Activating farmers' own capital is the right path
Activating farmers' own capital rather than urban capital flowing to the countryside is the right path for agricultural capitalization
In the era of agricultural capitalization, whose capital is flowing to the countryside? Who reaps the benefits of that capital? Only by activating farmers' own capital and enabling farmers to profit from agricultural capitalization can farmers' incomes ultimately increase and agriculture ultimately develop.
As China's agricultural factor markets gradually develop, and especially as agricultural land recently shows market prices amid accelerating transfer, capital has fully entered the agricultural sector, and Chinese agriculture has inevitably entered an era of capitalization. Capital has begun to play a leading role in almost every link of agricultural production. But we must ask: whose capital is it? Who reaps the benefits of that capital? We see that what is entering agriculture on a large scale today is urban capital, which enters rural areas in the name of industrial capital and financial capital, and begins to capture profits from the entire agricultural industry chain under the name of agricultural industrialization and meeting rural financial needs.
Urban capital flows to the countryside only to seize profits
Policymakers hope that urban capital entering agriculture can revitalize rural land, labor and other resources and help modernize agriculture, while the latter hopes agriculture will become their new gold mine.
As for the distribution of capital investment in agriculture by sector, there is still no authoritative nationwide survey data, but analysis of data from some provinces and municipalities shows that capital directly participating in agricultural production is already a relatively large volume.
According to a report by Li Shaofei in Outlook Weekly News, in Zhejiang Province, where agriculture is relatively developed, since 2010 industrial and commercial capital invested in modern agriculture has totaled more than 20 billion yuan, of which 10.964 billion yuan was invested in grain production functional zones and modern agricultural parks. Of the 9 billion yuan invested by industrial and commercial capital in 2011, planting and breeding accounted for 47.33%, circulation and processing of agricultural products accounted for 33.67%, and sightseeing and leisure agriculture accounted for 18.9%. In Chengdu, a pilot area for urban-rural integration, 61 projects of industrial and commercial capital entered the agricultural sector in 2012, with a total investment of 17.27 billion yuan. Of these, 21 projects engaged in large-scale planting and breeding, with an investment amount of 3.412 billion yuan.
Although relevant central documents specifically point out that urban industrial and commercial capital should be encouraged and guided to develop planting and breeding suitable for enterprise-based operation in rural areas, the lack of clear provisions on what constitutes “suitable for enterprise-based operation” in specific implementation makes it difficult in practice to form effective regulation and restraint on capital.
Moreover, out of the inherent nature of pursuing economic interests, capital investment in agriculture currently tends more toward higher-value cash crops such as vegetables, fruits and flowers, strengthening the trend toward non-grain agricultural production. For example, Chongqing, which is at the forefront of comprehensive coordinated urban-rural reform, has since 2007 successively established ten demonstration projects for urban resources flowing to the countryside, but none involved grain production.
The most profitable areas of agriculture are the links after production, such as processing, purchasing and marketing, and circulation. At present, the profits in these links are basically occupied by capital, and the proportion of profit obtained by farmers is very low, which is not conducive to their long-term development. And if farmers cannot make money from agriculture, leaving agriculture is inevitable, and when the agricultural sector lacks strong and high-quality labor, it is also impossible for capital invested in agriculture to continue to profit.
Capital flowing to the countryside cannot easily solve agricultural production increases and farmer income growth
Current agricultural commercialization and agricultural industrialization are mainly manifested in the expansion of agricultural product trading markets and the emergence of leading enterprises. Such an organizational form of agricultural marketization is incomplete, or rather marginalizes farmers; in fact, it is a kind of agricultural capitalization dominated by capital forces outside farmers.
This reality creates huge difficulties for dispersed farmer economies seeking to realize their own interests: first, commercialization dominated by outside capital means farmers inevitably face enormous exogenous transaction costs when connecting with the market; second, when facing leading enterprises, farmers are in a weak bargaining position and are unable to win their own reasonable profits by striving for reasonable prices. This trend will continuously weaken the ability of dispersed small farmers to obtain benefits from the entire agricultural industry chain, leading them to become increasingly dependent on capital.
A review of the current forms of cooperation between capital and farmers in China mainly includes the following: first, direct land expropriation by the government, turning farmers into urban residents or agricultural workers, while capital occupies the land for economic operations; second, household-enterprise cooperation, in which farmers contribute land as shares and enterprises contribute technology, factories and other assets as shares, with guaranteed minimum dividends; third, the industrial park model, in which enterprises transfer farmers' land, pay transfer fees, and farmers work in the parks, with income coming from land rent and labor income; fourth, the cooperative-enterprise cooperation model, in which farmers establish cooperatives and the cooperatives join with enterprises. Examining the above cooperation methods, farmers, especially small farmers, are in a passive position, and it is difficult to help them join the profitable areas outside production links, such as processing and sales, and obtain sufficient economic returns.
Due to the huge gaps in information, management, technology and other aspects, in most areas dispersed small farmers actually do not have the ability to negotiate fairly with large capital.
Activating farmers' own capital is the right path
Large-scale urban capital entering the agricultural sector may, from individual cases and short time periods, help promote increases in farmers' incomes, but from a long-term and overall perspective, it weakens farmers' ability to obtain benefits from the entire industry chain, leading to insufficient follow-up self-development momentum and capacity among farmers, and is not conducive to solving deep-seated agricultural problems.
Fundamentally solving the difficult problems of agricultural development and promoting increases in farmers' incomes still requires new thinking. The core goal of resolving the current “contradiction between small production and large markets” is to ensure, under market conditions, that farmers obtain average social profits based on engaging in the cultivation and sale of agricultural products, and can sustainably carry out the production, processing and sale of agricultural products, thereby ensuring increases in farmers' incomes and meeting society's demand for agricultural products. To achieve this goal, the core of the next stage of reform lies in how to better promote the organization of the farmer economy.
The practical policy is to activate farmers' own capital, establish and improve a comprehensive agricultural service system, and lay a solid foundation for farmers to lead the entire agricultural production industry chain.
The main reason rural areas lack capital is that large amounts of rural funds, resources and assets have not been fully provided to farmers and agriculture, and some have even flowed outward. In most rural areas, there are already many household savings, but there is simply no reasonable financial system to use them to serve agriculture, rural areas and farmers. Now, guiding and even encouraging capital to flow to the countryside on a large scale does not identify the root cause.”
The urgent task is to establish and improve the rural cooperative financial system so that rural own capital can exert its due strength, and at the same time improve the comprehensive agricultural service system to provide all-round services and support for farmers in production, processing, sales and other links.
This requires the government to focus policy on public service areas such as strengthening agricultural infrastructure construction and agricultural talent training, while capital can play to its strengths in areas such as agricultural science and technology research and development and extension, so as to achieve the goal stated in the No. 1 Central Document: building a new type of agricultural socialized service system that combines public-interest services with commercial services and coordinates specialized services with comprehensive services.