Agricultural supply-side structural reform: who will carry it out? What will be reformed? How will it be reformed?
This supply-side structural reform focuses on innovation in the institutions and mechanisms of the agricultural sector
The 2016 No. 1 Central Document put forward the strategic concept of "advancing agricultural supply-side structural reform," which deepens the policy thinking of "advancing agricultural structural adjustment" proposed in the 2015 No. 1 Central Document. Unlike the "strategic adjustment of agricultural structure" proposed by the Central Committee in 1998, this supply-side structural reform focuses on innovation in the institutions and mechanisms of the agricultural sector and is a new revolution in the agricultural field. Specifically, three major issues need to be addressed: first, who will carry it out; second, what will be reformed; and third, how it will be reformed.
Who will carry it out
Who will carry it out is the foremost issue of supply-side structural reform. China is a major agricultural country with nearly 200 million farming households, with an average of less than 1 hectare of land per household, divided into about 4 plots, and household operations show a high degree of part-time farming. Such part-time smallholders can hardly shoulder the heavy task of building modern agriculture and advancing supply-side structural reform. From the supply perspective, the notable characteristic of ultra-small-scale farming households is the convergence of industrial structure within the same region, and the "cobweb" feature of agricultural product supply is very obvious - rushing in together and rushing out together - causing the phenomenon of cheap grain hurting farmers to appear periodically. Not only is it difficult for farmers' incomes to rise sustainably, but the foundation for modern agricultural development has also remained very fragile, unable to withstand either relatively large natural risks or relatively large market risks.
In recent years, the frequent difficulties in selling perishable agricultural products such as vegetables and fruits across the country are essentially the result of operating entities failing to adapt to market laws. Although more than 1.5 million farmers' professional cooperatives have been registered nationwide, the average number of members per cooperative is only less than 70, and the vast majority can only do some work in providing information and technology extension, unable to influence even the local market, let alone the regional market or the national market. The problems faced by a single cooperative are in fact the collection of problems faced by small-scale farming households. As of the end of 2015, the area of contracted cultivated land transferred nationwide was 447 million mu, accounting for 33.3%. On this basis, there were more than 4.3 million specialized large-scale farmers and family farms with operating areas of more than 50 mu, but the scale of a single farm is still on the small side. In fact, the aforementioned difficulties in selling agricultural products appeared against the background of a certain level of development of new-type agricultural operating entities.
Therefore, the foremost task of agricultural supply-side structural reform is to achieve the reconstruction of new-type operating entities, making them the leading force in advancing agricultural supply-side structural reform and improving agricultural competitiveness. Specifically, there are mainly three major issues that urgently need to be resolved. First, accelerate the pace of rural land system reform and advance the development of new-type operating entities. The land system is the foundation of the rural institutional system; almost every institution is derived from the land system, and rural reform also began with the land system. At present, to continue advancing rural land system reform, the first thing is to do a good job in the "confirmation of rights, issuance of certificates, and registration" of farmers' contracted land, so that farmers know precisely how much land they have contracted. This is the basis for realizing the usufructuary right of farmers' contracted management rights granted by the Property Law, and also the basis for realizing the requirement put forward at the Third Plenary Session of the 17th CPC Central Committee to "give farmers more fully guaranteed land contractual management rights, and the existing land contractual relationship must remain stable and unchanged for a long time." Only when contracted management rights are precise and stable can the management rights within them be transferred stably, can land transfer be stabilized and long-term, and can all kinds of new-type operating entities develop stably on this basis. Second, the union of family farms. As of the end of 2015, the total area of transferred land nationwide was 447 million mu, of which 262 million mu flowed to farming households, accounting for 58.6%. Calculated on the basis of 4.3 million specialized large-scale farmers and family farms, each averages 609 mu, generally between 200-300 mu, and it is impossible for a single household to face the market alone, so union and cooperation are still needed. In reality, jointly establishing, leading, or joining farmers' professional cooperatives by family farms are all feasible paths. In fact, most cooperatives are led by specialized large-scale farmers, and cases of family farms joining together to establish cooperatives have already appeared in Shandong, Anhui and other places, illustrating that even large-scale farmers have the possibility and urgency of joining forces to venture into the market. Therefore, relevant departments must adapt to this trend in policy-making, not only supporting the development of specialized large-scale farmers and family farms, but also advancing union and cooperation among them. Third, actively promote the development of federations of farmers' professional cooperatives. At present, more than ten provinces across the country have issued relevant policies and regulations to promote the development of federations of farmers' professional cooperatives, mostly allowing other market entities besides cooperatives (such as enterprises) to join, thereby making it possible to develop a modern agricultural complex in which family farms and large-scale farmers do the operating, cooperatives do the servicing, and enterprises do the marketing, which is conducive to improving agricultural competitiveness.
