2016 No. 1 Document to Launch Agricultural Supply-Side Reform
At the start of the year, the 2016 Central No. 1 Document focusing on the “three rural issues” is about to be issued. The reporter has learned that the “Several Opinions of the Central Committee of the Communist Party of China and the State Council on Implementing New Development Concepts, Accelerating Agricultural Modernization and Achieving the Goal of Building a Moderately Prosperous Society in All Respects (Discussion Draft)” announced at the Central Rural Work Conference at the end of last year has been listed as the draft of this year's No. 1 Document. Judging from the title, the No. 1 Document will also focus on agricultural modernization for the fourth consecutive year. Compared with the previous two years, this year, while adhering to the basic approach of advancing agricultural modernization, it further proposes implementing new development concepts and achieving the goal of building a moderately prosperous society in all respects.
Previously, the state had intensively issued a series of heavyweight agricultural policy documents, involving important topics in the process of agricultural modernization such as rural e-commerce, agricultural reclamation reform, and deepening rural reform. Judging from the “13th Five-Year Plan” planning recommendations of 31 provinces, autonomous regions, and municipalities across the country, all provinces, autonomous regions, and municipalities have also placed the focus of agricultural development on modernization, actively responding to the state's new concepts for agricultural development.
“The No. 1 Document will specifically implement the ‘13th Five-Year Plan’ and put forward the goal of building a moderately prosperous society in all respects. Modern agricultural construction must follow the five major development concepts of innovation, coordination, green, openness, and sharing to strengthen weak areas and shore up weaknesses.” Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, told the reporter that this Central No. 1 Document, to be issued in the opening year of the “13th Five-Year Plan,” will provide guidance and direction for China's medium- and long-term agricultural development.
Supply-Side Reform: Structural Adjustment of Agriculture
Major agricultural provinces including Heilongjiang, Shandong, and Zhejiang have all set goals for optimizing the agricultural structure in their “13th Five-Year Plan” planning recommendations. Among them, Heilongjiang Province will highlight the development of green and organic agricultural products and high-quality, high-efficiency crop cultivation, and develop contract farming.
The reporter has learned that “supply-side reform,” a concept proposed in resolving overcapacity in industry, will also be applied to agriculture this year.
“Similar to the industrial sector, China's agriculture also faces the problem of structural overcapacity. Specifically, inventories of agricultural products such as corn and cotton are too high, while soybeans, white sugar, and others rely excessively on imports. Capacity allocation is unreasonable, and the situation in which farmers increase production without increasing income frequently occurs.” a research report said.
In fact, the problem of structural overcapacity in domestic agricultural products should not be underestimated. Last year, due to overcapacity and a large backlog of inventories, market prices fell, and China's seven-year-old temporary corn storage price was also lowered for the first time to 1 yuan per jin. Vast numbers of corn growers faced the dilemma of a bumper year without a bumper harvest, and the impact even spread to downstream corn deep-processing enterprises, farmers, and other terminal links in the industrial chain.
Behind this problem, the first issue is that the corn planting structure urgently needs adjustment. At the National Planting Structure Adjustment Work Conference held on December 26 last year, Vice Minister of Agriculture Yu Xinrong specially instructed that the task of reducing corn planting in the “sickle bend” region by more than 10 million mu must be fully completed. He pointed out that the current development of the planting industry faces many difficulties and problems, and structural contradictions are more prominent.
After sorting through the “13th Five-Year Plan” planning recommendations of various regions, the reporter found that major agricultural provinces including Heilongjiang, Shandong, and Zhejiang have all set goals for optimizing the agricultural structure in their “13th Five-Year Plan” plans. Shandong Province proposed deepening agricultural structural adjustment and developing refined agriculture with high standards, deep integration, long chains, good quality, and new methods. Heilongjiang Province will also adhere to market orientation in the next five years, highlight the development of green and organic agricultural products and high-quality, high-efficiency crop cultivation, optimize the planting structure, and develop contract farming.
On the other hand, the structural supply problem also reflects the chronic problem that China's current agricultural product price mechanism is still imperfect. This Central Rural Work Conference proposed improving the price formation mechanism and purchase and storage policies for grain and other important agricultural products to provide impetus for structural reform of agriculture. The “Several Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting Price Mechanism Reform” issued last October already proposed improving the price formation mechanism for agricultural products. This includes continuing to implement and improve the minimum purchase price policy for rice and wheat, reforming and improving the corn purchase and storage system, and continuing to implement pilot reforms for target prices of cotton and soybeans.
An official from the Ministry of Agriculture told the reporter, “At present, China's spatial layout and policy system centered on agricultural production have basically taken shape, but there will still be relatively large changes in market circulation in the future. This is highly consistent with the requirement put forward at the 2013 Central Rural Work Conference to adhere to market orientation and consumer orientation in developing agriculture.”
In addition, to truly implement supply-side structural reform, it is also necessary to improve the quality and efficiency of the agricultural supply system, truly form an effective supply of agricultural products with a reasonable structure and strong safeguards, and attach great importance to reducing inventories, lowering costs, and strengthening weak areas. Xie Gang, an agriculture analyst at Zhongtai Securities, pointed out, “For the agricultural industry, the direction of future transformation is not large-scale operation and pure ‘high yield,’ but rather ‘reducing production costs and improving agricultural efficiency and competitiveness’ and ‘establishing the concepts of big agriculture and big food,’ integrating horizontally or vertically with industry-chain thinking to improve overall efficiency.”
