grain production and environmental management in china's fertilizer economy

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Journal of Environmental Management (1996) 47, 283–296 Grain Production and Environmental Management in China’s Fertilizer Economy Qingbin Wang*, Catherine Halbrendt* and Stanley R. Johnson² *Department of Community Development and Applied Economics, The University of Vermont, Burlington, VT 05405, U.S.A., ²Department of Economics, Iowa State University, Ames, IA 50011, U.S.A. Received 20 June 1995; accepted 26 September 1995 The rapid growth in China’s per hectare chemical fertilizer application, from less than 10 kg in 1960 to 331 kg in 1993, has contributed significantly to the growth in grain production, but has also caused many environment problems such as groundwater pollution. With one-fifth of the world’s population but only 7% of the earth’s arable land, China is facing the challenge of increasing grain production and protecting the environment. This paper analyzes the contribution of both chemical and organic fertilizer to China’s grain yield improvement since 1952 and discusses policy implications for improving fertilizer eciency and reducing groundwater pollution. A quantitative estimation of the major sources of China’s fertilizer supply shows that organic fertilizer was dominated by chemical fertilizer in terms of total plant nutrient supply by 1982 but that it still plays an important role in Chinese agriculture. A grain yield response function is then constructed to estimate the contribution of fertilizer and other factors to China’s grain yield growth. Results indicate that the changes in grain yields during 1952–1993 were significantly determined by fertilizer application as well as by technological and institutional changes. China’s fertilizer-related environmental problems require urgent attention because of their impacts on the global environment as well as on the welfare of a large proportion of the world’s population. Major suggestions for improving China’s fertilizer eciency are to increase the proportion of phosphates and potash application and to adjust the highly skewed chemical fertilizer distribution by allocating more fertilizer to areas with low and medium application rates. 1996 Academic Press Limited Keywords: China, chemical fertilizer, environment, organic fertilizer, yield response function. 1. Introduction Chemical fertilizer has been increasingly used to improve crop yields in both developed and developing countries, especially in such populous nations as China and Japan Corresponding author: Dr Q. Wang 283 0301–4797/96/070283+14 $18.00/0 1996 Academic Press Limited

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Journal of Environmental Management (1996) 47, 283–296

Grain Production and Environmental Management in China’sFertilizer Economy

Qingbin Wang∗, Catherine Halbrendt∗ and Stanley R. Johnson†

∗Department of Community Development and Applied Economics,The University of Vermont, Burlington, VT 05405, U.S.A.,†Department of Economics, Iowa State University, Ames, IA 50011, U.S.A.

Received 20 June 1995; accepted 26 September 1995

The rapid growth in China’s per hectare chemical fertilizer application, fromless than 10 kg in 1960 to 331 kg in 1993, has contributed significantly to thegrowth in grain production, but has also caused many environment problemssuch as groundwater pollution. With one-fifth of the world’s population butonly 7% of the earth’s arable land, China is facing the challenge of increasinggrain production and protecting the environment. This paper analyzes thecontribution of both chemical and organic fertilizer to China’s grain yieldimprovement since 1952 and discusses policy implications for improvingfertilizer efficiency and reducing groundwater pollution.

A quantitative estimation of the major sources of China’s fertilizer supplyshows that organic fertilizer was dominated by chemical fertilizer in terms oftotal plant nutrient supply by 1982 but that it still plays an important role inChinese agriculture. A grain yield response function is then constructed toestimate the contribution of fertilizer and other factors to China’s grain yieldgrowth. Results indicate that the changes in grain yields during 1952–1993 weresignificantly determined by fertilizer application as well as by technological andinstitutional changes. China’s fertilizer-related environmental problems requireurgent attention because of their impacts on the global environment as well ason the welfare of a large proportion of the world’s population. Majorsuggestions for improving China’s fertilizer efficiency are to increase theproportion of phosphates and potash application and to adjust the highlyskewed chemical fertilizer distribution by allocating more fertilizer to areaswith low and medium application rates. 1996 Academic Press Limited

Keywords: China, chemical fertilizer, environment, organic fertilizer, yieldresponse function.

1. Introduction

Chemical fertilizer has been increasingly used to improve crop yields in both developedand developing countries, especially in such populous nations as China and Japan

Corresponding author: Dr Q. Wang

2830301–4797/96/070283+14 $18.00/0 1996 Academic Press Limited

China’s fertilizer use and environment284

with extremely limited per capita arable land. The world’s average chemical fertilizerapplication per hectare arable land increased from 60·20 kilograms (kg) in 1973 to109·57 kg in 1992, whereas China’s application rate rose from 63·60 kg to 307·06 kgover the same period and reached a record of 331·43 kg in 1993 (FAO; State StatisticalBureau of China (SSB), 1994). China has recently emerged as the largest consumer, thesecond largest producer and a major importer of chemical fertilizer in the world (SSB,1994). The rapidly increasing application of chemical fertilizer has been identified as akey factor to the significant growth in China’s agricultural productivity over the pastthree decades (Kueh, 1984; An, 1989; McMillan et al., 1989; Halbrendt and Gempesaw,1990; Lin, 1992; Smil, 1993). On the other hand, the increased use of chemical fertilizerand other farm chemicals like pesticide has caused environmental problems such asgroundwater pollution in many areas of China (Wu, 1991; Smil, 1993; China NewsDigest, 15 April 1995). For example, a water survey conducted in the lower reaches ofthe Yangzi River in 1990 reported an average nitrate concentration rate of 16·34 ppmin pond and reservoir water (Wu, 1991).

