Why Has China's Agricultural Competitiveness Suddenly Declined? Chen Zhangliang Speaks Out

November 05, 2015, Mudanjiang City, Heilongjiang Province, the national grain reserve depot in Linkou County, Heilongjiang Province, is purchasing and storing corn sold by farmers. Shao Guoliang/VCG

Original title: Chen Zhangliang: Why Has China's Agricultural Competitiveness Suddenly Declined

[Caixin Online] (Reporter Wang Su) “This year I visited three provinces and eight cities to conduct surveys, and the results were astonishing. China does not import so much because it lacks grain; the grain produced is all sitting in warehouses. This year the warehouses are full, and it cannot be sold. What is sold is imported grain.” Chen Zhangliang, Vice Chairman of the China Association for Science and Technology, said this on November 27 at the “City China Plan 2015 Annual Meeting” hosted by McKinsey's City China Plan.

Chen Zhangliang was once president of China Agricultural University, and when he served as Vice Chairman of the People's Government of Guangxi Zhuang Autonomous Region, he also oversaw agricultural work. At the forum, Chen Zhangliang could not help but speak his mind about the “strange current situation” of Chinese agriculture.

Severe Impact of Imports

Chen Zhangliang said that China's grain output has continued to grow, achieving “ten consecutive increases” and “eleven consecutive increases.” “Everyone was very happy, and many agricultural economists even proposed that there was enough grain and that production should stop. At the Fifth Plenary Session of the 18th CPC Central Committee, a concept was even formally proposed: ‘fallow land.’” But strangely, while on the one hand it was said that there was too much grain, on the other hand China's imports of foreign grain continued to increase.

He pointed out that in 2012 China imported 80.25 million tons of grain, the first year in the history of the Chinese nation that it imported so much grain, “and almost all staple grains were imported.” Among them, more than 2.3 million tons of rice were imported in one go, 3.7 million tons of wheat, and 5.2 million tons of corn. More than 5 million tons of cotton were also imported, and more than 3.6 million tons of white sugar.

“That year I suddenly found that ‘something was very wrong.’ I myself was in charge of agriculture, so how did things turn out like this? The main sugar-producing area is Guangxi, which I was in charge of. China consumes 11 million to 13 million tons of white sugar. Importing so much white sugar in one go made me very nervous.”

He also said that by 2013, “things became even stranger.” Pork, beef, and mutton were all imported, and milk also seemed insufficient. In 2014, China produced 600 million tons of grain itself, while imports exceeded 100 million tons, “which is equivalent to one-seventh of the grain being brought in.”

However, the results obtained through visits and surveys greatly surprised Chen Zhangliang: the reason China imports foreign grain on a large scale is not insufficient domestic supply; on the contrary, “the warehouses are full of our own grain.” Chen Zhangliang said that now “the mayors in Northeast China have the hardest time, thinking about how to collect all the corn in their cities. The warehouses are already overflowing, and they are rushing to build more warehouses.”

At present, in order to subsidize farmers' incomes, the state still implements a minimum purchase price policy for some crops. But this year, the National Development and Reform Commission and other departments not only failed to continue raising the minimum purchase prices for wheat and rice as in previous years, but also lowered the temporary purchase and storage price for corn for the first time by 0.12 yuan, to 1 yuan/jin. Chen Zhangliang said, “Why? It could no longer be sustained; it collapsed. Adding the purchase and storage price bit by bit by one jiao after another no longer works. At this very moment, American corn is already at Chinese ports. Chinese corn has no way to compete with American corn.”

According to institutional monitoring, on November 24, the FOB price of US No. 2 yellow corn for December delivery was 170.2 USD/ton, equivalent to 1,087 yuan/ton; after duty within quota at a Chinese port, the total cost was about 1,560 yuan/ton, down 173 yuan/ton from the same period last year. In some eastern coastal areas, even after adding the high 65% out-of-quota tariff, importing the three major staple grains from abroad is still cheaper than domestic grain.

