An In-Depth Interpretation of the New Normal in China's Agricultural Development
The term "new normal" first originated as a concept put forward by Wall Street economists after the 2008 U.S. financial crisis, and its main manifestations were low growth and low employment rates. Since 2014, "new normal" has become the hottest topic in China, with all industries discussing the new normal together. What kind of new normal China's agriculture faces can be summed up in three phrases: "squeezed by two boards," "restricted by two lights," and "pioneering the sixth industry." The "two boards" are the "ceiling" of agricultural product prices and the "floor" of cost prices. The "two lights" are the yellow light of the WTO and the red light of resources and the environment. The "sixth industry" refers to the sixth sector, a new concept proposed by Japan and South Korea several years ago. The so-called sixth industry means that agriculture can be an industry encompassing the primary, secondary, and tertiary sectors; one plus two plus three equals six, and therefore agriculture is called the sixth industry.
Squeezed from above and below by the "two boards"
The "floor" keeps rising. The "floor" refers to the cost price of agricultural products. The continuous rise in agricultural product prices is caused by many factors. First, the price of labor keeps rising. For cotton picking in Xinjiang, the labor cost has risen to 800 yuan per mu; for rice transplanting and tea picking in the interior, even at the high price of 200 yuan per day, it is very difficult to find workers. Second, land rents keep rising; some land rents exceed 1,000 yuan per mu, higher than the income from the land itself. Third, the prices of pesticides, fertilizers, and seeds remain high, while their usage keeps increasing. Fourth, the cost of agricultural technical services also keeps rising; per mu, plowing, planting, and harvesting have increased from more than ten yuan in the past to more than 100 yuan today. These four factors make agricultural product prices higher and higher.
The "ceiling" has already been broken through. Agricultural product prices are rising across the board, and some agricultural products have already broken through the "ceiling," exceeding international market prices. The prices of some major agricultural products are already higher than foreign landed duty-paid prices, such as cotton. In 2008, only soybeans were in this situation; today, the prices of major bulk agricultural products are all higher than international market free-on-board prices. The inversion of domestic agricultural product prices is intensifying and spreading continuously, and will become the norm. This phenomenon will seriously affect farmers' enthusiasm for growing grain and hinder agricultural development. Large quantities of cheap foreign agricultural products are pouring into the Chinese market, and smuggling is becoming more and more serious. Cao Binghai, chief scientist of the National Beef Cattle Industry Technology System, said that in 2013 China's beef consumption was more than 9 million tons, of which smuggled beef accounted for about more than 2 million tons. The current phenomenon of dairy farmers dumping milk is also related to foreign dairy products entering the Chinese market. The rising "floor" and the pressing-down "ceiling" make the space for agricultural production smaller and smaller.
Restricted by the yellow and red "two lights"
The "two lights" are one yellow light and one red light. The "yellow light" refers to the "amber box policy" set by the WTO. After China joined the WTO, it must abide by its rules. The WTO has established amber, green, and blue box policies. The "amber box policy" refers to agricultural subsidies that enter costs and distort market prices; the "green box policy" refers to subsidies that do not enter cost accounting and do not distort market prices; the "blue box policy" refers to fallow land subsidy policies, and China has no fallow policy. China's "amber box policy" has been almost fully used; for example, direct grain subsidies and grain seed subsidies are all contents of the "amber box policy." When joining the WTO, we promised that amber box subsidies would not exceed 8.5% of agricultural output value (5% for developed countries and 10% for developing countries). Further grain subsidies would already violate WTO rules, and there is no room left for subsidies. This policy has shown a yellow light, and some products have already shown a red light. "Green box policy" inputs such as land consolidation, farmland water conservancy, poverty alleviation, agricultural insurance, and pollution control do not directly distort agricultural product prices. The WTO has no restrictions on them, so much can be done in this area.