With about one-fifth of the world’s population but only 7% of the earth’s arableland, the major goal of Chinese agriculture is to provide sufficient food for its hugepopulation. The attainment of such a goal has been challenged by the decreasing percapita arable land and changing food consumption patterns from grain to animalproducts that require more grain as feed (Dixit and Webb, 1992; Wang et al., 1993).Because China’s arable land has been almost fully used and the scope for reclamationis extremely limited, any significant growth in domestic grain production has to comefrom yield improvement or acreage reduction of other crops, such as cotton andrapeseed. Among others, increasing chemical fertilizer application has been selected asa key measurement to improve grain yields because the overall yield response to fertilizeris believed to be significant in Chinese agriculture (Kueh, 1984; Stone, 1986; Halbrendtand Gempesaw, 1990; People’s Daily, 20 October 1994). Recent information from Chinaindicates that, since the late 80s, both the central and provincial governments haveallocated a large percentage of their investment to increase chemical fertilizer production(People’s Daily, 20 October 1994). China’s growing chemical fertilizer supply withimproving quality is expected to increase grain production through yield improvementbut also cause environmental problems like groundwater contamination. Such en-vironmental problems in China require urgent attention because of their impact on thewelfare of a large proportion of the world’s population and on the global environment(Smil, 1993).

This study analyzes the contribution of fertilizer, along with other factors, to China’sgrain yield improvement since 1952 and discusses policy implications for improvingfertilizer efficiency and reducing groundwater contamination. The following sectionsbriefly review the development of China’s fertilizer economy since 1949, present aquantitative estimate of organic fertilizer supply from 1952–1993, report the estimationresults of a yield response function, discuss economic and policy implications andsummarize major conclusions.

2. China’s fertilizer economy since 1949

With a farming history of thousands of years, most of China’s arable land was cultivatedand deficient in organic matter and plant nutrients by the time the People’s Republicof China was founded in 1949 (Hsu, 1982; Stone, 1986). The Chinese government hasfully recognized the importance of yield improvement to feed the growing population

Q. Wang et al. 285

and has paid special attention to soil fertilization since the early 1950s. Among all thetechnological policies adopted by the government, those on fertilization have beenpersistently stressed and least disputed (Hsu, 1982; Stone, 1986). The policy emphasiswas placed on mobilizing all possible resources of organic fertilizer in the 1950s andwas shifted to chemical fertilizer use in the early 1960s.

As a result of the high production incentives stimulated by the nationwide landreform around 1950 and the government’s strong promotion to improve crop yields,Chinese farmers applied much more organic fertilizer in the 1950s than in the previousdecades. Chao (1970) reported that the per hectare application of organic fertilizerincreased from 7·47 tons in 1933 to 11·25 tons in 1952 and then reached 15·0 tons by1957. Although the central government’s exhortation that “manure can be foundeverywhere and fertilizer can be made from almost anything” resulted in significantwaste of human and natural resources, the increased use of organic fertilizer was a keyfactor contributing to China’s rapid growth in grain production, from 132·13 millionsof metric tons (mmt) in 1950 to 195·05 mmt in 1957 (SSB, 1993). Unfortunately, China’s“Great Leap Forward” in 1958 caused sharp decreases in grain production over thenext three years and a widespread famine that killed an estimated 30 million people(Tyler, 1995).

Recognizing the limitation of organic fertilizer in both quantity and nutrient content,the Chinese government began to emphasize chemical fertilizer in the early 1960s byinvesting in domestic production, increasing imports and providing price subsidy forfarmers. The available time-series data show that both domestic production and importsof chemical fertilizer were extremely low in the 1950s, then increased steadily in the1960s and 1970s, and have grown rapidly since the late 1970s (SSB, 1994). China’sdomestic chemical fertilizer production in the 1960s and 1970s was mainly from smallplants using a cheap process developed in China in 1962 to produce ammoniumbicarbonate (Stone, 1986). For example, about 70% of China’s nitrogen fertilizer wasproduced by 1533 small fertilizer plants in 1978 (Stone, 1986). Because of these smallfertilizer plants’ low product quality and increased fertilizer and grain prices in theworld markets in the early 1970s, the Chinese government imported 13 large scalecomplexes to produce synthetic ammonia in the mid-1970s and four additional largeplants around 1980 (Smil, 1993). These large plants have contributed significantly toChina’s fertilizer production growth, from 12·89 mmt in 1975 to 39·54 mmt in 1993(SSB, 1994).

The rapid growth in China’s chemical fertilizer supply and consumption since thelate 1970s has been closely related to China’s rural economic reform initiated in 1978.The rural reform replaced the commune system established in 1958 with the “householdproduction responsibility contract system”, under which farmers are allowed to maketheir own production and marketing decisions (Lin, 1988; Sicular, 1988). Becausefarmers’ incomes are directly dependent on their productivity and marketing decisions,Chinese farmers have made great efforts to improve crop yields by increasing farminputs, such as chemical fertilizer, adopting new crop varieties like hybrid rice andimproving field management. When the land contract was extended from 1–3 yearsaround 1980 to 15–25 years in the late 1980s, the positive impacts of the new systemwere more fully evident (Carter and Zhong, 1991; Lin, 1992). The growing demand forchemical fertilizer has been the key factor in the increases in fertilizer price and supply.Detailed discussions of China’s rural economic reform and its consequences are availablein several western publications (e.g. Lin, 1988; Sicular, 1988; McMillan et al., 1989;Carter and Zhong, 1991).

