Development and Restructuring of Chinese Agriculture Dr. Funing Zhong College of Economics & Management Nanjing Agricultural University Nanjing, 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 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

Development in 5 Decades Grain production, mmt

Development in 5 Decades Growth rates of per capita real net income in rural areas % %

Development in 5 Decades Nominal annual net income per capita in rural areas, by sources yuan

Restructuring of Rural Economy Diversification in Agriculture

Restructuring of Rural Economy Sown area structure, %

Restructuring of Rural Economy Rural employment structure, %

Rural employment structure Restructuring of Rural Economy

Restructuring of Rural Economy Structure of grain sown areas, %

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: Con t (%) = Con b (%) + Con c (%)×Con i (%) 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 % % %  Relatively slow declining of agriculture’s share of employment % % %

Future Challenges  Agricultural GDP per worker as a percentage of national average % % %

Future Challenges Widening rural:urban income gap

Future Challenges  Increasing number of farmers despite declining share in total employment millions millions 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 kg aquatic products 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.

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