Ministry of Finance Supports Agricultural Industrialization, Aiming to Form a Hundred Distinctive Industrial Clusters in 3 Years

Agricultural industrialization will receive key financial support in the future.

On November 17, the Ministry of Finance issued the "Guiding Opinions on Supporting Agriculture's Advantageous and Distinctive Industries through Comprehensive Agricultural Development to Promote Agricultural Industrialization" (hereinafter referred to as the "Opinions"). The "Opinions" proposed striving to use 3 years to initially form across the country a hundred regional agricultural advantageous and distinctive industrial clusters with relatively large resource comparative advantages, long industrial chain extensions, integrated development of the primary, secondary and tertiary industries, and strong demonstration and driving effects.

Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, told the "Daily Economic News" reporter that agricultural industrialization can solve the phenomenon of agricultural production increasing without income increasing caused by excessive supply of low-quality agricultural products in the agricultural products market, improper use of agricultural resources and factor allocation, and excessively high agricultural production costs.

Encourage the development of “Internet + Agriculture”

2015 was another bumper harvest year, but corn and wheat prices in major grain-producing areas all declined to varying degrees. Corn prices fell significantly, with farmers' prices falling by an average of more than 20%, and the highest decline reaching 30% compared with last year, while wheat also experienced a round of decline before National Day.

Some estimates say that the sharp drop in grain prices in 2015 may lead to negative income growth on a scale of hundreds of billions, which reflects the current situation in our country where agricultural production increases without income increasing.

Li Guoxiang analyzed that our country's agricultural production costs remain high, and the comparative efficiency of agriculture is relatively low. Excessive supply of low-quality agricultural products in the agricultural products market, improper use of agricultural resources and factor allocation, and excessively high agricultural production costs cause agricultural production to increase without income increasing.

Against this background, agricultural industrialization is a necessary way out. The "Opinions" believe that under the new situation of rising agricultural production costs and intensifying hard constraints on resources and the environment, there is an urgent need to strengthen the role of comprehensive agricultural development in supporting industrialization development, so as to achieve agricultural quality improvement and efficiency enhancement and sustained increases in farmers' income.

The support content mainly revolves around improving the agricultural advantageous and distinctive industrial chain, specifically including: in crop farming, seedling breeding, standardized planting bases, agricultural product storage and preservation, waste processing and utilization, etc.; in livestock farming, breeding of breeding livestock and poultry (including aquatic products), standardized breeding bases, livestock and poultry (including aquatic products) trading venues, forage planting, feed processing, harmless treatment of manure, organic fertilizer processing, etc.

In addition to traditional agricultural fields, the "Daily Economic News" reporter noted that processing bases, raw material warehousing, finished product storage and preservation, cold chain logistics, and production area wholesale markets involved in processing and circulation industries are also key support areas. At the same time, the Ministry of Finance will also encourage the development of “Internet + Agriculture” and actively support the construction of e-commerce platforms for advantageous and distinctive agricultural products.

Li Guoxiang said that the key to realizing agricultural industrialization lies in the active participation of multiple agricultural market entities such as enterprises, farmers and their organizations, with leading organizations as the dominant force, extending the supply chain, and through building mechanisms for benefit sharing and risk sharing, organically linking different agricultural industry links into a whole to obtain value appreciation and high added value.

As for the mode of financial fund support, the "Opinions" emphasize giving full play to the guiding and leverage role of fiscal funds on financial capital and social capital, adjusting and improving the support methods of fiscal funds for agriculture's advantageous and distinctive industries, and gradually forming a diversified support system dominated by loan interest subsidies, supplemented by fiscal subsidies, and coexisting with multiple forms such as fiscal equity investment funds.

Financial commentator Li Wenhai told the "Daily Economic News" reporter that in the past, financial support was mainly based on tax incentives, fiscal subsidies, and project support, which made the links of pre-evaluation, in-process supervision, and post-event accountability of supported enterprises extremely complicated and bred a large amount of rent-seeking space, while a system dominated by loan interest subsidies can effectively avoid this problem, and the scope of support will also become larger.

Focus on supporting advantageous and distinctive industries

According to the "Opinions", the key industries supported financially will mainly be those included in the "National Comprehensive Agricultural Development Support Plan for Agriculture's Advantageous and Distinctive Industries". Each provincial agricultural development institution is encouraged to determine about 10 key agricultural advantageous and distinctive industries within its region. In principle, each county-level agricultural development institution shall select the best options within the scope of the region's agricultural advantageous and distinctive industries.

The Ministry of Finance requires that, for the agricultural advantageous and distinctive industries within the region, the key links and weak links in the industrial chain be accurately identified for key support and continuous support, so as to build a complete industrial chain and make the regional agricultural advantageous and distinctive industries larger and stronger.

The "Opinions" state that limited comprehensive agricultural development fiscal funds should be concentrated into supporting regional agricultural advantageous and distinctive industries, solving the problems of projects being small and scattered and returns being low, giving full play to the effects of industrial agglomeration in saving costs, promoting innovation, and stimulating economic growth, and improving the efficiency of the use of comprehensive agricultural development fiscal funds.

The advantage of industrial clusters lies in obtaining more value appreciation and high added value. For example, in the first half of the year, 10 agricultural industrial clusters in Shangrao City, Jiangxi, had sales revenue of 4.536 billion yuan, a year-on-year increase of 12.31%; they drove 84,000 farmer households, with an average income increase of 3,600 yuan per household. The growth of agricultural industrial clusters has promoted the vigorous rise of new agricultural business entities. In the first half of the year, the city had 6,255 farmers' cooperatives, with 421 newly added.

In terms of the timetable, starting from 2016, comprehensive agricultural development industrialization operation projects will focus on supporting regional agricultural advantageous and distinctive industries. For advantageous and distinctive industries included in the priority support scope of comprehensive agricultural development, key support and continuous support will be provided.

The "Opinions" also state that efforts should be made to use 3 years to initially form 1~2 advantageous and distinctive industries in each comprehensive agricultural development county, form about 10 in each province as a unit, and initially form across the country a hundred regional agricultural advantageous and distinctive industrial clusters with relatively large resource comparative advantages, long industrial chain extensions, integrated development of the primary, secondary and tertiary industries, and strong demonstration and driving effects.

“The development plan for agricultural industrialization must also avoid overcapacity.” Li Wenhai said that just like steel and cement, if all northern provinces grow apples, then the result will inevitably be falling product prices, diluted corporate profits, and large stockpiles of agricultural products. In particular, industrialization still requires a period of time to cultivate, and it is not so easy to “turn around”; attention should be paid in advance to the issue of differentiation among regions.

The Ministry of Finance also mentioned that, based on market changes and development trends, a dynamic management mechanism will be established for the advantageous and distinctive industries proposed for support, so as to improve the precision of industrial support.

In terms of restraint mechanisms, the National Agricultural Comprehensive Development Office will include the progress of each province's work in supporting agriculture's advantageous and distinctive industries in the comprehensive assessment scope for the management work of provincial agricultural development institutions. For provinces with high work enthusiasm and obvious results in the development of advantageous and distinctive industries, preference will be given in fund allocation in the next planning cycle.