China’s fertilizer use and environment286

With a steady but relatively lower growth rate since 1960, organic fertilizer wasdominated by chemical fertilizer in terms of total nutrient supply by 1982, but stillplays an important role in Chinese agriculture, especially in regions with low applicationrates of chemical fertilizer (Kueh, 1984; Stone and Desai, 1989; McMillan et al., 1989;Fan, 1991). Because data on China’s organic fertilizer have been highly limited, somerecent studies have excluded organic fertilizer in modeling China’s grain yield oragricultural productivity (e.g. Halbrendt and Gempesaw, 1990; Lin, 1992). Kueh (1984)demonstrated that the exclusion of organic fertilizer in grain yield response functionscould underestimate the marginal return of fertilizer in Chinese agriculture. The nextsection will present a quantitative estimation of China’s organic fertilizer supply from1952–1993 using the most recent available data from China.

The rapidly increasing application of chemical fertilizer has contributed significantlyto China’s grain yield improvement since the late 1970s (Halbrendt and Gempesaw,1990; Carter and Zhong, 1991). When the application rate of chemical ferilizer persown hectare increased from 58·90 kg in 1978 to 213·34 kg in 1993, the per hectaregrain yield rose from 2527·38 kg to 4130·76 kg (SSB, 1994). An official Chinese estimateindicates that about 40% of the growth in total grain output in the period from1986–1990 was accounted for by increased chemical fertilizer application (People’sDaily, 28 November 1991). On the other hand, the increased application of chemicalfertilizer and other farm chemicals has resulted in environmental problems, such aswater contamination, in areas with a high application rate. According to the results ofa three-county water survey conducted in the lower reaches of the Yangzi River in1990, the nitrate concentration rate was above 10 ppm in 65% of water samples fromponds and reservoirs which were the major local sources of drinking water (Wu,1991). Many local residents questioned if certain health problems were related to thecontaminated water (Wu, 1991). A recent report indicates that about 50 000 Chinesefarm workers were poisoned by farm chemicals in 1994 (China News Digest, 15 April1995). As the application rate of chemical fertilizer continues to increase and moreresearch results become available, China’s public concern about water quality is expectedto increase and therefore requires forward-thinking on policy options to find a balancebetween food production and environmental protection. Selected policy implicationsfor improving China’s fertilizer efficiency and reducing groundwater contamination willbe discussed in Section 5.

3. Estimation of organic fertilizer supply

Chinese farmers have used organic fertilizer from a wide range of sources such as nightsoil, animal manure and oil cakes. Night soil and animal manure are the most importantsources due to their availability, high nutrient content and low cost. Livestock producinga significant amount of manure includes hogs, cattle, horses, goats, sheep, mules anddonkeys. China’s long history and well-developed techniques of using organic fertilizerhave attracted wide interest and engendered many assessments of organic fertilizersupply and its role in Chinese agriculture (e.g. Dawson, 1966; Chao, 1970; Kilpatrick,1978; Tang, 1980; Kueh, 1984; McMillan et al., 1989; Fan, 1991). Most availableestimates of China’s organic fertilizer supply are based on the method originallydeveloped by Dawson in 1966. Dawson’s pioneering estimates have been consecutivelyupdated and refined by Chao (1970), Kilpatrick (1978), Tang (1980) and Kueh (1984).Kueh’s formula represented in Equation (1) determines the total organic fertilizer supply(FS) measured in chemical fertilizer equivalent nutrient weight:

Q. Wang et al. 287

FS=]i

QiUi(ni+pi+ki)AOi

ACi

(1)

where Q is the gross weight of organic fertilizer; U is the utilization rate; n, p and kare the content coefficient of nitrogen (N), phosphates (P2O5) and potash (K2O); ACand AO are, respectively, the average plant absorption rates for chemical and organicfertilizer; and i denotes the source of organic fertilizer. Such estimates of the organicfertilizer supply allow direct comparison and adding-up of chemical and organic fertilizer(Kueh, 1984). Using the proportions of the three groups of chemical fertilizer in thetotal chemical fertilizer consumption as weights, Kueh (1984) estimated AC as theweighted average of AC n, AC p and AC k, which are the corresponding plant absorptionrates of chemical nitrogen, phosphate and potash fertilizer. For each organic fertilizer,the absorption rates of the three plant nutrients are assumed to be identical (Kueh,1984). Detailed discussion on plant absorption rates of fertilizer can be found in Chao’s(1970) book and Kueh’s (1984) article. Using this formula and China’s time-series data,Kueh (1984) estimated China’s organic fertilizer supply from 1950–1981. This studyextends Kueh’s (1984) estimate from 1981–1993 using a modified formula.

