Development and Restructuring of Chinese Agriculture

 Dr. Funing Zhong

 College of Economics & Management

Nanjing Agricultural UniversityNanjing, China

Outline of Presentation

Development of Chinese Rural Economy in the Past 50 years

Restructuring of Chinese Rural Economy During the Reform

Sources of Growth in Chinese Rural Economy

Challenges Facing Chinese Rural Economy

Policy Alternatives

Development in 5 Decades

Growth rates in the past 50 years

1952-1978 1978-2003

Agricultural GDP 2.0% 4.5%

Total output value 6.13%Cropping 4.26%Forestry 5.23%Animal 9.07%Fishery 11.45%

Development in 5 Decades

I ndi ces of Gross Output i n Chi neseAgri cul tural , 1978- 2003

100

300

500

700

900

1100

1300

1500

1700

1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Total

Farmi ng

Forestry

Ani malHusbandry

Fi shery

Development in 5 Decades

Grain production, mmt

year total cereals rice wheat maize beans tubers

1978 304. 8 136. 9 53. 8 55. 9 31. 71980 320. 6 139. 9 55. 2 62. 6 28. 71985 379. 1 168. 6 85. 8 63. 8 26. 01990 446. 2 189. 3 98. 2 96. 8 27. 41995 466. 6 416. 1 185. 2 102. 2 112. 0 17. 9 32. 61998 512. 3 456. 2 198. 7 109. 7 133. 0 20. 0 36. 02000 462. 2 405. 2 187. 9 99. 6 106. 0 20. 1 36. 92003 430. 7 374. 3 160. 7 86. 5 115. 8 21. 3 35. 1

Development in 5 Decades

Growth rates of per capita real net income in rural areas

1952-1978 1.0%

1978-2003 7.1%

Development in 5 Decades

Nominal annual net income per capita in rural areas, by sources yuan

Net income by source 1985 1990 1995 2000 2003

total 397.6 686.31 1577.74 2253.42 2622.24

Wages income 72.15 138.80 353.70 702.30 918.38

Family business income 295.98 518.55 1125.79 1427.27 1541.28

from agriculture 263.81 456.04 956.46 1090.67 1195.58 from non-agriculture 32.19 62.51 169.33 336.6 345.68Transfer and propertyincome

29.47 28.96 98.25 123.85 162.58

Restructuring of Rural Economy

Shares of Gross Output Val ue i n Chi neseAgri cul tural , 1978-2003

0%

20%

40%

60%

80%

100%

1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Farmi ng　 Forestry　 Ani mal 　 Husbandry fi shery

Diversification in Agriculture

Restructuring of Rural Economy

Sown area structure, %

year grain oil seeds cotton fiber sugar tobacco vegetables tea orchards

1978 80. 3 4. 1 3. 2 0. 5 0. 6 0. 5 2. 2 0. 7 1. 11980 80. 1 5. 4 3. 4 0. 5 0. 6 0. 3 2. 2 0. 7 1. 21985 75. 8 8. 2 3. 6 0. 9 1. 1 0. 9 3. 3 0. 8 1. 91990 76. 5 7. 3 3. 8 0. 3 1. 1 1. 1 4. 3 0. 7 3. 51995 73. 4 8. 7 3. 6 0. 3 1. 2 1. 0 6. 3 0. 7 5. 42000 69. 4 9. 9 2. 6 0. 2 1. 0 0. 9 9. 7 0. 7 5. 72003 65. 2 9. 8 3. 4 0. 2 1. 1 0. 8 11. 8 0. 8 6. 2

Restructuring of Rural Economy

Rural employment structure, %

year agriculture non-agriculture

1985 81. 9 18. 11990 79. 4 20. 61995 71. 8 28. 22000 68. 4 31. 62003 63. 8 36. 2

Rural employment structureRural Non- agri cul tural Labor Force(1985- 2003)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

198519901991199219931994199519961997199819992000200120022003Year

10, 000 Persons

OtherNonagr i cul turalTrades

Whol esal e, Retai lTrade　 and　 Cater i ngServi ces

Transport , storage,post 　 andconmmuni cat i onservi cesConst ruct i on

I ndust ry

Restructuring of Rural Economy

Restructuring of Rural Economy

Structure of grain sown areas, %

year cereal rice wheat corn soybean tubers

1978 n.a. 28. 5 24. 2 16. 6 n.a. 9. 81980 n.a. 28. 9 24. 6 17. 1 n.a. 8. 71985 n.a. 29. 5 26. 8 16. 3 n.a. 7. 91990 n.a. 29. 1 27. 1 18. 9 n.a. 8. 01991 83. 8 29. 0 27. 6 19. 2 8. 2 8. 11995 81. 1 27. 9 26. 2 20. 7 10. 2 8. 62000 78. 6 27. 6 24. 6 21. 3 11. 7 9. 72003 77. 3 26. 7 22. 1 24. 2 13. 0 9. 8

