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, (million)

Rural poverty incidence in China, (%)

Shares of agricultural and non-agricultural GDP in China,

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

Source (%) of farmer’s income

Anti-Poverty Programs During : US$ billion annually 1998: US$ 2 billion 2000: exceeded US$ 3 billion Poverty loans (52%), grants (17%) & FFW (26%) and other (5%).

Challenges: Gini coefficient in rural China,

Per capita income in rural Bottom 10%:180%; Top 10%:407%

Farmers ： full time farming % Human capital or education is key for farmers to access to non-agricultural employment

Major policies affecting non-agricultural income growth Rural enterprise development: –Promoting “TVE” development in 1980s Credit and finance provided by local townships/ villages Granted local land and low wage of rural labor –Promoting private enterprise development in 1990s Rural infrastructure development since late 1980s Privatizing rural TVEs since middle 1990s Promoting rural small town development since late 1990s Urban economic reform: Reforming SOE in urban since early 1990s Releasing migration constraints since middle 1990s External economy: –Attracting FDI and trade liberalization Pro-poor interventions Agricultural development policies

Agri diversification -- output shares (%)

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

Major agricultural development policies  Institutional reform: land (in early 1980s) Allocated land equally to all households in the villages Land use right: 15 years in and 30 years in After 2025: can be extended forever …  Irrigation improvement  Agricultural technology  Market reform since the late 1980s  Trade 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 (%)

Dalian Guangzhou (Shekou Port) Maize price

Dalian Fujian

Integration in Northeast China’s Markets (percent of markets that have integrated price series) Corn Soybean5695

WTO commitments: Market access Tariff  Simple mean:  China:21 ％ 17%  Developing countries 20-50%  Trade weighted:  China:13 ％  SE Asia 16%  Japan & Korea53%  Other Asian countries24%  EU20% China’s tariff: one of the lowest in the world

China’s agriculture: Tariff rate (%):  2004 Liberalization: Continuous of past trend, not just starting

China’s 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 Remarks  Productivity growth resulted from R&D investment is essential for the agriculture to be competitive and a precondition for a successful economic transition  Agricultural diversification contributes to farmers’ income, healthy diversification needs substantial domestic market reform  Agricultural growth is important for farmers’ income growth, but substantial growth has to come from non-agri sectors

Concluding Remarks  Non-agri development needs significant public investment in rural infrastructure and education and government’s industrialization policies (i.e., migration/finance) in both rural and urban areas  Trade liberalization and FDI can facilitate the growth of and structural changes in economy  Growth is essential for poverty alleviation, but poverty alleviation and narrowing income disparity require more pro-poor interventions  A challenge that China is facing