Rural E-Commerce: Promoting the Integration of the Three Industries
Rural e-commerce has also been included by various regions as a key focus in “13th Five-Year Plan” planning recommendations. For example, Sichuan Province proposed maintaining an average annual growth rate of rural e-commerce transaction volume at above 30%, with total rural e-commerce transactions exceeding 100 billion yuan by 2017. The spring breeze of “Internet+” has also blown into the traditional agricultural sector.
In the second half of last year, the state issued three policy documents in succession to step up rural e-commerce, basically laying out the development approach for agricultural e-commerce. Various regions also included rural e-commerce as a key focus in “13th Five-Year Plan” planning recommendations. Against the background of the integration of rural primary, secondary, and tertiary industries, e-commerce can serve as a link coupling multiple parties, strengthening the application and promotion of internet technology in agricultural production, processing, circulation, and other links; in markets such as folk custom products and rural tourism, it can promote development guided by big data from e-commerce.
Hebei Province proposed that during the “13th Five-Year Plan” period it would vigorously develop “Internet + Agriculture,” cultivate new circulation formats with e-commerce as the main means, and achieve full coverage of rural e-commerce service stations. Sichuan Province proposed maintaining an average annual growth rate of rural e-commerce transaction volume at above 30%, with total rural e-commerce transactions exceeding 100 billion yuan by 2017.
At the same time, rural e-commerce will also drive the advancement of work to strengthen weak areas in rural areas. At the State Council executive meeting held on October 14 last year, Premier Li Keqiang proposed investing 140 billion yuan within five years to improve rural broadband telecommunications services, enabling broadband to cover 98% of administrative villages. The subsequently issued “Opinions” also involved improving the compensation mechanism for universal telecommunications services, rural information infrastructure construction, and broadband penetration. These will effectively strengthen rural public services and infrastructure, which are currently weak.
In addition, the rollout of applications of agricultural big data and Internet of Things technology will also promote the development of backward productive forces in rural areas and advance the process of agricultural modernization. Tianjin stated in its “13th Five-Year Plan” planning recommendations that it is necessary to promote the expansion of agricultural functions into the secondary and tertiary industries, advance the application of new-generation information technologies such as the Internet of Things and big data throughout the entire agricultural production process, and vigorously develop new formats such as cold-chain logistics. It is necessary to increase efforts to invigorate agriculture through science and technology, accelerate the development of modern seed industry and biological agriculture, and cultivate and strengthen high-tech agricultural industries.
Market participants predict that rural e-commerce and internet agriculture will become one of the key focuses of this year's Central No. 1 Document.
Agricultural Reclamation Reform: Group-Based Development
Agricultural reclamation groups in various regions have entered the fast lane of reform. Guangdong Province proposed deepening the comprehensive reform of supply and marketing cooperatives and advancing agricultural reclamation reform and development; Hainan Province incorporated the related work of transferring agricultural reclamation hospitals into overall planning. For a long time, the agricultural reclamation system, with large amounts of land resources and assets, has occupied a special “national team” position in the national agricultural development pattern. In the 2015 Central No. 1 Document, agricultural reclamation reform occupied an important section for the first time, and since then the pace of agricultural reclamation reform has accelerated.
On December 1 last year, the “Opinions of the Central Committee of the Communist Party of China and the State Council on Further Promoting the Reform and Development of Agricultural Reclamation” was officially issued, marking the official opening of the curtain on agricultural reclamation reform. Minister of Agriculture Han Changfu also emphasized at the recent National Agricultural Reclamation Work Conference that, with the grouping of reclamation areas and the corporatization of farms as the main line, efforts should be made to build a group of modern agricultural enterprise groups with international competitiveness.
“Agricultural reclamation reform mainly has two cores: one is the reform of the state-owned property rights system in reclamation areas, and the other is the reform of the management system of agricultural reclamation enterprises.” the analyst pointed out. Specific reform measures include advancing the grouping of reclamation areas, transforming systems and mechanisms as a whole, and building large modern agricultural enterprise groups; reforming the social functions undertaken by state-owned farms and adhering to the reform direction of separating social functions from enterprises; innovating the agricultural management system and actively promoting various forms of appropriately scaled agricultural operations; building a new labor and employment system; improving the social security mechanism; improving the state-owned asset supervision system; improving the state-owned asset supervision system; and innovating land management methods.
Under the guidance of major national policies, agricultural reclamation groups in various regions have also entered the fast lane of reform. Guangdong Province proposed in its “13th Five-Year Plan” planning recommendations that it would deepen the comprehensive reform of supply and marketing cooperatives and advance agricultural reclamation reform and development. Hainan Province held a special meeting in November last year to incorporate the related work of transferring agricultural reclamation hospitals into the overall planning of Hainan Province's “13th Five-Year Plan” medical and health service system. On December 29 last year, Hainan Agricultural Reclamation Investment Holding Group Co., Ltd. was established in Haikou. The company was formed on the basis of the Hainan Provincial Agricultural Reclamation Bureau and Hainan Provincial Agricultural Reclamation Group Co., Ltd. as a wholly state-owned enterprise directly under the provincial government, marking a fundamental transformation of Hainan agricultural reclamation's systems and mechanisms.
Last year, China's agricultural reclamation achieved a gross domestic product of 701.1 billion yuan, and total grain output in agricultural reclamation reached 72.7 billion jin, an increase of 21.2% over 2010. The comprehensive mechanization level of agriculture reached 87.4%, 26 percentage points higher than the national average. The industry generally believes that the land circulation and enterprise restructuring involved in agricultural reclamation reform will further revitalize agricultural reclamation enterprise assets and various factors, release huge reform dividends during the “13th Five-Year Plan” period, and increase agricultural added value.