Agricultural machinery leasing begins trial, Ministry of Agriculture joins hands with Agricultural Bank of China

It is cotton harvesting season in Xinjiang again. A Case New Holland cotton picker worth 3.2 million yuan requires no collateral; an agricultural machinery cooperative only needs a 30% down payment to take it home. This was the first agricultural machinery leasing order in China, witnessed by reporters in Shawan County, Xinjiang. Similar to taking out a mortgage to buy a house, 3 agricultural machinery cooperatives in this county, through financial leasing, “purchased” 17 large cotton pickers in one go this year.

Not only can they be taken home in advance, but each machine can also enjoy a “discount” of 900,000 yuan. Xinye Agricultural Machinery Cooperative in Liumaowan Town leased 5 cotton pickers. Chairman Zhu Qingjiang told reporters: “Under the method of paying interest monthly and principal annually, after paying off the remaining 70% over 3 years, ownership of the agricultural machinery can be transferred from the leasing company. Although 3 years of interest comes to nearly 500,000 yuan, as a pilot project of the Ministry of Agriculture this year for financial support to agriculture, the Ministry of Agriculture will provide a full interest subsidy, and at the same time they can also enjoy a 400,000 yuan agricultural machinery purchase subsidy, saving 900,000 yuan all at once.”

“In the past we could only find a way to raise funds to buy one, but now we can build an operation service team all at once. Moreover, this leasing method is much more convenient than a mortgage loan; it took only one month to get the keys, whereas before it could not be done in half a year.” Kangwang Agricultural Machinery Cooperative in Sidaohezi Town leased 7 cotton pickers this year. Chairman Bai Jiuhui told reporters: “Last year the cooperative used 4,000 mu of land as mortgage to obtain a loan and bought one cotton picker for 3.25 million yuan. The interest on a 4-year loan alone was more than 500,000 yuan.”

According to Bai Yuping, director of the Shawan County Agricultural Machinery Bureau, one cotton picker can pick as much cotton in a day as 1,300 cotton pickers. Based on a yield of 350 kg per mu and a manual harvesting cost of 2.5 yuan per kg, mechanical harvesting saves more than 400 yuan per mu compared with manual harvesting. The higher the yield, the more obvious the cost savings and efficiency gains.

At the same time, the benefits that cotton pickers bring to the cooperative are also very considerable. “One cotton picker can harvest 9,000 mu of cotton in a season, with a net income of 1 million yuan a year. The cooperative has 18 cotton pickers, and the operating area can reach 150,000 mu. Last year, the largest dividend to members reached 2.3 million yuan, and the smallest was also tens of thousands of yuan.” Zhu Qingjiang said.

It is understood that the agricultural machinery leasing business has a history of several decades in agriculturally developed countries in Europe and America, and is the preferred way for farmers to purchase and use agricultural machinery and equipment. In China, however, purchases are still mainly made through mortgage loans and other methods, putting considerable financial pressure on farming households. In the pilot agricultural machinery leasing business for cotton pickers in Xinjiang, the total value of 17 agricultural machines reached 54.4 million yuan, and the financing amount reached more than 38 million yuan. By innovating the way fiscal funds are used, the Ministry of Agriculture provides fiscal subsidies for the interest portion in the agricultural machinery leasing business carried out by financial leasing companies, greatly reducing the cost for farmers to buy machines.

Chen Peihua, president of ABC Financial Leasing Co., Ltd. of the Agricultural Bank of China, which undertakes this leasing business, told reporters: “The agricultural machinery financial leasing business achieves multiple wins at once: government departments can advance the development of agricultural mechanization; agricultural machinery suppliers and dealers can promote the sale of agricultural machinery and tools; lessees can reduce financial pressure and lower the threshold for mortgages and pledges; and grassroots Agricultural Bank branches can also expand their ‘three rural’ business development. ABC Leasing will further deepen cooperation with agricultural departments and carry out pilot work on agricultural machinery financial leasing business on a larger scale.”

“At present, farmers’ demand for large and medium-sized, multifunctional, high-performance agricultural machinery is growing, but their purchasing power is relatively weak, which restricts the development of agricultural machinery modernization. Now, through market means and government guidance to innovate financial service methods, the financing problem has been solved, opening a path for advancing agricultural mechanization.” said Li Weiguo, director of the Agricultural Mechanization Department of the Ministry of Agriculture.

Li Jianhua, director of the Finance Department of the Ministry of Agriculture, said: “Financial leasing has made a useful attempt to solve the problems of ‘difficult loans and expensive loans’ for farmers buying large agricultural machinery and tools. Solving ‘difficult loans’ through leasing, and easing ‘expensive loans’ through agricultural machinery purchase subsidies plus interest subsidies, has been recognized by financial institutions, welcomed by farmers, and has solved problems for the government. In the future we will continue to explore expanding the scope of pilot leasing of large agricultural machinery and tools, further summarize and explore a financial support model for agricultural machinery that has controllable risks and universally promotable value, and give full play to the role of fiscal funds in achieving ‘four taels moving a thousand jin’ and ‘small money leveraging big money’, encouraging and guiding financial capital to support the development of agricultural mechanization.”