Kueh’s formula in (1) is modified by directly including AC n, AC p and AC k ratherthan their weighted average (AC):

FS=]i

QiUiA ni

AC n+pi

AC p+ki

AC kBAOi (2)

The modified formula not only avoids the estimation of AC but may also improve theestimation accuracy because the weights used to derive AC are generally estimatedfrom secondary data. In our estimation, Q and U are assumed to be variables and allothers in the formula are assumed to be constants for each organic fertilizer (Chao,1970; Tang, 1980; Kueh, 1984). The utilization rates (U) and all the coefficients aredirectly adopted from Tang (1980) and/or Kueh (1984) with the assumption that theyhave remained constant over an extended period. Some observers have suggested thatthe absorption rates of chemical fertilizers (AC n, AC p and AC k) and the utilizationrates of organic fertilizer (U) in China might have decreased in the past decade due torapidly increasing use of chemical fertilizer and increasing opportunity costs of applyingorganic fertilizer (e.g. Kueh, 1984; An, 1989; McMillan et al., 1989), but no reliableinformation is available on their changes. Note that the estimation results would remainunchanged if AC n, AC p, AC k and U changed at the same rates. The yearly gross weight(Q) of night soil and animal manures is estimated as the annual per head excretamultiplied by year-end population (Kueh, 1984). For night soil, both rural and urbanresidents are included but with different utilization rates (Chao, 1979; Tang, 1980). Thisestimation is inconsistent with Kueh’s (1984) estimate that included only the ruralpopulation. The yearly gross weight (Q) of other organic fertilizer is estimated fromreliable information using the methods and coefficients from Tang (1980) and/or Kueh(1984). For example, the Q of oil cakes is assumed to be 33% of soybean output and31% of oilseed output (Kueh, 1984). The time series data used to estimate Q, such asyear-end population, are directly from SSB (1994). The estimation results of China’syearly organic fertilizer supply in terms of chemical fertilizer equivalent nutrient weight

China’s fertilizer use and environment288

T 1. China’s organic fertilizer supply 1952–1993 (10 000 tons)

Animal manures

Night Drought Sheep Green Oil OtherYear soil Hogs animals and goats manure cakes sources Total

1952 198·17 57·00 184·52 22·14 12·13 53·31 56·75 584·021953 208·08 62·79 200·96 26·55 15·49 53·68 60·15 627·701954 219·42 68·28 218·50 30·80 19·82 51·99 63·76 672·561955 230·78 60·61 231·92 32·77 25·46 54·09 66·19 701·821956 241·35 59·46 239·16 36·60 32·61 59·49 67·24 735·891957 253·16 105·88 234·71 40·37 41·71 55·42 64·92 796·171958 257·21 98·18 217·95 39·19 53·30 52·09 61·28 779·191959 258·85 87·39 223·61 45·73 43·98 49·97 62·13 771·66

1960 253·12 59·70 208·77 46·20 42·68 32·53 58·71 701·731961 252·42 54·81 198·74 50·73 42·68 31·35 56·42 687·151962 260·74 72·55 201·08 55·15 47·99 33·24 56·84 727·581963 280·83 99·59 224·19 58·62 64·89 36·52 59·72 824·361964 296·64 119·92 247·15 60·67 87·75 43·71 62·31 918·141965 318·50 136·28 272·10 64·06 92·84 37·81 65·15 986·741966 327·50 157·86 282·11 63·62 98·15 46·36 67·04 1042·631967 335·71 155·17 289·61 66·50 103·78 46·47 68·47 1065·711968 345·43 145·84 295·66 66·44 109·74 45·66 69·64 1078·421969 355·04 140·84 296·95 64·60 116·03 44·15 69·93 1087·54

1970 365·47 168·26 303·37 67·75 122·74 48·54 71·17 1147·291971 375·53 204·39 306·19 69·16 129·78 49·41 71·77 1206·231972 384·35 215·27 307·24 68·80 137·26 40·87 72·00 1225·791973 393·19 210·59 311·58 72·47 145·17 48·73 72·84 1254·561974 400·52 212·91 312·50 74·12 153·51 46·01 73·05 1272·621975 407·05 229·55 309·91 75·27 162·39 45·50 72·65 1302·331976 412·58 234·52 303·68 72·88 171·71 41·22 71·53 1308·111977 417·88 238·22 299·36 74·35 181·57 43·70 70·81 1325·881978 422·80 245·98 299·90 78·30 185·20 49·40 70·89 1352·461979 426·27 261·02 302·07 84·38 188·90 53·49 71·30 1387·43

1980 430·45 249·36 303·58 86·30 174·38 60·07 71·69 1375·831981 434·79 239·78 310·33 86·49 160·96 74·93 73·11 1380·391982 439·56 245·56 321·02 83·76 154·55 79·74 75·18 1399·381983 444·34 243·73 328·18 76·92 147·81 77·92 76·59 1395·491984 447·08 250·47 343·72 72·98 139·37 82·74 79·49 1415·851985 451·92 270·56 361·28 71·82 130·48 100·32 82·71 1469·101986 457·13 275·29 378·33 76·59 129·39 100·83 85·75 1503·311987 462·91 267·57 388·08 83·09 126·18 106·24 87·50 1521·581988 469·05 279·40 399·51 92·85 125·33 95·28 89·56 1550·981989 475·20 288·04 408·63 97·51 132·60 88·72 91·15 1581·84

1990 481·59 295·88 415·85 96·76 147·19 103·60 92·43 1633·301991 487·95 301·79 421·55 95·01 156·98 99·42 93·45 1656·161992 490·51 313·68 432·14 95·53 152·30 110·66 95·18 1681·211993 494·86 320·85 449·95 100·12 162·22 144·37 98·16 1766·28

from 1952–1993 are summarized in Table 1. All the coefficients and time-series dataused in our estimation are available from the authors. In Table 1, “drought animals”include cattle, horses, mules and donkeys, and “other sources” consist of river and

Q. Wang et al. 289

pond mud, compost and plant residues. Compared to the estimates by Kueh (1984)and Tange (1980) for the overlapping years, our results are slightly greater than Keuh’sestimates but less than Tang’s estimates. This difference is as expected because Kuehexcluded night soil of the urban population and Tang did not take into account thedifferences in plant absorption rates for chemical and organic fertilizer.

