Obstacles Remain to Increasing Farmers' Incomes, No. 1 Document Focuses on Agricultural Supply Side
The 2016 Central No. 1 Document will once again focus on the “three rural issues” (agriculture, rural areas and farmers), and the relevant content has begun to emerge.
According to an expert close to the Ministry of Agriculture, the proposed title of the 2016 Central No. 1 Document is "Several Opinions of the Central Committee of the Communist Party of China and the State Council on Implementing the New Development Concept, Accelerating Agricultural Modernization and Achieving the Goal of Building a Moderately Prosperous Society in All Respects" (hereinafter referred to as the "Opinions"). After further revision and improvement, according to convention, it is expected to be promulgated at the end of January or the beginning of February.
Consistent with the central government's goal of advancing supply-side reform, the "Opinions" stress the need to focus on strengthening agricultural supply-side reform. The basic requirement is to improve the effective supply of agricultural products such as grain. The so-called “effective supply” means that in terms of the sufficient quantity, variety and quality of agricultural product supply, it must match the overall needs of society and the demands of consumers. In plain terms, the more agricultural products produced, the better is not always the case; for example, the oversupply that has become prominent in the domestic corn market this year, with seriously excessive state reserves, and corn produced by farmers that cannot be sold, represents a waste and a loss both for the state and for farmers.
“Effective supply” also includes reducing agricultural production costs and improving agricultural efficiency and competitiveness. “Reducing” mainly refers to controlling the total amount of agricultural water use and reducing the use of chemical fertilizers and pesticides, while “improving” refers to raising the scientific and technological content of agriculture and raising farmers' incomes from growing grain and working the land.
The aforementioned expert close to the Ministry of Agriculture summarized agricultural supply-side reform in just 9 words——de-stocking, reducing costs, and shoring up weaknesses. In terms of “shoring up weaknesses,” a very important item is how to make rural areas develop as quickly as possible and farmers become prosperous, so that the goal of building a moderately prosperous society in all respects during the “13th Five-Year Plan” period will not fall through.
Agricultural Supply Side
The Central Rural Work Conference, which concluded on December 25 last year, had an important segment, namely the discussion of the draft of the above-mentioned "Opinions."
According to the aforementioned expert close to the Ministry of Agriculture, in the discussion draft, the most closely watched point was the proposal to “focus on strengthening supply-side structural reform in agriculture,” which is in the same vein as the central leadership's earlier emphasis on strengthening supply-side structural reform.
Niu Li, director of the Macroeconomic Research Office of the Economic Forecasting Department of the State Information Center, Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, and Zheng Fengtian, vice dean of the School of Agricultural Economics and Rural Development at Renmin University of China, and other experts have further analyzed agricultural supply-side reform. A number of “three rural issues” experts agree that, basically, the agricultural supply-side reform to be advanced next is “de-stocking, reducing costs, and shoring up weaknesses.”
Niu Li's analysis is that on the supply side, the basic bottom line of agricultural structural reform is to safeguard national food security. In terms of quantity, China has already achieved “basic self-sufficiency in grains and absolute security of staple foods”; in terms of quality, China's abundance of high-end agricultural products clearly still cannot meet demand. At the same time, with environmental problems and food safety problems such as pesticide residues, water source pollution and excessive heavy metals in soil, the government should in the future step up reform in the “three rural issues” field, work on improving the supply of high-quality agricultural products, and ultimately turn agriculture into a genuinely profitable industry.
Both Li Guoxiang and Zheng Fengtian mentioned the difficulty of selling grain that appeared this year in major grain-producing areas such as Henan and the Northeast, and suggested that the price formation mechanism and purchase and storage policies for grain and other important agricultural products should be improved as soon as possible. Li Guoxiang believes that China's agricultural products currently lack price competitiveness, mainly because agricultural production costs are too high and the comparative returns of agriculture are on the low side. To solve these problems, it is necessary to guide land shareholding cooperatives so that farmers can participate in dividends in the form of shareholding, and furthermore to promote agricultural mechanization, transform the agricultural development model, improve the efficiency of pesticide and fertilizer use, and truly reduce agricultural production costs.
The aforementioned expert close to the Ministry of Agriculture said that relevant departments now have a basically clear reform approach in the three areas of “de-stocking, reducing costs, and shoring up weaknesses.” Simply put, de-stocking means accelerating the digestion of excessively large state reserves of agricultural products and accelerating the processing and conversion of grain; reducing costs means reducing production costs and improving agricultural efficiency and competitiveness through developing appropriately scaled operations, reducing unreasonable use of chemical fertilizers and pesticides, and carrying out socialized services; and shoring up weaknesses means strengthening weak links in agricultural supply such as agricultural infrastructure and increasing the production of agricultural products in short supply on the market.
