How can Chinese agriculture escape the smallholder predicament?

Smallholder Agriculture in China Since the Sui and Tang Dynasties

A smallholder refers to an individual farming household that relies entirely or mainly on its own labor to engage in agricultural operations smaller than the scale it is capable of managing. Smallholder agriculture refers to the small-scale farming operated by smallholders. According to A History of China's Land System by economists Zhao Gang and Chen Zhongyi, during the period from the Qin and Han dynasties to the Northern and Southern dynasties, land relations were not yet strained, and the operating scale of farming households was 50-60 mu. Limited by agricultural technical conditions, farming households were unable to cultivate more land than that, and the agricultural operating scale matched the farming capacity of the household, remaining at a reasonable level. By the author's definition, farming households at that time did not yet count as smallholders. After the Sui and Tang dynasties, China's population growth exceeded the rate of increase in cultivated land area, and with improvements in agricultural techniques such as farm tools and fertilization, human-land relations began to tighten, and the trend of having more people and less land became increasingly obvious. The Tang dynasty implemented the equal-field system, with 65 mu per household as the upper limit, regardless of whether land was left fallow, and the operating scale of farming households often fell short of this upper limit. In the early Northern Song dynasty, the average cultivated land per household was 40 mu. During the Southern Song dynasty, as the population increased, per capita cultivated land declined rapidly, and the vast majority of farming households cultivated less than 25 mu each. During the Ming and Qing dynasties, the average cultivated land per household gradually decreased even further. By 1936, the average cultivated land per household was only 18.4 mu, and per capita cultivated land for farmers was 3.6 mu. It can be said that only after the Sui and Tang dynasties did China's farming households come to be called smallholders, and smallholder agriculture began to take shape.

After the founding of New China, with population growth and advances in agricultural technology, human-land relations became even more strained, and the operating scale of smallholders shrank even further. At present, the average cultivated land per farming household in China is only 7.5 mu, equivalent to 1/40 of that of the European Union, 1/400 of that of the United States, and less than 1/2 of that of Japan and South Korea. Therefore, Chinese agriculture is a typical smallholder agriculture that falls below the reasonable level of human-land relations. In addition, land plots are fragmented, with an average of 7-8 plots per household and each plot averaging only about 1 mu. Many farming households in Guangxi and other places have a dozen or more than twenty plots, and most plots are only a few fen in area, making land management especially highly small-scale and dispersed.

Accordingly, the author's view is that over the thousand-plus years from the Tang, Song, Yuan, Ming, and Qing dynasties to the present, the operating scale of farming households has gradually declined to an economically increasingly unreasonable low level. Farming households are capable of cultivating a scale far larger than what they actually cultivate, the surplus agricultural labor force has gradually increased, farming households have become typical smallholders, and agriculture has become typical smallholder agriculture.

The "Smallholder Dilemma"

Relying on intensive and meticulous smallholder agriculture, China has always fed the world's largest population. But it cannot be denied that China has many people and little land, with prominent human-land contradictions, and that the overly small scale of agricultural operations makes them economically unreasonable. Smallholder agriculture with less than 10 mu per household falls below the reasonable agricultural operating scale, resulting in a large surplus of labor, low agricultural production efficiency, and increased agricultural production costs per unit area for cultivation, harvesting, fertilization, and pesticide application. Smallholder agriculture is also unfavorable to the use of advanced agricultural machinery and equipment, restricts improvements in agricultural production efficiency, and narrows the room for agricultural production returns. Taking grain-growing households as an example, the single-season return per mu is about two hundred yuan, and calculated at an average of 7.5 mu per household, the return is less than two thousand yuan. If labor costs are priced at market rates, then engaging in agriculture amounts to self-employment, and agricultural returns amount to wage income. The author holds that Chinese smallholder agriculture has fallen into a "low-level development dilemma of smallholders," or "smallholder dilemma" for short. That is, smallholder agriculture is a "thin-profit agriculture" (even a "no-profit agriculture"): not only is the return per unit area low, but because the operating scale is small, total returns are also low. Low returns in turn limit the capacity for agricultural investment and reduce enthusiasm for investment, thus leading to slow application of agricultural technology and extensive land management or even abandonment. Smallholder agriculture has low output, low efficiency, low returns, and low investment, cycling at a low level and finding it difficult to move toward modernization.

