including cotton, beans, etc.), or increases for specific grains, continue to have low incomes. The rapid and generous provisions of subsidies for grain pro-ducers also offers qualitative evidence in support of our findings. Similarly, those places with the greatest increases from 2000 to 2009 in the gross value of all agricultural activities also

Fig. 7. Percentage change in rural per capita income by province, 2000–2009.

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VEECK AND SHUI 259

have some of the lowest incomes—at least at this stage in the most recent round of policy and program reform.

What now matters most for rural incomes are those options for investments of capital and labor far away from the fields that paint the landscapes of rural China. More effective predic-tors would include the percentage of the workforce employed in services and manufacturing, per capita remittances from those who work in the cities and towns far from home, distance to major markets, and the income and educational levels of parents. Can income and crop production be re-united? What happens if they are not?

FINAL COMMENTS AND DISCUSSION

Perhaps most importantly from the policy perspective, China has registered five impres-sive years of increased grain production. It seems that for the present decade or more, grain security goals have essentially been met. There can be little doubt that the new policies and programs described above, as well as upgrades to infrastructure and farms on a field-by-field basis are responsible.

Improvements stemming from the new policies have been uneven across the nation. Specifically, there is an interesting and distinct “geography” to both the implementation and the outcomes associated with these most recent reforms, whereby the best-endowed regions typically are not those that have registered the greatest recent progress in terms of increases in crop yields, gross production, value of crops, value of agricultural production, or rural incomes since 2000. Most probably, in wealthy, well-endowed coastal provinces, most of these field transformations and technical improvements were made prior to 2000, so neither unit yields nor gross provincial grain production could be expected to increase dramatically under the current programs. There are so many ways for so many types of investors, including farm households, to invest capital in these areas. It does not appear that field crop production is high on the list.

On the other hand, historically poor provinces with greater proportions of low- to moderate-quality land more prone to natural disasters (e.g., Jiangxi, northern Jiangsu, Anhui) and/or places with low population density (e.g., the provinces of the Northeast) appear to have benefited the most from the new programs. These provinces have registered the most impres-sive proportional gains since 2000. Anhui Province in eastern China, once synonymous with poverty, out-migration of youth, and irregular annual crop production due to natural disasters (floods, frosts, waterlogging) is now a major grain base and the fifth-largest source of cereals in the nation. On the other hand, Guangdong Province, once renowned for its highly produc-tive double and triple rice cropping systems, has seen rice, corn, and wheat production drop from 2000 to 2009 by 34.5, 1.8, and 93.8 percent,9 respectively.

These declines, and similar ones for nearby wealthy coastal provinces might be cause for alarm—as the rich alluvial plains of southern Guangdong, southern Jiangsu, or the produc-tive, well-watered intermountain valleys of Fujian and Zhejiang represent important national resources. Yet all reported declines in rice from 2000 to 2009. The sun rose the same, the rain did not stop, and the soils remain thick and rich; the agro-environment did not change. Rather, there are too many intervening opportunities for investment in these areas. As a conse-quence, it may prove increasingly difficult to coerce rural residents of affluent coastal farming regions to invest in grain production—with or without the subsidies at present levels. Many

9Wheat has always been a minor crop in Guangdong, so this dramatic decline is due to the very limited production of 2000 essentially disappearing by 2009.

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of Guangdong’s farmers are now immigrants from other provinces, effectively share crop-pers with few rights and protections, and have little reason to invest in land, equipment, or infrastructure. Most native farmers in these coastal provinces have primary employment off-farm except in the poorer, less accessible areas. While land was transferred and subcontracted quietly for decades, in October 2008 land rents and transfer agreements were legalized, in an effort to get more from land by safeguarding the renter or tenant’s rights and encour-aging long-term investments in land quality and capital investments related to agricultural production. In the future, this may help reverse the trend in these areas. The many other laws and new policies summarized above also represent efforts to optimize resources, technol-ogy, markets, and labor. It is possible that poorer places, with fewer options, must be helped more—precisely so that in the short run, they can shoulder more of the burden.

