What hidden dangers exist when industrial and commercial capital goes to the countryside? An in-depth analysis
Under the combined pressure of the central government's slogan of "synchronizing the four modernizations," local governments' pursuit of political debt, and capital's instinct to seek profit, in the current period a wave of industrial and commercial capital going to the countryside has appeared in many regions across the country, and the media has basically taken a welcoming attitude toward it, with relatively little in-depth investigation and analysis of the problems that industrial and commercial capital going to the countryside may bring. According to research by the China Rural Governance Research Center of Huazhong University of Science and Technology, where the author works, industrial and commercial capital going to the countryside carries serious hidden dangers, and if no precautions are taken, it may lead to serious consequences.
I
The entry of industrial and commercial capital into the agricultural sector has inevitability and rationality. After land was allocated to households, and especially since Deng Xiaoping's Southern Tour speech, industrial and commercial capital has entered the pre-production and post-production links of agriculture, especially the fields of agricultural product processing, storage, transportation, sales, and brand packaging, strengthening agriculture's ability to connect with the market and raising the level of agricultural modernization. When each household engages in agricultural production as a small farmer, small production finds it very difficult to connect with the large market, so the entry of industrial and commercial capital into post-production links such as processing and sales of agricultural products has inevitability and rationality.
In addition to entering the post-production links of crop farming, industrial and commercial capital has also generally entered the dairy industry and livestock farming. Around the time agricultural tax was abolished, in order to ensure stable urban meat prices, the state encouraged scaled breeding, and thus a high tide appeared nationwide of industrial and commercial capital entering the breeding industry to run "ten-thousand-head pig farms." At present, more than half of the country's total hogs slaughtered come from scaled breeding operations with an annual slaughter of 300 head or more. Chicken and duck farming and so on also show this trend. Because of the high processing requirements and brand building in the dairy industry, almost all dairy processing is monopolized by industrial and commercial capital.
In recent years, industrial and commercial capital going to the countryside has differed from the earlier entry of industrial and commercial capital into the post-production processing and sales links of crop farming and into the breeding industry; instead, it is now characterized by land enclosure and is entering the mid-production links of crop farming. The industrial and commercial capital going to the countryside discussed in this article also specifically refers to industrial and commercial capital entering crop farming from planting to harvest by transferring farmers' land contractual management rights. This is the latest trend of industrial and commercial capital entering agriculture, and it is being vigorously promoted and encouraged by local governments at all levels. Such industrial and commercial capital going to the countryside may bring serious problems.
II
Generally speaking, agricultural production is the combination of a natural process and a social process, and it is very difficult to carry out standardized labor assessment, so it is naturally suited to family operation. China currently has about 200 million farming households, and the whole country has a total of 2 billion mu of cultivated land, of which a little more than about 2/3 is used to grow grain. Grain is a bulk agricultural product and the foundation of national agricultural security, and the state implements protective-price purchasing for grain. Precisely because grain is a bulk agricultural product, is easy to store, and is purchased by the state at protective prices, and because the agricultural inputs needed to produce grain are also mostly standardized means of production, grain-growing farmers do not face the difficulty of connecting with the market. The so-called contradiction between small production and the large market basically does not exist for grain farmers.
Precisely because there is no problem of connecting small production with the large market, small farmers operating on a household basis have a natural advantage in grain production. Grain production provides the country's more than 200 million small farming households with the opportunity to share in agricultural GDP, and it is precisely through grain production that farming households can obtain a self-sufficient economy through courtyard economy. In other words, farming households engaged in crop farming can not only obtain income by growing grain and selling it for money, but their cost of living in the countryside is also far lower than in the city. Considering that among current farmer households there is generally a structure of half work and half farming based on intergenerational division of labor, that is, the younger children in the family go to the city to work and earn wage income, while the older parents stay in the village to farm and earn agricultural income, and the self-sufficient economy greatly lowers the cost of living, this enables farmer households to have savings every year, have relatively good economic conditions, and enjoy a relatively high standard of living.
Because grain production basically does not face the difficulty of connecting with the market, grain production is especially suited to smallholder operation. From our nationwide research, when small farmers produce grain, the per-mu yield must be far higher than under capital operation. The reason is simple: small farmers farm their own land, so they must cultivate intensively and carefully, while capital hires people to farm, so it must operate extensively. Precisely for this reason, although relevant departments have continuously promoted scaled agricultural operation, to this day the vast majority of the country's cultivated land is still operated by small farmers, and farming households produce more than 90% of the country's grain, that is, they share in about 90% of grain GDP.
If industrial and commercial capital goes to the countryside and forms scaled grain growing by transferring farmers' contractual management rights, then industrial and commercial capital will certainly have to share in grain GDP. At a time when agricultural GDP accounts for an increasingly low share of total GDP and the share of agricultural GDP is relatively limited, the more grain GDP industrial and commercial capital occupies, the less grain GDP farmers can share.
In other words, when industrial and commercial capital goes to the countryside to farm, it is bound to compete with farmers for profit. This situation has already appeared in the breeding industry. Because of state support for scaled breeding, industrial and commercial capital has currently entered the breeding industry, and the income that farmers previously generally obtained from side occupations such as raising pigs has become less and less.
III
One precondition for industrial and commercial capital to enter crop farming is being able to obtain farmers' contractual management rights in contiguous plots, and to obtain contractual management rights in contiguous plots, industrial and commercial capital must pay high rent to the farmers least willing to withdraw from agricultural production, and the highest rent must also be the rent that industrial and commercial capital pays for all transferred land. In many parts of the country this rent is as high as 1000 yuan/mu. Agricultural profits are inherently low and risks are high, especially natural risks, so industrial and commercial capital that rents cultivated land at high rent to grow grain is very likely to lose money year after year and ultimately go bankrupt. In our research in rural areas across the country in recent years, we have rarely found industrial and commercial capital that rents farmers' cultivated land at high rent to grow grain and does not lose money and go bankrupt.
In order to pursue profit, industrial and commercial capital is bound to attempt de-grainization or even de-agriculturalization on the land. In fact, most industrial and commercial capital entering the agricultural sector nationwide to enclose land was not originally for growing grain, but for growing high-priced cash crops, or even for developing sightseeing agriculture and engaging in real estate.
Industrial and commercial capital developing sightseeing agriculture through land enclosure is now a common phenomenon in rural areas around provincial capitals nationwide, and this is not a good thing. What is strange is that local governments across the country seem not only not to stop it, but to support it, even using fiscal resources to support it.
The de-agriculturalization direction of industrial and commercial capital is certainly wrong, and the problem of de-grainization is very serious. The problem also lies in the fact that when industrial and commercial capital de-grainizes the land it has transferred in, the risk is still very great, because growing cash crops not only requires large investment, but also carries especially great market risk. Prices of cash crops nationwide fluctuate sharply: if one hits the peak, making money is fine; if one hits the trough, a single loss cannot be made back for several years. From our research, industrial and commercial capital engaged in cash crop cultivation also faces enormous risk. The probability of bankruptcy for industrial and commercial capital engaged in crop farming and breeding is far greater than for capital engaged in processing and manufacturing.
Once industrial and commercial capital that rents land from farmers at high rent goes bankrupt, it will no longer be able to pay land rent and may run away. Once industrial and commercial capital runs away, farmers have no choice but to seek out local government. Therefore, large-scale inflow of industrial and commercial capital into land may lead to social risk.