Table 2 summarizes the time series data of China’s total supply and averageapplication rate of both chemical and organic fertilizer and aggregate grain yield from1952–1993. The data on chemical fertilizer supply and total crop sown acreage used tocalculate fertilizer application rates are from SSB (1994). To examine the structuralchange in China’s fertilizer supply, the percentage share of organic fertilizer is alsoreported in Table 2. The yearly average grain yield is estimated from total grain outputand sown acreage that are directly from SSB (1994). Table 2 clearly shows that theaverage grain yield and the application rates of both chemical and organic fertilizerhave increased significantly over the study period, especially since the 1978 economicreform. However, chemical fertilizer use has increased much faster than the use oforganic fertilizer since the early 1970s and had become the dominant nutrient sourceby 1982. On the other hand, organic fertilizer is still a major source of crop nutrientsin Chinese agriculture.

4. Estimation of a grain yield response function

Crop yield response and farm prices are key factors determining the optimal levels offarm inputs such as fertilizer. Yield response reflects the natural processes of plantproduction and farm prices are determined by market demand and supply as well asgovernment policy. In Chinese agriculture, yield response has always been moreimportant for policymakers because farm prices have been highly controlled by thegovernment. Under the commune system from 1958–1978, both production and priceof almost all farm outputs and inputs like chemical fertilizer were governed byrigid state planning (Sicular, 1988). Although China’s agricultural system has beensignificantly decentralized since 1978, the government still purchases a large proportionof major farm outputs at contract prices and plays a major role in determining thesupply and price of industrial farm inputs like chemical ferilizer. Yield response is akey factor determining the Chinese government’s fertilizer policy and farmers’ demandfor fertilizer and other farm inputs. This section reviews some alternative crop yieldresponse functions and presents the estimation results of a selected yield responsefunction.

Grain yield is determined by many factors such as inputs, technology, weather andmanagement. Estimating a yield response function can provide rich information on thecontribution of alternative factors to crop yield and the relationships among thesefactors (Tang, 1980). Several function forms such as linear and Cobb–Douglas functionshave been used to model China’s grain yield or agricultural productivity (e.g. Kueh,1984; McMillan et al., 1989; Halbrendt and Gempesaw, 1990; Carter and Zhong, 1991;Fan, 1991; Lin, 1992). Kueh (1984) estimated a power function to examine the impactsof fertilizer application on grain yield and concluded that fertilizer (chemical andorganic combined) in China exhibited a coherent trend of constant return from1961–1981. McMillan et al. (1989) used a Dennison–Solow accounting approach toanalyze the contribution of farm inputs and institutional changes to total productivitygrowth. Carter and Zhong (1991) modeled China’s aggregate grain yield response topurchasing price and the household production responsibility system using a linear

China’s fertilizer use and environment290

T 2. China’s fertilizer application and grain yield 1952–1993

Fertilizer supply (mmt) Share of Application rate (kg/ha) Grainorganic yield

Year Chemical Organic Total fertilizer (%) Chemical Organic Total (kg/ha)

1952 0·078 5·840 5·918 98·68 0·552 41·34 41·90 1322·161953 0·108 6·277 6·385 98·31 0·750 43·58 44·33 1317·361954 0·139 6·726 6·865 97·98 0·940 45·46 46·40 1314·211955 0·232 7·018 7·250 96·80 1·536 46·45 47·99 1415·131956 0·296 7·359 7·655 96·13 1·860 46·23 48·09 1413·751957 0·373 7·962 8·335 95·52 2·372 50·63 53·01 1459·591958 0·561 7·792 8·353 93·28 3·691 51·27 54·96 1567·281959 0·522 7·717 8·239 93·66 3·666 54·19 57·86 1465·26

1960 0·649 7·017 7·666 91·53 4·310 46·60 50·91 1172·101961 0·457 6·872 7·329 93·76 3·191 47·98 51·17 1214·591962 0·630 7·276 7·906 92·03 4·493 51·89 56·38 1315·571963 0·937 8·244 9·181 89·79 6·682 58·79 65·47 1407·981964 1·153 9·181 10·334 88·84 8·033 63·97 72·00 1535·631965 1·942 9·867 11·809 83·56 13·553 68·86 82·42 1626·131966 2·742 10·426 13·168 79·18 18·675 71·01 89·68 1768·741967 2·944 10·657 13·601 78·35 20·312 73·53 93·84 1826·891968 2·168 10·784 12·952 83·26 15·505 77·12 92·63 1799·761969 2·886 10·875 13·761 79·03 20·477 77·16 97·64 1793·96

1970 3·224 11·473 14·697 78·06 22·468 79·96 102·42 2011·951971 3·774 12·062 15·836 76·17 25·906 82·80 108·71 2069·841972 4·312 12·258 16·570 73·98 29·151 82·87 112·02 1983·991973 5·213 12·546 17·759 70·65 35·093 84·45 119·55 2186·701974 4·858 12·726 17·584 72·37 32·683 85·62 118·30 2275·331975 5·369 13·023 18·392 70·81 35·901 87·08 122·98 2350·201976 5·830 13·081 18·911 69·17 38·939 87·37 126·31 2371·231977 6·480 13·259 19·739 67·17 43·394 88·79 132·18 2348·261978 8·840 13·525 22·365 60·47 58·902 90·12 149·02 2527·381979 10·863 13·874 24·737 56·09 73·161 93·44 166·60 2784·78