The spatial “reorientation” of the farm sector remains a work in progress, but has already resulted in remarkable shifts in the “classic” agricultural geography of the nation in terms of gross production, domestic “exporting” provinces, and the role of agriculture in provincial economies. Who would associate Northeast China, with its short growing season and frigid winters, as the fastest-growing rice production area in China?

The lack of relationships between these significant increases in cereal production and farm incomes is problematic, as it is in every nation. Perhaps the returns from grain sales for these small farms often of only 5–10 mu (1/3–2/3 ha) are too slight, even with the subsidies, to compete with the myriad off-farm and agro-processing opportunities of more developed areas of the eastern seaboard. It is the interior provinces that are largely meeting China’s growing demand for more corn and wheat, but at least at this rough provincial scale, these efforts so far have had only limited effect on incomes, confirming Gale’s (2005) essay on the subject. The scale of farm operations may matter here, and while rice is increasing in the Northeast and some other poorer provinces, the overall contribution to the value of grain production on these small area farms, even in these places, may be too small to register much if any effect. Still, the poor associations for both years between per capita incomes and the gross value of field crops and the gross value of all agricultural products is troubling. Results suggest the subsidies of all kinds provided to grain producers may play a critical role in the rural economy for years to come, and as importantly may have to be steadily increased to assure long-term grain targets.

It may also be that the new programs and policies are too new, that four to nine years is an insufficient time period to measure their success, but as noted earlier, similar results were found for correlation analysis employing the same variables for the earlier reform period from 1980 and 1985. Incomes cannot be raised through increased grain production, unless farm scale is shifted radically upward. Income from off-farm work and remittances from family members working in cities now often comprise the lion’s share of household income and the importance of revenues from off-farm sources will certainly increase even more in the future. It is an official goal at present to create conditions in which labor will shift from the farm sec-tor, thereby increasing per household land access for those who remain—creating a class of “professional” farmers. But will this be enough?

In 2009, the total area sown to grain was 108 million ha, 2,300 ha more than the previ-ous year, and despite the horrendous flooding in southern and Northeast China and drought in the Southwest, production was the highest since 1999—on less land than in the past. There is little doubt this stability, this success, should be credited to infrastructural improvements associated with these new programs and policies as well as better inputs and varieties. China’s population will not peak until 2026, and population growth, joined with a steadily improving diet with ever-increasing amounts of meat, will place constant strain on the nation’s cereal

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VEECK AND SHUI 261

production systems. These challenges will not desist, but the recent systematic reforms of both agricultural production systems and the policy environment have established a founda-tion that will serve the nation well.

These steps may offer important lessons to the farming systems of many nations, devel-oped and undeveloped. Yes, there are many challenging problems that China’s farm, forestry, aquaculture, and husbandry sectors must address and these are also part of the ongoing story, but the past 15 years or so have turned out very differently from what Brown (1995) envi-sioned: that ever-increasing grain imports from China would inflate prices and place even a minimal diet out of the reach of citizens of the many nations also importing food and compet-ing for imports with China. Although what did happen was considerably different, concerns voiced by Brown and others in the mid-1990s were important; they ramped up policy debate as well as development and investment in China’s farm sector so that food needs have largely been met with domestic production. It has been expensive, and the well-travelled “subsidy road” is always difficult to leave.

The renewed attention to the farm sector since 2000 has not only placed China’s rural economy on sounder footing, helped promote sustainable farming practices, and improved rural environmental quality in many areas, but the resulting sufficient and consistent food supplies have proven a major brake on inflation and have promoted some measures of social stability as well. Indeed, as is often the case, the old sayings are true: “Pearls and jade are not most precious, rather it is the five grains,” and “Grain is the treasure of treasures.”

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china's quiet agricultural revolution: policy and programs of the new millennium

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