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How Can the Rural Financial System Be Innovated? Agricultural Insurance Cannot Be Rushed
For China to achieve the grand goal of agricultural modernization, an efficient new-type rural financial system is indispensable. The central government supports the development of new-type rural cooperative financial organizations, and proposes that on the basis of farmers' cooperatives and supply and marketing cooperatives that are democratically managed, standardized in operation, and strong in driving force
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Busy winter potato planting in Yilong Town, Shiping County, Yunnan
On the eve of the winter solstice, the villagers' committees of Doudiwan, Gaojiawan and Xiaoshui in Yilong Town by Yilong Lake in Shiping County seized the farming season to rush-plant winter potatoes. In recent days, the weather at Yilong Lake has been clear and sunny, making it an advantageous time to sow winter potatoes. Located by the shores of Yilong Lake, Doudiwan and Gaojiawan
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Busy winter potato planting in Yilong Town, Shiping, Yunnan
On the eve of the Winter Solstice, the villagers' committees of Doudiwan, Gaojiawan, and Xiaoshui in Yilong Town by Yilong Lake in Shiping County seized the farming season to rush-plant winter potatoes. In recent days, the weather at Yilong Lake has been clear and sunny, making it an ideal time to sow winter potatoes. Located by the shores of Yilong Lake, Doudiwan, Gaojiawan
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Farmland concentration must not be rushed; it should be advanced step by step.
In recent years, China's farmland system has seen some innovations. The issue I want to discuss is this overly hasty innovation: should we support it or oppose it? My view is that we should not be too hasty. At present, the innovation of China's rural land system has the following backgrounds: urbanization, the late stage of industrialization, land finance, the contradiction in grain supply, and so on, plus the 2008 international financial crisis. It is under such circumstances that some of our people have come up with ways to solve the problem of insufficient land supply and to solve the problem of the relatively small scale of agricultural production. So where do they want the relatively small scale of agricultural production to go? Toward large-scale operation. Then how should the problem of insufficient land supply be solved? We solve it through the centralized consolidation of homestead land. This is what we call the Chengdu model. The approach of the Chengdu model is to merge the homestead land, the four or five mu of homestead land of each household. Of course, some preparatory work is needed in advance, and the establishment of financial support and government platforms must all be fairly well in place. Then the homestead land they consolidate is converted into agricultural land, so that the 1.8 billion mu red line, the amount of agricultural land stipulated by it, can free up some surplus, and this freed-up land can be used for real estate development. The latter part is relatively simple: the use rights of the consolidated homestead land are handed over to enterprises, and real estate development can be carried out directly. This was the most typical Chengdu model at the time. Mr. Zhou Qiren wrote an article specifically supporting this approach. My view is precisely not to support it. The second is even simpler, the Jiaxing model, called "two separations and two exchanges." Both homestead land and agricultural land are exchanged. Homestead land is concentrated and exchanged for land for concentrated residence, or land security rights, and so on, while agricultural land is concentrated into scale. This is the Jiaxing model. The third is the Suzhou model. The Suzhou model looks a bit more complicated. The Suzhou model is precisely the opposite of our conception. We believe that the phenomenon of land aggregation should be gradually realized in such a way that farmers themselves choose how to unite, and finally large-scale operation is gradually realized. This is for agricultural land; homestead land should also be like this. Farmers themselves unite, and then solve their own housing problem. After its scale develops to a certain degree, it can then contend with real estate developers. The Suzhou model is precisely the opposite: the government first decides to concentrate the land, concentrating agricultural land and homestead land, and then makes other supplementary, fill-in-the-blank arrangements. These arrangements include the establishment of three types of cooperatives. In fact, these practices can be summarized as the concentration of land (mainly homestead land) and the scaling-up of farmland. This is the phenomenon we are going to discuss today.