According to Pan Wenbo, deputy director of the Planting Industry Management Department of the Ministry of Agriculture, in November last year, the overall approach for advancing a new round of agricultural adjustment is already clear. Next, the Ministry of Agriculture will, in accordance with the national food security strategy under the new situation and the strategies of “storing grain in the land” and “storing grain in technology,” adhere to “market orientation, science and technology as the guide, and ecological protection as the priority,” enhance production capacity, and form an agricultural development pattern of coordinated grain, economic crop and feed production, integration of agriculture, forestry, animal husbandry and fisheries, integration of planting, breeding and processing, and integration of the primary, secondary and tertiary industries.
Regarding the supply of major agricultural products such as grain, cotton and oil, Pan Wenbo's statement is that the self-sufficiency rate of the two major staple foods, rice and wheat, is hoped to be maintained at 100%, the grain self-sufficiency rate at above 95%, and for cotton, oil and sugar, the self-sufficiency rate of cotton should basically satisfy domestic consumption. The specific requirement for edible oil is that the self-sufficiency rate should be stabilized at above 30%.
The aforementioned expert close to the Ministry of Agriculture added that in the agricultural supply-side reform to be advanced next, the central government also proposed for the first time the idea of fostering a grand agriculture and grand food perspective. For grain production and “food security,” it is no longer a one-sided, single-minded emphasis on output and quantity, but rather a shift from the past focus on output growth and quantity growth to placing equal emphasis on quantity, quality and efficiency. This greatly expands the connotation of “food security,” and this shift can also be said to be revolutionary in nature.
Moderately Prosperous Society in All Respects
2016 is the opening year of the “13th Five-Year Plan.” While emphasizing agricultural supply-side reform, the "Opinions" also propose increasing farmers' incomes through multiple channels, so as to push forward the goal of building a moderately prosperous society in all respects during the “13th Five-Year Plan” period.
According to data released by the National Bureau of Statistics, Chinese farmers' incomes have now maintained growth for 6 consecutive years, and the growth rate is also higher than that of urban residents' incomes, meaning that the income gap between urban and rural residents is gradually narrowing. But even with such data support, there are still some experts concerned with the “three rural issues” who believe that farmers' incomes are rising too slowly, that state subsidies for agriculture are too small, and that social security support for migrant workers and rural elderly people is still too weak.
Not long ago, Song Xiaowu, vice president of the China Society for Economic Reform, publicly stated that although the urban-rural income gap has narrowed slightly in recent years, it is not that farmers' farming income has truly increased, but rather that migrant workers' earnings in cities account for 40% of their total income. From the current perspective, internationally there is still “not a single country that counts money paid out by secondary and tertiary industry enterprises as farmers' income; only in China, under the special background of urban-rural division, is it counted as farmers' income.”
Song Xiaowu also stated that the group worst covered by the social security system at present is migrant workers. Some experts now also suggest establishing a separate social security system for migrant workers. He believes that to solve the problem of poor social security coverage for migrant workers, the answer is not to establish a separate social security system, but to help them become urban residents as soon as possible, integrate into cities, and enjoy the same social security and wage treatment as urban employees. In terms of equalizing basic public services in cities, migrant workers and their children are also excluded, and this also needs to attract the attention of relevant departments and be resolved as soon as possible.
Gao Shangquan, president of the China Society for Economic Reform, also pays attention to the issue of farmers' incomes. At the China Reform Annual Conference held on November 28-29, 2015, he said that if rural areas cannot develop and farmers cannot become prosperous, the goal of building a moderately prosperous society in all respects during the “13th Five-Year Plan” period will fall through.
Gao Shangquan believes that an important reason for the long-term lag in rural development is that farmers' contracted land, homestead land and collectively operated land are difficult to turn into capital, and farmers find it difficult to obtain property income. Through reforms such as the land system, it should be possible to “let farmers' pockets bulge in a lawful way, so that farmers can live a moderately prosperous life.”
Regarding the institutional obstacles in many respects that still affect farmers' ability to increase their incomes, the aforementioned expert close to the Ministry of Agriculture analyzed and stated that this Central Rural Work Conference mentioned the need to “increase farmers' incomes through multiple channels,” and the "Opinions" also make further arrangements and deployments in this regard. In recent years, the central government has consistently encouraged social capital to invest in agricultural industries, hoping thereby to accelerate the development of large-scale agricultural operations, promote agricultural industrialization, and thus provide more safeguards for raising farmers' incomes from growing grain and working the land.
Next, the relevant parties will continue to promote the participation of social capital in industrialized agricultural operations. At the same time, they will gradually introduce social capital into rural network infrastructure construction and promote the development of rural e-commerce. It is expected that through these means, the costs of agricultural production will be greatly and effectively reduced, thereby providing more and more effective safeguards for raising farmers' incomes.