The "red light" refers to the constraints of resources and the environment, and the red light for resources and the environment has already been lit. Agricultural resources are tight, and environmental pollution is severe. The three factors most strained in China's agricultural resources are, first, arable land. China's 2 billion mu of arable land accounts for about 1?10 of the world's 20 billion mu of arable land, but it must feed one-fifth of the world's population. Per capita arable land is 1?13 of that of the United States, 1?18 of that of Canada, and even India's per capita arable land is 1.2 times ours. In terms of quantity, land resources are becoming tighter and tighter. Arable land involves China's food security. Feeding more than 1.3 billion people is not only an economic issue but also a political issue. As General Secretary Xi Jinping has said, the Chinese people's rice bowl must be firmly held in our own hands, and the Chinese people's rice bowl must mainly contain the Chinese people's own grain. The quality of China's land is getting worse and worse. The world's best land has an organic matter content of 12%, Japan's land has an organic matter content of 10%, and China's is 0.7%. Straw and human and livestock manure are discarded instead of being returned to the fields, and the use of chemical fertilizers and pesticides is increasing, causing a serious decline in land quality. China consumes 2.4 million tons of agricultural plastic film every year, while the amount recovered is less than 1 million tons, with all the rest left in the soil. The pollution from agricultural plastic film seriously affects crop yields. Taking cotton as an example, residual agricultural plastic film of 3.5 kg per mu can affect cotton yield by 15%. The current national average residual is more than 4 kg per mu, and a survey of 20 counties in Xinjiang showed an average residual of 22.88 kg per mu. Another issue is heavy metal pollution. According to public figures, 20 million hectares of land in China are polluted by heavy metals. Experts estimate that treating one hectare of land polluted by heavy metals costs more than 100 million U.S. dollars. The theory of polluting first and treating later is obviously absurd.
The second is water resources. China is one of the world's 13 water-poor countries. China's per capita freshwater availability is 27% of the world average, and it is mainly distributed south of the Yangtze River, accounting for 81% of China's freshwater resources, while the arable land area there accounts for only 36%. The vast northern regions are arid, and the temporal and spatial distribution of rainfall is very uneven. China's grain output has increased for eleven consecutive years, and agricultural development has achieved gratifying results. But grain harvests should originally come from the southern grain-producing areas rich in water resources; since the Song Dynasty, a pattern of transporting grain from the south to the north had formed. However, for more than a decade, the area planted to grain in the south has been decreasing. Guangdong's grain self-sufficiency rate is less than 30%, and Fujian and Zhejiang are less than 40%. Large amounts of grain are transported from the north to the south, but the north is short of water resources and agricultural facilities are incomplete. The grain harvest in the north mainly depends on large-scale exploitation of groundwater, and over-exploitation has turned more than 200,000 square kilometers of the North China Plain into the largest funnel on Earth. Water resources are extremely scarce, and water pollution is also very serious. Not to mention large rivers, even rural ditches are full of sewage, and fish and shrimp have disappeared.
Furthermore, the agricultural labor force is becoming more and more strained, and the phenomena of leaving agriculture, disliking agriculture, and abandoning agriculture are spreading throughout society. As long as there is the slightest possibility, the rural labor force will flee agriculture, let alone high-end talent. According to relevant surveys, since reform and opening up, more than 1,000 top scorers in China's college entrance examination across all provinces have been produced, and not one has engaged in agricultural research; more than 60% studied finance. China's agriculture is still extensive in operation, and agricultural modernization mainly lacks modern farmers.
Environmental problems are not only about pollution; the major hidden danger is that the biological chain and ecological chain have not received enough attention. What is the biological chain? Hubei is the place of origin of the four major Chinese carps. Before the Three Gorges Dam on the Yangtze River was built, 20 billion fry were produced each year. Once the Three Gorges Dam was built, output is now 200 million fry, and 98% are gone. Once the biological chain is broken, many species disappear, causing chain reactions. One species goes extinct on Earth every hour, and throughout the 20th century, 3/4 of crop varieties have disappeared. This is a very frightening thing. What is the ecological chain? The lifeblood of people lies in the fields, the lifeblood of the fields lies in water, the lifeblood of water lies in the mountains, the lifeblood of the mountains lies in the soil, and the lifeblood of the soil lies in trees. Without trees, the mountains cannot hold soil; without soil, the mountains have no water source; without water, the fields cannot be irrigated. This is a complete chain. Once the biological chain and ecological chain are broken, they will have a huge impact on people's lives, livelihoods, and production. In 2009, scientists defined and quantified nine planetary boundaries for what the Earth's ecology can bear: climate change, ozone depletion, ocean acidification, biodiversity, land use, freshwater use, chemical pollution, atmospheric pollution, and biogeochemical Earth-system cycles. They believe that as long as humanity does not cross these boundaries, it can reproduce and develop on Earth. But recently the American journal Science said that human activities have already crossed four boundaries: climate change, biodiversity, land use, and biogeochemical Earth-system cycles, fundamentally changing the operation of the Earth.