</p> <p> For such a phenomenon, we first need to do a bit of analysis. The perspective for analysis is still the perspective of institutional economics, which I personally prefer. I think the problem can be analyzed from two aspects. One of the problems it brings is the impact of information asymmetry: information asymmetry between farmers and the government, and information asymmetry also exists between the government and industrial and commercial enterprises. Moreover, farmers often cannot make accurate judgments about the present, and it is even harder for them to make rational judgments about the future. Under such circumstances, blindly following behavior will appear. Blindly following behavior has appeared many times in history. This is one problem. Because of information asymmetry, they may choose to obey the government's arrangements. Also because of information asymmetry, they may choose not to resist even when they have clearly suffered a loss. This is the wave of withdrawing from cooperatives that appeared in Yongjia, Zhejiang. They may choose to resist. This did not change during the agricultural crisis. They choose to continue obeying the government's arrangements. This is what farmers' information asymmetry brings. The second perspective: I think this is in fact a three-party game. I already mentioned what the background is. The government is very worried about its fiscal problems and needs to solve its fiscal problems. At the same time, there may be problems of industrialization and insufficient supply of agricultural products. Under such circumstances, the government may have an impulse: urban land may no longer be sufficient, and some other land is needed. So the government may be the more active party in the game structure. Then the other party is what we call industrial and commercial enterprises or financial institutions. They will tend to ride along. The ones who actually suffer more are the farmers. This is the structure of a three-party game. Why is it like this? What may be harder to understand here is why industrial and commercial enterprises do not voluntarily ask to develop land and real estate. Why do they choose to ride for free? Because in the game structure, their game with the government means that both they and the government must obtain benefits, and these benefits must also be greater than their costs. Only when marginal cost equals marginal benefit will they make such a choice. Think about it: if the government brings them benefits in such a situation, they do not need to pay costs. Between this choice and the other choice of advocating on their own and paying costs to persuade the government, which will they choose? Of course they will choose the one that does not require paying costs. Therefore, the key to this game is that industrial and commercial enterprises naturally see themselves as free riders, not paying fees but enjoying benefits. In this way, the game is actually simplified and becomes a game between farmers and the government. Such games have occurred many times in history. The experience and lessons from many times are that if the government adopts a policy of concession, farmers will obtain some benefits; if the government does not want farmers to obtain benefits, farmers cannot obtain benefits. In this article I mention a phenomenon: that is, during the period from 1949 to 1978, the contribution farmers provided to the state through agricultural surplus reached one third of industrial fixed asset investment. One third came from agricultural surplus. This figure is quite, quite large. So we can see that in fact farmers suffered relatively more losses in this kind of game. This is roughly what I mean. So when farmers suffer losses relatively often, this implies a paradox for a country. If we did not need a government, such a three-party game structure of setting up a stage and putting on a play would not appear. But once there is a government, farmers will suffer losses again. So what exactly should be done? This is the problem. The second aspect is the information asymmetry and the game that we see. The third aspect is the cost of implementing a new system. I can look at it from two sides, the government and the farmers, that is, what costs are contained in this kind of overly hasty approach. We can divide costs according to institutional economics into the cost of designing the system, the cost of abandoning the old system, and the cost of persuading and pacifying farmers, three aspects of cost. So how large is this cost exactly? In the first aspect, let us look at the cost of design, which comes from the costs brought by large-scale operation. Let us first look at agricultural land. What kind of cost increase will large-scale operation of agricultural land bring? Agricultural economics theory analyzed this problem very thoroughly long ago. When you are just starting out, the teacher tells you that there are all kinds of supervision costs. When a production becomes team production, its supervision costs and information costs will increase. This is a cost that can increase. The second cost that can increase is this: our current agricultural population, is it too much or too little? Is it insufficient? In fact, someone long ago clearly told us this problem: that is, even if our transfer rate reaches 80 percent, there are still hundreds of millions of agricultural people. If you implement large-scale operation, you may squeeze out many people's livelihood, their means of livelihood. One example I learned of: a place implemented large-scale operation. In principle, the number of people employed in this village, whether fully or not fully, was about several thousand. But after it implemented large-scale operation, it leased this land to an enterprise. The method the enterprise adopted still had those farmers cultivate it, but it could not use so many farmers. The original several thousand