1980 12·694 13·758 26·452 52·01 86·719 93·99 180·71 2734·361981 13·349 13·804 27·153 50·84 91·961 95·09 187·05 2827·291982 15·134 13·994 29·128 48·04 104·553 96·68 201·23 3124·381983 16·598 13·955 30·553 45·67 115·272 96·92 212·19 3395·781984 17·398 14·158 31·556 44·87 120·635 98·17 218·81 3608·221985 17·758 14·691 32·449 45·27 123·637 102·28 225·92 3483·021986 19·306 15·033 34·339 43·78 133·880 104·25 238·13 3529·261987 19·997 15·216 35·213 43·21 137·952 104·97 242·92 3621·711988 21·415 15·510 36·925 42·00 147·824 107·06 254·88 3578·551989 23·571 15·818 39·389 40·16 160·835 107·94 268·77 3632·19

1990 25·903 16·333 42·236 38·67 174·590 110·09 284·68 3932·841991 28·051 16·562 44·613 37·12 187·519 110·71 298·23 3875·691992 29·302 16·812 46·114 36·46 196·645 113·41 310·06 4003·791993 31·519 17·663 49·182 35·92 213·341 119·84 333·18 4130·76

function form. For the objective of predicting China’s wheat production and con-sumption, Halbrendt and Gempesaw (1990) constructed a system of six equations inwhich wheat yield was a linear function of only the chemical fertilizer application rate.Fan (1991) and Lin (1992) modeled China’s agricultural productivity growth using

Q. Wang et al. 291

alternative specifications of the Cobb–Douglas function. Although most of these studiesidentified fertilizer as a key factor of China’s agricultural growth, their estimationresults are substantially different. In addition to their differences in function forms,study period and data sources, selection of a fertilizer variable was a key factorcontributing to the different results. For example, Kueh (1984) and McMillan et al.(1989) considered both organic and chemical ferilizer, while Halbrendt and Gempesaw(1990) and Lin (1992) included only chemical fertilizer. Using the time-series data from1961–1981, Kueh (1984) demonstrated that excluding organic fertilizer in China’s grainyield response function would underestimate the marginal return of fertilizer.

This study uses the following quadratic function to model China’s aggregate grainyield:

Y=a+b1F+b2F 2+b3T+b4D (3)

where Y is the aggregate average grain yield; F is the average fertilizer application rate(chemical and organic combined); T is a time variable to capture technological changes;and D is the proportion of rural households under the commune system. The selectionof such a yield response function is based on the results of previous studies as wellas data availability. With significant impacts on production incentives and incomedistribution, institutional changes have been identified as key factors determiningChina’s labor and land productivity over the past four decades (Lin, 1988; McMillanet al., 1989; Carter and Zhong, 1991; Lin, 1992). China’s major institutional changesin the rural areas since 1950 have been highly associated with the commune systemwhich was implemented nationwide in 1958 and replaced by the household responsibilitysystem around 1980. The proportion of rural households under the commune systemtends to be a good indicator of China’s institutional changes over the study period(Carter and Zhong, 1991; Lin, 1992). Technological changes have also been identifiedas a key factor to China’s agricultural growth (Fan, 1991; Lin, 1992).

Theoretically, many other variables such as labor and irrigation inputs might haveaffected China’s grain yield and should therefore be included in the yield responsefunction. These variables are not included in our yield function in part because dataon their changes over the study period are either incomplete or inconsistent (Kueh,1984; Halbrendt and Gempesaw, 1990; Carter and Zhong, 1991). Furthermore, thechanges in farm inputs other than fertilizer may be well represented by the time variableor fertilizer application rate (Halbrendt and Gempesaw, 1990). Because there are noavailable data on fertilizer distribution among grain and other crops, and because graincrops have accounted for more than 75% of the total sown acreage in China, thefertilizer application rate used to estimate the model is derived from total fertilizerconsumption and sown acreage.

Estimation results of the grain yield function in (2) using the ordinary least squares(OLS) are as follows:

Y=768·01+12·123F−0·0143F 2+20·267T−287·49D (4)(9·52) (3·75) (−3·21) (1·62) (−4·91)

R2=0·993, DW=1·82, df=37

where figures in parentheses are the t-ratios of the estimated coefficients, R2 is the

China’s fertilizer use and environment292

19901

Year

Gra

in y

ield

(to

n/h

a)

1970

5

4

3

2

1960 1980

Figure 1. Comparison of the actual and predicted average grain yield.Ε=Actual yield;Β=predicted yield.

regression coefficient, DW is the Durbin–Watson statistic, and df are the degrees offreedom.

The regression coefficient of 0·993 indicates that this model fits the data quite well.The signs of all the estimated coefficients are consistent with our hypothesis: bothfertilizer application rate and technological change have contributed positively toimprovements in grain yield, and the commune system results in a negative impact ongrain yield. Such conclusions are quite consistent with previous studies (Halbrendt andGempesaw, 1990; Carter and Zhong, 1991; Fan, 1991). Furthermore, the negativecoefficient of F 2 implies a diminishing marginal impact of fertilizer application ongrain yield when other variables are held constant. Because the marginal impact oftechnological change on grain yield might not be constant over the period, we testedsuch a hypothesis by adding T 2 into the function. Test results show that the coefficientof T 2 is not significantly different from zero at the 95% confidence level. To examinethe regression result graphically, the actual and predicted average grain yields from1952–1993 are plotted in Figure 1. It is clear that the predicted yield is very close tothe observed yield for almost all the years over the study period. Figure 1 and theregression results suggest that the estimated model can well explain the variation ingrain yield in China since 1952.

