Supply and Marketing Cooperatives Stage a Comeback to Take On E-Commerce Giants' Rural Strategies
Yi Nong's note: The return of supply and marketing cooperatives to rural areas is of great political significance. It marks a directional turning point in the rural strategy of the CPC Central Committee and the State Council. Yi Nong believes that the organization of farmers has been placed on the political agenda. Of course, that is a story for another day. This article only provides an analysis from the economic perspective. Your criticisms and exchanges are welcome.
On April 1, April Fools' Day, the central government of China convened a national teleconference to deploy the reform of supply and marketing cooperatives, and issued the "Decision on Deepening the Comprehensive Reform of Supply and Marketing Cooperatives" in the name of the CPC Central Committee and the State Council. This document re-endowed the supply and marketing cooperatives, which had already withdrawn from rural areas and had been living on urban rent for many years, with three major missions: first, to become a fresh force and comprehensive platform for serving farmers' production and daily life; second, to become a bridge and bond for the Party and government to closely connect with the peasant masses; third, to become an important force in agricultural modernization. At the same time, it also endowed the supply and marketing cooperatives with three new functions: first, the function of financial institutions; second, the function of coordinating the urban and rural purchase and sales markets for means of production and means of livelihood related to agriculture, rural areas, and farmers; third, the function of policy-based support for agriculture. Seen this way, the new China Supply and Marketing Cooperative is no longer a supply and marketing cooperative in the traditional sense, because its missions and functions have already gone far beyond supply and marketing cooperation itself. The new missions and functions granted to the supply and marketing cooperatives by the CPC Central Committee and State Council's "Decision on Deepening the Comprehensive Reform of Supply and Marketing Cooperatives" suddenly make the supply and marketing cooperatives many, many times more important than departments and institutions such as the Ministry of Agriculture, rural credit cooperatives and the Agricultural Bank, and insurance companies. Yi Nong Consulting believes that this is an extremely, extremely major event.
Although this event occurred on April Fools' Day, it can be certain that this is not an April Fools' prank.
I. The great battle between supply and marketing cooperatives and Taobao and JD.com for the rural market has officially begun
At the beginning of this year, Taobao announced an investment of 10 billion yuan to implement the Thousand Counties and Ten Thousand Villages Plan, to solve the problem of farmers' difficulty in selling.
On April 1, 2015, Li Chunsheng of the All China Federation of Supply and Marketing Cooperatives said that in serving farmers before, during, and after production, supply and marketing cooperatives must provide services such as plant protection, soil testing and formulated fertilization, and pre-production seeds; in comprehensive post-production services, they must build platforms so that farmers can enjoy convenient and diverse services. Through the construction of the “New Network Project”, the problems of “difficulty in buying” and “difficulty in selling” agricultural products will be solved; in addition, supply and marketing cooperatives must also create a cooperative bank and financial service system covering the whole country.
Obviously, on April 1, 2015, supply and marketing cooperatives launched a comeback and formally declared war on e-commerce giants such as Taobao and JD.com that are contending for the rural market!
II. Why supply and marketing cooperatives want to compete with Taobao for the rural market
As is well known, from the very day supply and marketing cooperatives came into being in the 1950s, they bore the mission of connecting urban and rural areas, linking industry and agriculture, achieving interconnection, exchanging what each has and lacks, and mutual benefit, and supply and marketing cooperatives were found in almost every corner of urban and rural areas. Due to well-known historical reasons, after the reform and opening up, the supply and marketing cooperative business gradually withdrew from rural areas, and supply and marketing cooperatives retreated to cities and key towns at or above the township level, and countless old remnants began a comfortable and privileged life relying on urban real estate rent. It was also precisely by relying on the abundant rental income brought by the enormous real estate assets retained in cities and towns that supply and marketing cooperatives, after more than 30 years of the storms of reform, not only did not collapse, but also accumulated enormous assets through the appreciation of real estate.
Now, Alibaba has announced that it is going to the countryside, to do the business that supply and marketing cooperatives used to do but no longer do. Supply and marketing cooperatives suddenly woke up——so the countryside is a blue ocean! You Taobao invest 10 billion yuan in the rural market, what is that? Compared with the resources that our China Supply and Marketing Cooperatives can invest, it is merely a fractional amount!
For the supply and marketing cooperative system, Taobao going to the countryside is no different from a “wild lion coming” to seize territory.
The old remnants of the supply and marketing cooperative system, who have been enjoying privilege and comfort for many years, have the guts too, and have come out to meet the challenge carrying the CPC Central Committee and State Council's "Decision"!
III. Seizing the rural market——unified purchasing, sales, and distribution is not merely an economic act
When the Communist Party had just come to power, speculation ran wild, prices soared, and the Communist Party's ruling position was in crisis. Under the top-level design led by Chen Yun and others, a nationwide supply and marketing cooperative system was established, industrial goods going to the countryside were uniformly purchased and distributed by supply and marketing cooperatives, and agricultural products other than grain going to the cities were uniformly purchased and sold by supply and marketing cooperatives and others; the result can be imagined: the once rampant “market behavior” of hoarding for profiteering, speculation, and price gouging was almost completely eliminated, and countless “capitalists” had no choice but to accept socialist transformation. The supply and marketing cooperative system played a crucial role in consolidating the Communist Party's new regime and embarking on the “socialist road.”
After more than half a century of development, the Chinese economy has evolved from (an era of shortage and insufficient supply) a stage of pursuing gains from quantitative growth to (an era of excess and insufficient consumption) a stage of pursuing stable market share gains and pricing power gains——moving toward the stage of monopoly capitalism. Technological monopoly, organizational monopoly, and channel monopoly are the most basic means of monopoly. E-commerce giants such as Taobao are in fact pursuing stable market share gains and pricing power gains, and the Taobao economy is in fact also a monopoly economy to a certain extent. If one day Taobao has the role and status of the supply and marketing cooperative system of decades ago, will it also carry out a Taobao-style “socialist transformation movement” in the economic sphere?
If Taobao were the Communist Party's Taobao or the supply and marketing cooperatives' Taobao, presumably the old remnants of the supply and marketing cooperatives would not need to don their armor and go out to battle again; perhaps there would be no need at all for the CPC Central Committee and State Council to issue this "Decision."