farmers now required only 172 farmers. Where would the remaining two thousand farmers go? This clearly became a problem at the time. Although these farmers were relatively old, some were people in their 60s. Our academicians can still supervise doctoral students at 80. Do you think farmers cannot work once they are 60? You cannot think like that. You cannot simply assume that 60-year-olds are not labor force. This is the cost in the second aspect. Add to that the possible problem of employment pressure, the costs that large-scale operation may bring. The cost in the second aspect is the cost of homestead land. How can we ensure that in the transfer of homestead land, industrial and commercial enterprises and financial institutions do not offer resistance, or that their resistance can be effectively controlled? This is one problem. The second problem is the farmers' costs. Where are the farmers' costs? I think it is that they cannot go back and yet cannot survive. They go to the city and then have to go back, but if they cannot go back, what then? This may be a cost that is difficult to estimate. The third cost is the cost involved in the law. As a law, the first thing to consider is whether the law is appropriate, whether its provisions are complete, and a series of issues. Although our land-related laws have various problems, in handling them we already have some experience in coordinating and implementing land-related laws and related aspects. If we now remake the laws, what will happen to the previous laws?</p> <p> Now everyone sees a strange phenomenon: rural construction land must be included in the unified market operation of city and countryside for sale. This practice conflicts with many laws. Many laws say that rural land, including rural construction land, belongs to rural collective ownership. Farmers live in the countryside, and in fact it operates in a closed manner in the countryside. The method the state has no choice but to adopt in order to unify the sale of construction land in city and countryside is to have the National People's Congress revise and formulate new judicial interpretations, and then make this State Council policy legal. In Western countries this is actually a joke. The law should be supreme. Now it has unexpectedly become a servant of city governments, needing to follow every step and adapt to the government's requirements. And why do we want to put urban and rural construction land together for unified sale? I will not say much about the reason; perhaps there are also some problems in certain aspects involved. Even if we put it aside, this procedure is wrong. This is a legal problem. New laws will bring problems of adaptation, because there is a problem of systematic coordination between laws and the sword of law. Fourth, will accidental factors appear? We have not seen too many cases of collective opposition by farmers. I have not studied it specially, but when I wrote the article, economic downturn had not yet appeared. The economic downturn has already affected many of us. So what will happen if an economic downturn appears? Will you still imagine that they will spend more money investing in large-scale operation? More money investing in land circulation? Today's farmers are very clear: if the grain produced on their one mu of land cannot be sold, and the grain produced on three thousand mu of land cannot be sold, the loss they will have to bear is even greater. So when the economy goes down and everyone tightens their wallets, you can imagine what farmers will do. In the second aspect, we may abandon the old system, which will bring some problems. These problems do not need me to say much. China has an ancient saying: it is hard to leave one's native land. This refers to the living. If you are a dead person, being buried in the earth brings peace, and you cannot leave the earth. This is all related to what we call household operation and pastoral life. That is to say, this problem is worth all of us thinking about. And the problem often lies in the fact that when we examine the costs in this aspect, we do not consider them fully. As for the losses from giving them up, many times we do not measure them. In the models mentioned earlier, when they calculate the land price for farmers, it is impossible to calculate it very clearly. For example, the attractiveness of the pastoral life we mentioned, the brothers can no longer chat freely and play happily together. Such costs will certainly not be calculated in it. In fact, we should take them into account. The cost in the third aspect is the cost of persuading and pacifying farmers. Here it needs to be emphasized again that in some places we now see that the social security system has gradually been established, or that the social security system plays a relatively obvious role. But generally speaking, the protection our social security system provides to farmers is still limited. Whether it is old-age support or medical care, it is just that little bit of money. You can imagine what these problems will be solved by. Originally, when they had a piece of land, this land in fact had social security functions attached to it. It was not only a place of employment, but also social security. So how can they be persuaded? How can they be pacified? This is probably also a very important cost. If we understand farmers' costs as the government's