Easing the transition to More Open Economy: China's Agricultural and Rural Policy

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Easing the transition to More Open Economy: China's Agricultural and Rural Policy. Jikun Huang Center for Chinese Agricultural Policy Chinese Academy of Sciences. Growth of GDP and Ag GDP (%). Per capita rural real income. Number of population under poverty in China, 1978-2001 (million). - PowerPoint PPT Presentation

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  • Easing the transition to More Open Economy:China's Agricultural and Rural PolicyJikun HuangCenter for Chinese Agricultural PolicyChinese Academy of Sciences

  • Growth of GDP and Ag GDP (%)

  • Per capita rural real income

  • Number of population under poverty in China, 1978-2001 (million)

  • Rural poverty incidence in China, 1978-2001(%)

  • Shares of agricultural and non-agricultural GDP in China, 1970-2001

  • Share of non-agri employment of rural labor, 1981-2000 (source: CCAP)

  • Source (%) of farmers income

  • Anti-Poverty ProgramsDuring 1984-1996: US$ 1-1.5 billion annually1998: US$ 2 billion 2000: exceeded US$ 3 billion Poverty loans (52%), grants (17%) & FFW (26%) and other (5%).

  • Challenges:Gini coefficient in rural China, 1980-2000

  • Per capita income in ruralBottom 10%:180%; Top 10%:407%

  • Farmersfull time farming %Human capital or education is key for farmers to access to non-agricultural employment

  • Major policies affecting non-agricultural income growthRural enterprise development:Promoting TVE development in 1980s Credit and finance provided by local townships/ villagesGranted local land and low wage of rural laborPromoting private enterprise development in 1990sRural infrastructure development since late 1980sPrivatizing rural TVEs since middle 1990sPromoting rural small town development since late 1990sUrban economic reform:Reforming SOE in urban since early 1990sReleasing migration constraints since middle 1990sExternal economy:Attracting FDI and trade liberalizationPro-poor interventionsAgricultural development policies

  • Agri diversification -- output shares (%)

  • Output, input and TFP indexes: Rice (1979=100)

  • Major agricultural development policiesInstitutional reform: land (in early 1980s)Allocated land equally to all households in the villagesLand use right: 15 years in 1980-95 and 30 years in 1995-2025After 2025: can be extended forever Irrigation improvementAgricultural technologyMarket reform since the late 1980sTrade liberalization

  • Government rice procurement as total production

  • Rice price ratios: procurement vs market prices

  • Implicit tax of grain (rice, wheat, maize) marketing (government procurement)

  • Number of rural free market (10,000)

  • Agri commodities traded in free market (%)

  • DalianGuangzhou (Shekou Port)Maize price

  • DalianFujian

  • Integration in Northeast Chinas Markets(percent of markets that have integrated price series)

  • WTO commitments: Market accessTariff 20012004Simple mean: China:21 17% Developing countries 20-50%Trade weighted: China:13 SE Asia 16% Japan & Korea53% Other Asian countries24% EU20%Chinas tariff: one of the lowest in the world

  • Chinas agriculture:Tariff rate (%): 1992-2001 2004Liberalization: Continuous of past trend, not just starting

  • Chinas Agriculture:Nominal Protection Rates (NPR,%)Policy distortions: declining significantly overtime

  • NPRs (%):Soybean, rapeseed, sugar, and cotton in 2001

  • NPRs (%):Japonica rice, Vegetable, Fruits and Meats in 2001

  • Agricultural Trade Balance (million US$)

  • Concluding RemarksProductivity growth resulted from R&D investment is essential for the agriculture to be competitive and a precondition for a successful economic transitionAgricultural diversification contributes to farmers income, healthy diversification needs substantial domestic market reformAgricultural growth is important for farmers income growth, but substantial growth has to come from non-agri sectors

  • Concluding RemarksNon-agri development needs significant public investment in rural infrastructure and education and governments industrialization policies (i.e., migration/finance) in both rural and urban areasTrade liberalization and FDI can facilitate the growth of and structural changes in economyGrowth is essential for poverty alleviation, but poverty alleviation and narrowing income disparity require more pro-poor interventions A challenge that China is facing

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