China's Agricultural Wholesale Markets Urgently Need Transformation and Upgrading
In recent years, the development of China's agricultural wholesale markets has slowed down, showing signs of fatigue. Regarding the transformation and upgrading of agricultural wholesale markets, theoretical circles have been continuously exploring, and government departments such as the Ministry of Commerce and the National Development and Reform Commission have also attached great importance to this, but the pace of transformation and upgrading has been slow to advance. We believe there are two important reasons for this: First, there are problems with the positioning of the main entities in China's agricultural wholesale markets; only by solving the problem of main entities can the transformation and upgrading be successfully completed. Second, there is the issue of the quasi-public welfare nature of agricultural wholesale markets; the shift from enterprise-oriented operation to quasi-public welfare operation is also an important prerequisite for the transformation and upgrading of agricultural wholesale markets.
The issue of the main entities in agricultural wholesale markets, simply put, is who should enter the wholesale market to conduct transactions, and who should assume the roles of buyers and sellers. At present, China's wholesale markets are in a low-level trading state, where both buyers and sellers are self-employed individuals, mostly individual farmers, rural brokers, or small wholesalers. There are numerous cases where farmers transport their own grown products to wholesale markets and set up stalls on the spot to sell. Secondly, there are small-scale centralized sales organized by rural brokers, and buyers are also mostly small wholesalers or self-employed individuals. They all enter wholesale markets as individual operators, and transactions are mostly one-on-one bilateral deals. Economic activities are loosely organized, the degree of organization is low, and it is difficult to standardize and manage uniformly. In addition, due to the educational limitations of farmers and rural brokers themselves, their legal awareness is weak, their moral self-restraint is not strong, and they handle problems based on simple cognition alone. Their vision and perspective are mostly limited to meeting their own needs, and their awareness of overall development is weak. Under such circumstances of main entities, building the transformation and upgrading of wholesale markets fundamentally lacks a foundation and impetus.
We believe that the main entities in agricultural wholesale markets must be organized and scaled up. Only when large institutions with certain strength enter wholesale markets to assume the roles of buyers and sellers, and first achieve the upgrading of wholesale market main entities, can the transformation and upgrading of the entire wholesale market be supported. Through extensive investigation, we have found that in many modern, high-efficiency wholesale markets, the trading entities are all institutions, such as in Japan, South Korea, and Taiwan, China. China should learn from their development experience and introduce large institutions into wholesale markets, such as using rural cooperatives, supply and marketing cooperatives, and other farmer cooperative organizations to organize scattered farmers and rural brokers, forming trading entities with a high degree of organization and easy standardized management. Such trading entities have the ability to organize large-scale centralized transactions and can use modern trading methods to improve trading efficiency. Only in this way can wholesale markets be effectively distinguished from farmers' markets that mainly rely on individual transactions, the functional upgrading of wholesale markets be better realized, and conditions be created for the implementation of modern trading methods such as the auction system.
Besides the issue of main entities, the issue of the attributes of agricultural wholesale markets is also unavoidable. At present, China's agricultural wholesale markets are enterprise-operated, and the purpose of enterprises is to make profits. They have no obligation to stabilize prices, nor can they bear the responsibility for food safety inspection. The starting point of various criticisms from all sectors of society toward agricultural wholesale markets is that they do not treat agricultural wholesale markets as profit-making enterprises. Our view is that wholesale markets themselves indeed should not be institutions with large profits; they should be quasi-public welfare and low-return, but their public welfare portion should not be borne by enterprises, but rather built by the government.
Quasi-public welfare agricultural wholesale markets should be built by the government or companies absolutely controlled by the government. They are the top-level wholesale markets in China, undertaking the distribution function for most of China's agricultural products, with absolute advantages in scale, and their controlling rights belong to the government. The government then selects capable enterprises to operate them, but the operations of enterprises must be carried out under the guidance and regulation of the government. The government must first strictly stipulate that enterprises may not operate for the purpose of making profits, otherwise their operating qualifications will be revoked, and losses incurred by enterprises due to providing public welfare services shall be subsidized by the government. We believe that the reasonable range of profit margin for enterprises operating wholesale markets should be between 2% and 3%. Assuming the average social rate of return is 8%, then the 5% to 6% lost by enterprises should be subsidized by the government. Under this premise, enterprises assume public welfare circulation functions on behalf of the government, improve circulation infrastructure and public welfare facility construction in wholesale markets, and provide related public welfare services.
Top-level agricultural wholesale markets should focus on scale and quality, and 2 to 3 of them are sufficient. These 2 to 3 wholesale markets form a national circulation team and can become an effective focal point for the government's macroeconomic regulation. A series of industrial support and adjustment policies can all take them as implementation targets, which is of great significance to the government's macroeconomic regulation. On the one hand, top-level wholesale markets can perceive market fluctuations at the earliest opportunity, and the government can quickly grasp first-hand information so as to respond in a timely manner. In the past, when price fluctuations and supply-demand changes occurred in China's agricultural products, the government's response was often significantly delayed, and poor information flow led to regulatory policies not being put in place in time, thus triggering many problems such as sharp price increases or unsalable agricultural products, bringing much trouble to the government and the public, especially farmers. Once the operations of top-level wholesale markets get on track, similar problems faced in the past will be readily solved.
On the other hand, because top-level wholesale markets are controlled by the government, they can quickly and effectively implement policies, greatly improving policy execution efficiency. In addition, the establishment of top-level wholesale markets will provide new ideas for solving China's food safety problems. Since top-level wholesale markets control the entry and exit points of China's agricultural product circulation, once a food safety problem occurs, the government can start investigation from top-level wholesale markets and implement level-by-level tracing. Combined with the overall upgrading of wholesale market main entities, compared with the current scattered individual operations, the source of problematic products is easier to locate, thereby enabling rapid investigation and handling and timely and effective control of the spread of food safety problems.
In addition to the above two points, the transformation and upgrading of China's agricultural wholesale markets also faces many issues such as the upgrading of various functions and changes in overall planning. For many years, all sectors of society have devoted much attention to this topic, but progress has been slow. However, the transformation and upgrading of wholesale markets can be said to have a long and arduous road ahead and cannot be achieved overnight. Achieving the upgrading and replacement of main entities and the shift to quasi-public welfare marks a good beginning for the transformation of wholesale markets. As for how to build a more complete and reasonable overall function on this basis, we will continue our research and further provide relevant reports.