costs, then farmers' costs are in fact easy to understand. Among farmers' costs, what is relatively difficult is the question of how much money to give them. This money includes your agricultural land and homestead land. Exactly how much money do you give them? This is a difficult problem. In the 1990s, when Guangdong and Shanghai carried out reform of collective ownership and changed collective ownership into a share cooperative system, they encountered this difficult problem. How large should our collective shares remain, and how much should individual shares remain? This is one problem. Another problem is how exactly to measure each person's contribution to the collective. It has to be converted into shares, quantified into shares. How to measure it? All kinds of plans were introduced, and all kinds of plans would be picked apart for flaws. For example, some people had served as cadres, some made outstanding contributions to the locality, and so on. How exactly should this be measured between them and ordinary farmers? How much is more appropriate? Multiply by 2 or by 1.2, and so on. These are all problems. As for these other costs, everyone can refer to them. In fact, I think the most difficult cost is the cost that cannot be returned. I have seen too many examples of this. They hand their land over to their own cousin to cultivate, and after they come back the cousin is unwilling to give it back to them. What then? This is the farmers' cost. I will briefly mention it. In the time I have left, I may talk a bit more about one problem in history, namely the enclosure movement. Before talking about this enclosure movement, I may need to mention the game between the government and farmers. In this game, farmers can only suffer. This has been proven by history. One negative historical case is agricultural collectivization. The entire process of agricultural collectivization was not a negative case; the final result was in fact the expropriation of farmers. Just now I said this quantity was very large. One positive example is the golden period of agriculture that appeared in the 1980s after the establishment of the household contract responsibility system. At that time, four trillion tons of grain was not very far from the present.<br /> <br />
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Cheap Western Agricultural Imports May Crush Chinese Agriculture
The impact of cheap agricultural imports on Chinese agriculture is obvious: phenomena that occurred during the era of capitalist economic crises, such as abandoned farmland, dumping milk, and slaughtering cattle, have been replayed in China. Recently, the author learned that after importing soybeans, corn,
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Agricultural counties rushing to convert from counties to districts will inevitably affect food security
Recently, the news of Xinjian County's conversion from a county to a district sparked a wave of public discussion on the Internet. A relevant official of the Jiangxi Provincial Department of Civil Affairs once said that the plan currently submitted to the State Council for approval is one to convert Xinjian County as a whole into a district. If the conversion is approved, Nanchang City can further adjust
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Tighten the Regulatory Fence Around Industrial and Commercial Capital Rushing to the Countryside to Enclose Land
Hunan Takes Aim at Illegal Land Enclosure by Enterprises. For days now, in the Tianyang Ecological Agriculture Industrial Park in Sandu Village, Sandu Town, Zixing City, Hunan, workers have been busy putting protective bags on grapes about to hit the market. It is understood that this place was originally a 500-mu wasteland that had lain fallow for 10 years.
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Grain in Ear arrives and farm work is busy, a time for rushed harvesting and planting in the fields
On June 6, farmers in Zhongfeng Town, Zhuxi County, Hubei Province, pick jiaogulan (Gynostemma pentaphyllum) at a base. Photo by Xinhua (Yan Yizhong). That day marks Grain in Ear, one of the 24 solar terms, and farmers everywhere are seizing the farming season for field management and harvesting mature crops, with busy scenes across the fields. June
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China's soybean crushing capacity reached 145 million tonnes by the end of 2014
From November 2014 to January 2015, a survey was conducted of 100 soybean processing enterprises with a daily processing capacity of over 1000 tonnes across more than 20 provinces and cities nationwide. The crushing capacity situation is summarized as follows: The survey shows that as of the end of 2014, China's daily soybean crushing capacity exceeded 10
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Heavy Rain Causes Disasters in the South, but Farmers Manage Seeding and Harvesting Without Missing the Farming Season
The "double rush" is in full swing in the South, with frequent heavy rainfall. But under the unified deployment of local Party committees, governments and agricultural departments at all levels, seeding and harvesting proceed without missing the farming season. Since May, heavy rainfall has occurred frequently in the South, with southern Hunan, eastern Jiangxi, northeastern Guangxi, most of Guangdong
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