In modern society, the commodity attributes of agricultural products have become increasingly obvious. Aside from meeting their own household needs, the agricultural products produced by smallholders must also be sold on the market, and smallholder agriculture is inevitably affected by domestic and international agricultural product markets. Especially in the wave of agricultural globalization, smallholders find it difficult to "keep to themselves" as they could in traditional agriculture; their production, demand, prices, and benefits are all deeply affected by world agriculture. In recent years, domestic grain prices have remained continuously higher than international market prices, and the inherent difficulties of smallholders and smallholder agriculture have been intensified by pressure from the international market. The "smallholder dilemma" has held back the pace of China's modern agriculture like a huge boulder.

From Smallholders to Family Farms: The Path Out of the "Smallholder Dilemma"

The important difference between a smallholder and a family farm lies in the difference in operating scale. If the operating scale of a farming household is smaller than its labor and management capacity, it is a smallholder; if larger than its labor and management capacity, it is a family farm. A small operating scale is the main characteristic of smallholders and the main cause of the "smallholder dilemma." Once the operating scale of a farming household reaches a reasonable level matching its labor force and management capacity, the smallholder moves toward a family farm, the agricultural operating situation improves, and agricultural income increases and becomes comparable to non-agricultural employment income. Taking grain production as an example, survey and calculation data from the Ministry of Agriculture show that under current production conditions, a sown area of 100-120 mu is the scale standard distinguishing smallholders from family farms. According to research by the United Nations Food and Agriculture Organization, only an agricultural operating scale of no less than 170 mu for cash crops and no less than 300 mu for grain crops is internationally competitive. For a period in China's future, both family farms and smallholders will be the main entities in agricultural operations, but family farms operated by professional farmers at or above an appropriate scale are the vehicle for Chinese agriculture to emerge from the "smallholder dilemma" and the direction for smallholder agriculture to be thoroughly transformed.

At present, China has gradually acquired the economic and social conditions for appropriately scaled operations, and appropriately scaled land operations will become inevitable. The prerequisite for scaled land operations is the transfer of surplus agricultural labor to the secondary and tertiary industries, achieving full employment in non-agricultural industries. Countries around the world generally take the stable transfer of 60%-70% of the agricultural labor force into non-agricultural industries as the starting condition for scaled agricultural operations. Most developed countries have relied on gradually concentrating land to achieve scaled agricultural operations and thereby achieve agricultural modernization. With the acceleration of urbanization and industrialization, the declining share of the rural labor force engaged in agriculture will become increasingly obvious. In 2012, China's total number of migrant workers exceeded 260 million, of which more than 160 million worked away from their home areas. There are about 150 million new-generation migrant workers, who basically do not know how to farm and will not make a living from agriculture in the future. In the long run, they have the possibility of breaking away from agriculture and from the land. In the developed coastal areas of eastern China and the peri-urban areas of some large and medium-sized cities, as well as some areas in the central and western regions where large numbers of agricultural laborers have gone out to work, the conditions for appropriately scaled land operations already exist. By the end of 2013, the area of contracted cultivated land transferred in China had reached 340 million mu, accounting for 26% of the national contracted cultivated land area. According to Ministry of Agriculture statistics, by the end of 2012, across 30 provinces, autonomous regions, and municipalities (excluding Tibet), there were 877,000 family farms, accounting for less than 1% of the total number of farming households, with an operated cultivated land area of 176 million mu, an average operating scale of 200 mu, and 13.4% of the national contracted cultivated land area.

Formulating a family farm development strategy and cultivating family farms are important paths for promoting the development of modern agriculture. In recent years, Jiangxi province, Jiangsu province, Hunan province, Suzhou city, and some other areas have issued special fiscal subsidy policies to promote appropriately scaled operations. At the central level, on the basis of drawing on local experience, special guiding documents to promote appropriately scaled operations could be drafted, encouraging localities to support appropriately scaled agricultural operations and family farm development under the premise of adhering to the basic rural operating system and protecting farmers' land rights and interests. Subsidy and support policies for family farms and smallholders (ordinary farming households) should mainly treat them equally, but there should be preferential policies for smallholders growing into family farms. It is suggested that national agricultural subsidies and agricultural development projects establish special programs to support entities engaged in scaled agricultural operations. The central finance, agriculture, comprehensive agricultural development, and other departments could, on the basis of existing policies, formulate and issue subsidies and projects specifically guiding and supporting scaled agricultural operations and family farms. Through policy support, break the "low-level development dilemma of smallholders," guide appropriately scaled agricultural operations, and create the basic conditions for achieving agricultural modernization. It must be emphasized that the movement of smallholders toward family farms is a gradual process. Farmers must not be forced or induced to transfer land simply in pursuit of agricultural operating scale, and family farms must not be pieced together simply by lumping everything together or building up large households.