These resource and environmental problems have become two "tightening bands," seriously affecting the improvement of the quantity and quality of China's agricultural products. The cheapness and high quality of foreign agricultural products form a strong competitive posture, making China's agriculture face unprecedented new challenges. For more than ten years since China joined the WTO, agriculture will for the first time undergo a severe test it has never experienced before. Squeezed by two boards and restricted by two lights will have extensive and profound impacts on the speed and structure, mechanisms and momentum, and strategies and policies of agricultural development.
Pioneering the "sixth industry"
Grasping the new normal, actively responding to the new normal, and proactively adapting to the new normal are serious issues that China's agriculture must face now and for some time to come. To perform well the grand logic of the agricultural new normal, agriculture must re-understand itself, reinterpret itself, and replan itself. Building agriculture into the "sixth industry" is the key and the core. The urgent task is to lengthen the industrial chain: inject modern elements to transform the primary sector; closely follow the theme of the four qualities to upgrade the secondary sector; and strive for innovative breakthroughs to develop the tertiary sector.
So-called injecting modern elements means injecting modern concepts, modern technology, modern management, and modern facilities into the primary sector. China's agriculture has always followed Lewis's path of extensive expansion, developing cities and industry to support agriculture in return. This was feasible at a certain historical stage, but under today's broader context, the two wheels of industry and agriculture should turn together so that China's agriculture can escape its predicament. Another Nobel laureate, Schultz, believed that agriculture must cultivate an endogenous material foundation and must strengthen itself, and cannot rely only on industry supporting agriculture in return. Schultz's research found that traditional agriculture's resource allocation is optimal, and the family is the most efficient community of interests for agricultural development. The reason it is backward is that modern elements have not been injected. Today we should walk on two legs and use both Lewis's and Schultz's theories, with particularly high attention to Schultz's theory: connotative transformation, cultivating rural endogenous material foundations, and cultivating the capacity for self-renewal. Industrial development should be considered in a comprehensive and coordinated way. Practice well the "grain and livestock skill," recite well the "classic of mountains and seas," sing well the "opera of forests and grasslands," and play well the "card of fruits and vegetables."
First, modern elements should be injected, and four good articles should be written in transforming the primary sector.
1. Do a good job with the article on land. On the basis of confirmation, registration, and certification of rights, promote appropriately scaled land operations. China's national conditions determine that the scale of agricultural operations must be moderate. American family farms average 3,500 mu. China and the United States have different national conditions: the United States has much land and few people, while we have many people and little land. The logical goal pursued by American agriculture is maximization of labor output, while the logical goal pursued by Chinese agriculture is maximization of land output. Blindly copying the United States would lead to massive unemployment of agricultural labor and trigger serious social problems. As for moderate land scale, central documents have already given the standard: 10 to 15 times the operating scale of local farmers. China's family farms at this scale are moderate. A new type of agricultural operating system should be built, composed of six main entities: family farms, specialized large households, cooperatives, socialized service organizations, leading enterprises, and small farmers. China has 230 million land-contracted households, but less than 30% participate in land transfer. Small farmers will remain the main body among China's agricultural operating entities for a fairly long period. New types of operating entities should be cultivated, but this should not damage the interests of old operating entities or dampen the enthusiasm of small farmers. No matter what form the operating entity takes, it must not depart from the core of family operation. The most core success of Xiaogang Village was restoring the family operation function of agriculture. Family operations account for 86% in the United States and 88% in the European Union. The five new operating models cannot do without family operation. As for the operating model of leading enterprises, some places have introduced the form of large parks and small owners, and the results have been very good.