One major implication of the estimated yield response function is that the aggregategrain yield response to fertilizer application rate in China is still positive although ata decreasing marginal rate. The estimated function can also be used to derive theoptimal application rate of fertilizer by maximizing the yield function with respect tothe application rate (F). Results show that the optimal application rate of fertilizer isabout 423·88 kg/ha, which is significantly greater than the 1993 application rate of333·18 kg/ha. This result should be interpreted with caution because the yield functionis estimated from time-series data. It should not be used directly to predict China’sfuture fertilizer application rate because technological changes and institutional reformscan shift the yield response function.

Q. Wang et al. 293

5. Policy implications

With rapidly growing demand for both foodgrain and feedgrain due to income growthbut decreasing arable land, China faces the challenge of providing food for its hugepopulation. Previous stuides have predicted that China will face serious grain shortagesand become a giant food importer (An, 1989; Liu, 1991; Lachica, 1994). One estimateindicates that China could have a grain shortage of 216 mmt by 2030, which wouldexceed the world’s entire 1993 grain surplus of 200 mmt (Lachica, 1994). The Chinesegovernment has recognized its food problem and has made great efforts to attain asustainable growth in domestic food production. Results of this study suggest thatChina’s chemical fertilizer application will continue to grow at a significant rate due topositive yield response and expected growth in chemical fertilizer supply. A major issuefacing China’s fertilizer economy is how to balance food production and environmentalquality. As the water supply is threatened by farm chemicals in many countries,alternative strategies have been developed to reduce chemical contamination. Thesestrategies can be grouped into technical solutions which advocate cleaning chemicalsfrom the water supply and application solutions which advocate reducing the use offarm chemicals and/or improving the efficiency of crop absorption. The technicalsolutions are obviously less applicable for China because they require huge capitalinvestments that are simply not feasible. This section discusses several policy implicationsfor improving fetilizer efficiency and reducing groundwater contamination in Chineseagriculture.

China’s home-produced and imported chemical fertilizer are mainly nitrogen fer-tilizers (Stone, 1986; SSB, 1994). With rapidly increasing application of manufacturednitrogen (N) since the early 1970s, the marginal response ratios to N have droppedbecause the provision of other crop nutrients, such as phosphates (P) and potash (K),has become a constraint in many areas (Stone, 1986; An, 1989; Smil, 1993). Such aproblem not only reduces the efficiency of N application but also results in increasednitrate concentrations in groundwater. Although the application of P and K hasincreased in many areas since the early 1980s, their proportions in total chemicalfertilizer supply are still significantly below the recommended levels. The N:P:K ratioof chemical fertilizer suggested by agronomists and soil scientists has been measuredat somewhere around 100:60:40, based on China’s soil fertility and crop production(An, 1989), but the national average ratio in 1992 was about 100:29:11 (see Table 3).Because China’s current chemical fertilizer production and imports are mainly underthe state control, increasing P and K production and imports is recommended toChinese policymakers. An increase in the proportion of P and K application can beexpected to improve the overall efficiency of fertilizer and reduce nitrate concentrationin groundwater.

Kueh (1984) argued that the relatively even distribution of chemical fertilizer wasan important factor contributing to the observed constant yield response to fertilizerapplication from 1961–1981. However, the situation has changed significantly since theearly 1980s. China’s provincial chemical fertilizer application in 1992 indicated that theper hectare application of chemical fertilizer was significantly skewed across provinces,ranging from 83·72 kg in Tibet to 323·66 kg in Guangdong (see Table 3). Applicationrates in the south-east provinces, such as Guangdong and Fujian, are now much higherthan that in the north-western provinces like Gansu and Qinghai. This provincialskewness reflects proximity to bureaucratic and infrastructure constraints on in-terprovincial trade (Stone, 1986). As chemical fertilizer is an important industrial farm

China’s fertilizer use and environment294

T 3. China’s provincial chemical fertilizer application and grain yield in 1992a

Fertilizer (10 000 tons) GrainProvince Total N:P:K Use rate yield

Nitrogen P2O5 K2O Mixed fertilizer ratiob (kg/ha) (kg/ha)