Beyond grain, the same is true for bulk agricultural products such as white sugar. Chen Zhangliang said, “Australian white sugar is extremely beautiful. No matter how China taxes it, it reaches the dock at 4,000 (yuan) per ton, while farmers in Guangxi would be doomed if their (selling price) did not reach 5,100 yuan to break even.”

Why Did It Suddenly Lose Competitiveness?

“In just 10 years, 10 years ago we were still cheaper than others, and suddenly everything became more expensive than internationally. What happened to Chinese agriculture? On the one hand, grain output increased; on the other hand, we can only import. But if we import everything, that still will not work. The world does not have enough grain, and we still have to solve this problem.” Chen Zhangliang said.

He believes that the reason for the decline in the competitiveness of Chinese agricultural products is “costs are too high.” In addition, over these 10 years, “China's labor force has undergone tremendous changes. While we were discussing urbanization, problems emerged in rural areas.”

Chen Zhangliang said that with the advancement of urbanization and the Chinese government's protection of migrant workers' rights and interests, we found that “now the wages of migrant workers and the wages of university graduates are actually the same. A university student can earn 4,000 yuan a month and still be quite happy, while a nanny cannot be found for 4,000 yuan a month.” This is certainly good, but the consequence it brings is that “no one is willing to stay in rural areas to work.”

He gave an example: now growing rice on one mu of land earns 700 yuan a year, corn just 1,000 yuan, soybeans 500 to 600 yuan, and wheat 800 yuan. “Working hard from planting to growing the crops, and then selling them, one mu of land earns only a few hundred yuan. One month's wages in the city equals the income from several mu of land.” Chen Zhangliang said that in the past, the elderly and women were left in the fields to work, and efficiency was already low. Now even women are unwilling to work.

Chen Zhangliang also said that this year a tea-making enterprise came to the Association for Science and Technology to seek him out, “saying, please, invent a tea-picking machine for us. Because this year no one is picking the tea leaves. They pay 300 (yuan) a day in wages. I think that would even be attractive to me, but rural women are unwilling to go because they would have to get up early.”

As many contradictions in China's agricultural sector have erupted, “what should Chinese agriculture do” has become a question pondered jointly by policymakers, academia, and industry. At the forum, Chen Zhangliang also put forward his own thoughts and suggestions.

He said that first, land transfer must be carried out on a large scale, turning small plots into large plots; otherwise, “there is no way to enter modern agriculture.” At present, the pace of land transfer in China is still too slow. In addition, how should large-scale transfer operate? How should the rights and interests of farmers who transfer out their land be protected? What should be done about landless farmers? Relevant policies should all keep up.

He said that after agricultural land transfer, the “tendency toward non-grain cultivation” is now relatively obvious. Farmers who rent land to grow grapes, blueberries, kiwifruit, and so on can earn more than 10,000 yuan per mu, but growing corn earns only 1,000 yuan. If this continues over time, grain will gradually cease to be grown by anyone. This is a major problem, and when promoting agricultural land transfer, relevant policies should be considered in a supporting manner.

Second, mechanization must be carried out on a large scale. Chen Zhangliang said that American agriculture can defeat us because of its high degree of mechanization and because it does not need so many farmers. He gave an example: in Guangxi, harvesting one mu of sugarcane requires four women working for a day. But an American sugarcane harvester can harvest 20 to 27 mu of sugarcane in one hour with one machine, which would require more than 80 Chinese people working for a day. “The labor cost is right here, so mechanization is a must.” And the prerequisite for mechanization must be large plots of land.

Third, new scientific and technological applications must keep up. He gave an example, such as the application of genetically modified technology. Now a strange cycle has formed: “the government does not allow genetically modified soybeans to be planted in Northeast China, but at the same time, China imports large quantities of genetically modified soybeans.”

Chen Zhangliang said that these problems in Chinese agriculture may have solutions, or they may not, but he still hopes that all sectors of society will pool their wisdom and provide more suggestions.