2. Do a good job with the article on "people." First, modern professional farmers must be cultivated. The first condition for professional farmers is that their educational level must keep up. The average number of years of education for China's more than 500 million agricultural laborers is 7.8 years. Such an educational level adapting to modernization is absurd. In particular, the closure and merger of rural schools over more than a decade has brought new difficulties in attending school. According to surveys in 17 provinces, primary school students live an average of 10.86 li from school, and junior high school students 35 li. The original 590,000 rural schools are now only more than 200,000, with more than double that number having been eliminated. Compulsory education has two major characteristics: first, it is free; second, it is nearby. After the closure and merger of schools, rural parents have to rent housing in cities for their children's education, greatly increasing living costs. Education is free, but farmers' burdens have greatly increased. The state's investment in education should be further increased. The educational investment of neighboring countries such as North Korea, South Korea, Japan, and Vietnam is higher than ours. The rural education model should also be transformed. While doing a good job in compulsory education, vocational education, continuing education, and lifelong education should be developed in many ways. The rural elite education model should be changed to a survival education model to improve farmers' ability to survive and develop, and to prevent the phenomenon of thousands of troops and horses all crowding onto the single-plank bridge of the college entrance examination. The education issue is fundamental to cultivating modern professional farmers. In this regard, China can learn from Japan's successful experience. In recent years, Japan has launched a "successor plan": the government recruits university graduates willing to engage in agriculture, pays for them to study at agricultural colleges for two years, and after graduation they follow large local growers as graduate students for five years. After passing evaluation and if they are willing to engage in agriculture for life, the government provides various preferential policies and they plant no less than 20 hectares of land. Japan's plan is very attractive, and the annual quota is quickly filled. This measure is worth learning from. Second is the issue of farmers' organization. Today's farmers' organizations are already far from suited to agricultural development. The country's agricultural cooperative organizations number only more than 1.2 million. China's farmers show three problems in organization: no organization, weak organization, and being organized. China's farmers should leap from organizing farmers to farmers' organizations. This is not merely a reversal of word order but a qualitative leap. When organizing farmers, farmers are passive; farmers' organizations are organized by farmers themselves to serve themselves, and farmers are active.
3. Do a good job with the article on money. Lack of funds is the biggest obstacle to rural development. For more than 20 years, agricultural loans have accounted for only about 5% of the country's total loans, while India's share is as high as 20%, reaching 25% at its highest. To solve this problem, two aspects are needed: first, policy finance must extend its legs down to the countryside; second, private finance must grow rapidly. The current situation of rural finance can be described as: "five dragons absorb water, one snake releases water." The four major state-owned commercial banks plus the Postal Savings Bank, these five "dragons," absorb farmers' savings, but only the rural credit cooperative, this one "small snake," lends to farmers. Relying only on state-run banks cannot solve the problem. Today, local forces in rural finance must be developed. The smoke of the world currency war fills every corner of the world. Only China's countryside, with more than 900 million farmers, is a blind spot. Farmers are excluded from the currency war and can never become rich. Rural development of local finance has advantages because rural areas are acquaintance societies. The rules of the game in an acquaintance society rely on kindness, trustworthiness, and harmony. Information collection requires no cost, and everyone knows each other thoroughly. Whoever fails to keep their word will be collectively abandoned by the acquaintance society, harming not only themselves but also their descendants. Excavating these rules and using them to develop rural finance is very feasible.
4. Do a good job with the article on the "green box." The "amber box" has already been closed, and the "green box" should be fully opened. Investment should be increased in areas such as land consolidation, farmland water conservancy, rural roads, and poverty alleviation and development. The "village-to-village" project only connects to village headquarters, not every natural village. Roads are the meridians of agricultural development. When the roads of life are open, the roads of production are still out of the question. Water resources are the lifeblood of agricultural development. Our effective irrigation area is 52%. Effective irrigation was pursued even in traditional agriculture, and if we cannot achieve even this in realizing agricultural modernization, how can we achieve modernization? Likewise, much can be done in rural electricity, pollution control, poverty alleviation, and many other areas. We still have more than 100 million poor people. According to the international standard of a minimum per capita consumption of 2 U.S. dollars per day, our poor population would be even larger. For so many poor people, annual poverty alleviation funds are more than 40 billion yuan, which spread over each person is only more than 200 yuan, and cannot solve the substantive problem. First, at the central level, synergy should be formed. The finance department, the Development and Reform Commission, the poverty alleviation office, and civil affairs departments all have poverty alleviation funds and projects, which makes poverty alleviation forces too dispersed. These forces should be gathered into one to form synergy, and fiscal appropriations should also be greatly increased. In short, the "green box policy" has great potential and should be fully tapped.
