What are the three major issues that must be emphasized in the structural reform of the agricultural supply side?

The just-concluded Central Rural Work Conference explicitly proposed “structural reform of the agricultural supply side,” which signals that Chinese agriculture will undergo a structural adjustment reform. At present, Chinese agriculture faces many contradictions and difficulties. For example, China's grain production has achieved “twelve consecutive years of growth,” while at the same time, the scale of grain imports in 2015 may once again set a record, and the domestic grain stockpiles purchased and stored under the support price policy will also remain at a high level, presenting the strange phenomenon of simultaneous growth in production, imports, and inventories, the “three quantities rising together.” In addition, China's agricultural production also faces new challenges such as the “ceiling” cap on agricultural product prices and the rising “floor” of production costs.

The “root causes” of these problems all lie in the structural problems of Chinese agriculture, as well as some distorted agricultural policy issues. To extend supply-side structural reform into the agricultural sector, it is necessary to adjust the agricultural structure, improve the effectiveness of agricultural product supply, and strengthen the market's allocation of agricultural resources, so as to promote quality improvement and efficiency enhancement in Chinese agriculture and fundamentally solve the problems of agricultural development.

We believe that the future development of China's agriculture needs to focus on solving several issues:

First, adjust the basic strategy for grain production. Adjust the flexibility of the grain self-sufficiency strategy and comprehensively safeguard food security from an international perspective. It is necessary to adjust the outdated grain self-sufficiency rate target, and while ensuring domestic staple food production, strengthen analysis of global agricultural development potential, environment, and risks, and make full use of both domestic and international resources and both markets to strengthen the safeguarding of food supply. As Anbang researchers have said in the past: importing grain is importing land and water resources. Taking China's grain imports of 100 million tons as a calculation, this is equivalent to 700 million mu of land internationally producing grain for China.

Second, a breakthrough should be sought in the rural land system. China's reform began in the countryside. The contract responsibility system reformed agricultural production relations, and this dividend has been relied upon for several decades. Now it is time for change. The difficulty of raising the marginal efficiency of smallholder production represented by the individual farmer contract system is growing ever greater, and a new institutional reform breakthrough is necessary. In our view, the greatest institutional breakthrough should be in the land system, referred to in short as the rural “three plots of land”——the reform of rural collective construction land, contracted land, and farmers' homestead land. We believe that land system reform will be the most important factor determining whether China's rural development in the next step will have vitality. For example, if rural homestead land can be listed and traded while ensuring land ownership rights, that will stimulate a wave in China of urban capital flowing to the countryside to develop small towns. The Standing Committee of the National People's Congress voted and passed on December 27, 2015, that China will carry out pilot programs for mortgage loans on rural contracted land management rights and farmers' housing property rights (that is, the “two rights”) in 232 pilot counties (cities, districts) and 59 pilot counties (cities, districts) including Jixian County in Tianjin, which is also expanding the experience of rural land reform.

Third, agricultural industry development faces reform and upgrading. From the perspective of planting, it cannot be only about grain for grain's sake; the economic output and benefits of agriculture must also be taken into account. Data provided by the National Development and Reform Commission show that in 2014 the average net profit per mu of vegetables in China was 2069.78 yuan, 10.1 times that of rice, 23.6 times that of wheat, and 25.30 times that of corn, while the net production profits of land-intensive agricultural products such as cotton, sugar crops, and soybeans were all negative. This shows that the resource allocation between China's land-intensive industries such as grain and cotton and labor-intensive and technology-intensive industries such as fruits, vegetables, and aquatic products is unreasonable. From the perspective of organizational methods, the individual contract system only reformed production relations, but in terms of the degree of agricultural production organization, it remains an individual smallholder economy, which has no way forward in the future. Greater efforts at reform should be made in areas such as the land transfer system, organized agricultural development, and industrial capital flowing to the countryside.