Restructuring of Rural Economy

Income of Sources Within Agriculture

0 200 400 600 800 1000 1200 1400

1985

1990

1995

2000

2003

Yea

r

Yuan

Farmi ng Forestry Ani mal 　 Husbandry Fi shery

2003

74. 1%

2. 4%

20. 5%2. 9%

By source: Share of I ncome Wi thi n Agri cul ture

1995

83.6%

1.4%13.4% 1.6%

Farmi ng

Forestry

Ani malHusbandryFi shery

Restructuring of Rural Economy

Source of growth

Land reform Incentives in early 1950s

Technology advancement Dwarf and semi-dwarf varieties in 1960s &

1970s Hybrid rice since 1970s Bt cotton in 1990s

Source of growth

Irrigation and land improvement Irrigated areas(mh ): 45 in 1978, 54 in 2003

Modern inputs Machine power(bw ): 117 in 1978, 604 in 2003

Chemical fertilizers(mt ): 9 in 1978, 44 in 2003

Electricity(bkwh): 25 in 1978, 343 in 2003

Source of growth

Contribution of diversification in cropping sector

Method of measurement:GOV = ∑(AREA×YIELD×PRICE) Indgov = Indarea×Indyield×Indprice Indprice = Indgov / (Indarea×Indyield)

Result:Increase in sown areas 5.5%Increase in yields 53.2%Diversification 41.3%

Source of growth Contribution of diversification in agriculture

Assumptions:Shifting of resources among sectors adds additional

growth

Method of measurement:Cont (%) = Conb (%) + Conc (%)×Coni (%)

Result:Inter-sector diversification 43%Growth of each sector 57%Within-sector diversification 41%Overall diversification 66%

Future Challenges

Rapid declining of agriculture’s share in total GDP

1952 50.5%

1978 28.1%

2003 14.6% Relatively slow declining of agriculture’s

share of employment 1952 83.5%

1978 70.5%

2003 49.1%

Future Challenges

Agricultural GDP per worker as a percentage of national average

1952 84.4%

1978 39.9%

2003 29.7%

Future Challenges

Widening rural:urban income gap

year income ratio

1978 2. 571980 2. 501985 1. 861990 2. 201995 2. 712000 2. 792003 3. 23

Future Challenges

Increasing number of farmers despite declining share in total employment

1952 173 millions

1978 283 millions

2003 365 millions 4.4 persons per household with 2.8

laborers working on 0.6 hectare of cultivated land

Future Challenges Annual production per farmer

grain 1362 kg

cotton 15.4 kg

oil-bearing crops 88.9 kg

red meats 174.1 kg

aquatic products 148.8 kg

milk 55.2 kg

Future Challenges

Continuing pressure on income and employment structure following economic growth and declining Engle coefficient

Increasing pressure on labor productivity and cost from imports

Continuing bias in public policy and investment towards modernized yet labor-saving technology

Policy Alternatives Future growth of agriculture and

farmers’ income largely depends on public policy and investment

Transformation of employment structure will ensure a long-run healthy growth of the whole economy

Reducing the number of farmers will facilitate expansion of farm size, increasing labor productivity and competitiveness

Policy Alternatives

Transformation of employment structure within agriculture is as important

Relocation of agricultural resources towards more profitable products is consistent with intensive use of labor

Relocation of agricultural resources towards more profitable products is consistent with comparative advantage

Policy Alternatives

Policy and public investment needed: 1.  Encouraging establishment and development

of private small enterprises that are relatively labor-intensive;

2.  Encouraging research, development, and extension of labor-intensive technology that may help absorb more laborers;

3. Providing a better policy environment, and supporting it with increasing public investment and expenditure, that allows and increases labor mobility among regions and among sectors;

Policy Alternatives

Policy and public investment needed: 4. Increasing public investment and expenditure

on infrastructures that may help creating more jobs;

5. Increasing public investment and expenditure on rural education and career training that may help farmers grasp newly-created non-farm job opportunities;

6. Increasing public investment and expenditure on rural institutions that may help farmers transform production and employment structure.

Thanks!