Food security, or agricultural product security, is first of all capacity security, and the key to capacity security is strongly implanting modern elements.
Second, closely follow the "four qualities" and upgrade the secondary sector.
To upgrade the secondary sector, first of all, several industrial chains must be built completely. First, the production and processing industrial chain for grain and agricultural and sideline products; second, the production and processing industrial chain for livestock and aquatic products; third, the production and processing industrial chain for forestry and forest products; fourth, the comprehensive utilization industrial chain for straw.
The "four qualities" are the appearance, quality, grade, and brand of agricultural product processing. Appearance means it must look good; quality means it must have good quality; grade means it must be high-end, from safety on the tip of the tongue to deliciousness on the tip of the tongue; and a brand must also be created. Human consumption has entered the brand era, so we must work hard on brands, expand markets, and create brands according to consumer needs. The rise of a great power first requires the rise of brands. We now have more than 1,500 products ranked first in the world in output, but internationally recognized brands that can really make a name for themselves are very limited. Creating brands is of great significance. One example is very interesting. Luochuan County in northern Shaanxi has natural climate conditions suitable for growing apples. The local government came up with a creative idea: Luochuan apples are humanity's fourth apple. The first apple was the apple stolen and eaten by Adam and Eve; the second apple was the apple that hit Newton on the head; the third apple was the Apple founded by Steve Jobs; the fourth apple is the Luochuan apple. From then on, Luochuan apples' value doubled.
Furthermore, strive for innovative breakthroughs and upgrade the tertiary sector.
The development prospects of agricultural services are broad. The more developed a country is, the more agricultural services become a popular occupation. American farmers account for a little more than one percent of the total population, while services for agriculture account for 20% of the total population. China's potential in this industry is still enormous and remains to be tapped.
First, innovative research and development. Especially seeds. There is now great disagreement in society over the issue of genetically modified organisms, but as scientific research, GM technology must certainly be studied in depth. The core issue of GM should in fact be a country's food security. The issue of GM and biotechnology is drawing worldwide attention. Japan's rice now costs 20 yuan per jin, but the state stipulates that imports are not allowed, and the state subsidizes farmers to produce it themselves. India has also proposed domestic production of seeds within a time limit. Many countries now demand seed democracy, that is, the right to choose seeds, to prevent manipulation and monopoly by a seed empire. Even the United States, after "9·11," issued a biodefense law that shocked the world, to prevent terrorists from using biotechnology to tamper with animals and plants and endanger national security. On the GM issue, the central government has already clearly stated that research and development must go deep and promotion must be cautious. Especially in the seed industry, the sales of our more than 7,000 seed sales companies in 2013 accounted for only 2% of the world's. Among the top ten seed companies, the United States occupies four. A recent hot issue is making potatoes a staple food. Potatoes are very rich in nutrition; their mineral content is dozens of times that of apples, and their comprehensive nutrition is also more than three times that of apples. Russia consumes the most potatoes, with a per capita annual amount of more than 170 kg; the United Kingdom more than 120 kg; the United States more than 50 kg; ours is 31 kg; and the world average is 50 kg. China's potato planting area is more than 100 million mu. The current average potato yield is 960 kg, and its potential yield per mu can reach more than 10,000 jin. Scientists are now researching and developing various potato foods, such as potato biscuits and potato bread, with great development potential.
Research and development should also track future trends in agricultural development and align with international standards. Future agricultural development has the following characteristics: first, development from flat to three-dimensional. The United States and Israel are developing three-dimensional agriculture and vertical farms. Three-dimensional agriculture was invented by our ancestors; now they use high-tech means to build vertical farms, that is, agricultural skyscrapers. A 30-story skyscraper can produce more than 100 kinds of agricultural products for the annual consumption of 50,000 people. Second, development from natural style to facility style. It integrates tourism, leisure, sightseeing, and science education. Third, development from human-controlled mechanization to computer automation. One computer intelligence module in a vertical farm skyscraper can solve problems such as planting, watering, picking, and packaging. Fourth, development from chemicalization to biologization. Chemical fertilizers and pesticides have aroused great controversy since their emergence. Today the harm of chemical fertilizers and pesticides is becoming more and more serious, and many experts are now again advocating the use of biological fertilizers. Agriculture is developing in the direction of biotechnology. The application of biochip technology has already entered the field of animal and plant life. Fifth, development from land-oriented to ocean-oriented. Sea granaries are being put into practice. The ocean civilization of the past relied on trade; the ocean civilization of the future may center on production. Sixth, development from Earth-oriented to space-oriented. Dozens of crops have now been tested and can grow in space. Building drifting farms in space will bring humanity into another nomadic era. The primitive nomadic era grazed on the great grasslands; future nomadism will use transporters to pick agricultural products from drifting farms to Earth for people to eat. Seventh, development from production-oriented to migration-oriented. Plans to migrate to Mars are being experimentally explored. The United States has announced that in the next 15-20 years it will transport 80,000 people to live on Mars.