Guangdong 102·6 20·5 29·7 24·8 177·6 100:20:29 323·66 4874·0Fujian 49·7 14·3 15·6 13·4 93·0 100:29:31 322·80 4303·0Jiangsu 154·1 40·3 9·6 42·9 246·9 100:26: 6 299·83 5336·0Shanghai 13·8 2·4 0·2 0·7 17·1 100:17: 1 284·19 5790·0Shandong 158·9 45·0 14·2 63·8 281·9 100:28: 9 260·12 4533·0Liaoning 63·8 13·1 2·7 10·9 90·5 100:21: 4 249·11 5139·0Beijing 9·1 0·6 0·2 4·5 14·4 100: 7: 2 246·03 5907·0Hubei 102·2 29·5 10·1 23·3 165·1 100:29:10 229·73 4897·0Zhejiang 68·2 13·1 5·4 9·6 96·3 100:19: 8 225·25 4910·0Jilin 57·4 3·5 3·7 26·5 91·1 100: 6: 6 225·01 5203·0Henan 148·5 64·5 10·1 28·0 251·1 100:43: 7 210·37 3532·0Guangxi 49.3 18.2 21·1 14·9 103·5 100:37:43 192·60 4029·0Anhui 90·6 32·0 8·5 24·9 156·0 100:35: 9 191·29 3959·0Hebei 100·4 29·0 4·7 29·4 163·5 100:29: 5 190·77 3299·0Hunan 86·9 23·4 20·9 15·0 146·2 100:27:24 183·65 4997·0Shanxi 56·0 12·0 2·6 14·1 84·7 100:21: 5 173·42 2541·0Hainan 7·8 1·4 1·8 4·0 15·0 100:18:23 172·75 3302·0Xinjiang 28·5 10·7 0·7 12·5 52·4 100:38: 2 170·80 3988·0Sichuan 137·8 44·0 5·2 19·9 206·9 100:32: 4 162·25 4330·0Jiangxi 50·3 19·4 15·0 9·4 94·1 100:39:30 161·00 4544·0Shaanxi 36·7 15·4 1·6 10·3 64·0 100:42: 4 160·71 2685·0Yunnan 45·0 14·1 5·0 10·3 74·4 100:31:11 158·03 2988·0Ningxia 9·4 1·4 0·1 2·8 13·7 100:15: 1 153·07 2562·0Tianjin 5·8 0·6 0·2 2·0 8·6 100:10: 3 149·93 4454·0Gueizhou 28·7 8·4 2·6 5·4 45·1 100:29: 9 115·46 2994·0Gansu 21·9 10·2 0·6 7·3 40·0 100:47: 3 109·24 2333·0Qinghai 2·8 1·1 0·2 1·8 5·9 100:39: 7 107·94 2953·0Heilongjiang 43·3 20·1 3·0 22·1 88·5 100:46: 7 104·37 3220·0Mongolia 25·8 7·1 0·7 7·3 40·9 100:28: 3 84·25 2670·0Tibet 0·8 0·4 0·6 1·8 100:50: 0 83·72 3406·0

China 1756·1 515·7 196·0 462·4 2930·2 100:29:11 196·65 4004·0

Source: State Statistical Bureau (1993).a Fertilizer is measured in pure nutrient weight.b Excluding mix fertilizer.

input, its distribution has been used as a policy instrument to encourage compliancewith procurement and various programs, and has been skewed toward state farms andareas with high crop yields because relatively more of their increased inputs are soldto the state (Stone, 1986). One option to improve the efficiency of chemical fertilizerdistribution is to get rid of the bureaucratic process and develop a free market forchemical fertilizer. Increasing fertilizer supply in areas with low and medium applicationrates can improve the overall marginal return of fertilizer and reduce groundwatercontamination in the areas with extremely high application rates.

With high content of organic matter and a wide range of crop nutrients, organicfertilizer can complement chemical fertilizer and therefore improve the latter’s effect-iveness. Stone and Desai (1989) indicated that the tradition of careful use of organicfertilizer made the transition to chemical fertilizers relatively easy in China in the 1960sand 1970s. Unfortunately, both the government and farmers have paid less and lessattention to the use of organic fertilizer since the early 1980s. In addition to theincreased opportunity cost of using organic fertilizer, China’s collective land ownershiphas discouraged farmers to use more organic fertilizer because of its relatively slower

Q. Wang et al. 295

and longer term effects on land productivity as compared with chemical fertilizer (Zhangand Makeham, 1992). Development of a land market may encourage farmers to makelong term investments to improve soil fertility.

Besides high yield and quality, environmental impacts should be added to theobjectives of agricultural research. Technological advancement offers the best hope forincreasing crop yield while maintaining an environmentally safe and sustainable use ofnatural resources. For example, development of crop varieties with the ability to fixnitrogen can reduce the demand for chemical fertilizer. China’s agricultural extensionand technical advisement system was significantly interrupted for many areas when thecommune system was dismantled around 1980. With lack of knowledge about landfertility, farmers might use unnecessary amounts of chemical fertilizer, resulting in botheconomic losses and water pollution. State assistance to restore the agricultural extensionsystem and to encourage collective and private investment in agricultural research andextension should be emphasized in China’s technological policies.

Regulation is another option to reduce environmental problems. China has im-plemented some environmental regulations such as those regarding industrial airpollution and waste dumping. But much less attention has been paid to the environmentaland health effects of farm chemicals. Certain regulations to ban the use of dangerousfarm chemicals and to set limits on chemical concentration in drinking water are ofgreat need in China. Furthermore, the environmental regulations designed for theindustrial sector should be modified and enforced for the rural industrial sector whichhas developed rapidly since the early 1980s.

6. Concluding remarks

This study presents a quantitative estimate of China’s organic fertilizer supply from1952–1993 and analyzes the contribution of fertilizer and technological and institutionalchanges to the growth of grain yield since 1952. Results show that China’s chemicalfertilizer production and imports were very low in the 1950s, then increased steadily inthe 1960s and 1970s, and have grown rapidly since the 1978 economic reform. Organicfertilizer was dominated by chemical fertilizer in terms of total plant nutrient supplyby 1982 but still plays an important role in Chinese agriculture. Estimation results ofa quadratic yield response function indicate that the changes in grain yield from1952–1993 were significantly determined by organic and chemical fertilizer application,as well as by technological and institutional changes.

Major suggestions for balancing China’s food production and groundwater qualityare to increase the proportion of phosphates and potash application and to adjust thehighly skewed chemical fertilizer distribution by allocating more fertilizer to theareas with low and medium application rates. Furthermore, environmental regulationsregarding farm chemicals and programs to promote environmental research and efficientuse of organic fertilizer are also strongly recommended.

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