Second, innovative services. First, innovate services across the entire industrial chain. The world's four major grain traders all provide whole-industrial-chain services, from seed research and development all the way to shopping mall sales. They all have more than a hundred years of historical accumulation and possess advantages in capital, technology, talent, and markets in every aspect. Only in this way can production efficiency be improved. Second, large-scale services. The most typical is agricultural machinery services. The Ministry of Agriculture issues only a few policies, such as subsidies for purchasing large agricultural machinery, and local agricultural machinery departments provide services within their capacity. In this way, farmers spontaneously buy harvesters. Every year, 500,000 harvesters travel south and north, solving the problem of mechanized harvesting of crops. Third, "idiot-proof" services. Now agriculture, household by household, needs many kinds of services, which is very complicated. A model can be created: make one phone call, and an enterprise can provide all needed agricultural services. Creating such a service model is of very practical significance for China's small-scale operations to achieve agricultural modernization today.
Third, innovative business forms. Against the internet background of cloud computing and big data, many incredible new business forms quickly emerge unexpectedly. Especially large leading enterprises such as Alibaba are developing Taobao villages and Taobao towns. The standard for a Taobao village is that shops are located in rural areas, there are more than 100 shops, and turnover is more than 10 million yuan; the standard for a Taobao town is that a town has more than 3 Taobao villages, and Alibaba allows them to enter its platform for sales. In 2014, there were more than 100 such villages and 19 towns nationwide. JD.com's idea is even cleverer. They plan to hire two farmers in each of several hundred thousand villages across the country to help sell pesticides, fertilizers, and seeds on credit, with payment made after the harvest, thus saving the costs of many intermediate links. Many new business forms based on internet thinking are springing up like bamboo shoots after rain. Human society is entering a new tribal era. Do not ask me where I come from; as long as hobbies, interests, and values are the same, one can enter a virtual tribe and exchange information and share results equally within that tribe. Today's internet thinking is to eliminate all intermediate links, taking goods from manufacturers and selling directly to users. This is the new business form. Jixi's "Gathered Land" is also a very meaningful exploration. They use crowdfunding, the internet, and e-commerce together to do something, making city people absentee landlords, bringing city people to the countryside and agricultural products to the city.
Building agriculture into a sixth industry that integrates the primary, secondary, and tertiary sectors, unites upstream, midstream, and downstream, and promotes production, supply, marketing, and processing together is a new proposition under the new normal. This requires a relatively long historical process. For agriculture to adapt to the new normal and perform well the grand logic of its own development under the new normal, it must achieve the "three haves": agriculture must be profitable; farmers must have work to do; and rural areas must have vitality. Only by attaching equal importance to all three can China's three rural issues be solved well under the new normal, and none can be neglected. If we speak only of improving efficiency and learn from the United States' large-scale agricultural operations, hundreds of millions of farmers having nothing to do will become a major social problem; if we speak only of farmers having work to do on fragmented land and disregard efficiency, agriculture will not escape the vicious circle of traditional low efficiency; if we speak only of agriculture being profitable and farmers having work to do while rural areas present a scene of decline without vitality and vigor, agricultural development will be unsustainable and agricultural modernization cannot be realized. To achieve the "three haves," urban and rural areas must be planned as a whole, and public facilities and public services must not belong only to the city and not to the countryside. People should enter the city, and the city should go to the countryside. To realize the transition from a new countryside of "things" to a new countryside of "people," three elements must be grasped well: a beautiful living environment, a beautiful harmonious society, and a beautiful human soul. Only when the three beauties coexist is it a complete beautiful countryside, and only against such a background can agricultural modernization be realized.