What will be reformed
First, strengthen weak links. On the road from a major agricultural country to an agricultural powerhouse, China has many weak links to strengthen, among which the most urgent is the construction of a new-type agricultural socialized service system. The Third Plenary Session of the 17th CPC Central Committee pointed out: "Accelerate the construction of a new-type agricultural socialized service system that relies on public service institutions, takes cooperative economic organizations as the foundation, takes leading enterprises as the backbone, and takes other social forces as supplements, combines public-benefit services and commercial services, and coordinates specialized services and comprehensive services." This is the basic direction for building the agricultural socialized service system in the new period. Specifically, there are three major aspects. In terms of institutional development: in accordance with the requirements of the Third Plenary Session of the 17th CPC Central Committee, a basic institutional framework should be formed in agricultural technology extension services, agricultural production socialized services, rural commodity circulation services, rural financial services, rural information services, and agricultural product quality and safety services, forming a long-term mechanism for serving agriculture.
In terms of entity development: first, strengthen the capacity building of agricultural public services, generally improve public service institutions for practical agricultural technology extension and animal and plant disease prevention and control at the township or regional level nationwide, and gradually establish village-level agricultural service stations. Among them, the reform of county-level agricultural technology extension institutions is one of the key points in establishing a new-type agricultural socialized service system. The services of such institutions should generally be free and are public-benefit services. Second, support farmers' professional cooperatives, agricultural specialized service organizations, farmers' professional technical associations, farmer brokers, leading enterprises and other market-oriented entities in providing various forms of agricultural production and operation services. The services of such institutions are generally charged and are commercial services (except where cooperatives and associations serve their members). Third, promote the integration of industry, academia and research and the combination of agriculture, science and education, and support institutions of higher learning, research institutes, farmers' professional cooperatives, leading enterprises and farming households in carrying out various forms of technical cooperation. Finally, the reform of supply and marketing cooperatives at all levels must, in accordance with the requirements of Central Document No. 11, serve agriculture, work for agriculture, and bear the name of agriculture, connect public-benefit service institutions and commercial service institutions, and continuously explore new models of serving agriculture, such as land trusteeship, so as to become, through reform, the main force and national team of agricultural socialized services. In terms of market development: mainly market order and market system development, advancing the modernization of rural circulation, developing modern circulation methods for agricultural products, and providing an excellent market environment for the development of agricultural socialized service entities.
Second, reduce inventory. At present, China's agricultural product inventories are mainly in corn, rice and so on, among which corn inventories in the Northeast region may reach one year's output, and some lower-quality rice in the South has also entered inventory. Excessive inventory means, on the one hand, the state must spend huge storage costs; on the other hand, the longer grain is kept in storage, the more new grain becomes old grain and then aged grain, with ever-lower value, which is also a huge waste of the grain itself. To reduce inventory, first, the fiscal costs of grain purchasing and storage should be turned from hidden losses into explicit losses, and the grain in inventory should be digested within a time limit through channels such as feed and fuel alcohol. Apart from enterprise inventories and other private inventories, the state's grain inventory quantity should be calculated on the basis of the 17%-18% of annual consumption recommended by the UN Food and Agriculture Organization for a country or region, plus the flexibility China has as a populous country, and under normal circumstances should not exceed this quantity. Second, focus on advancing the reform of the grain circulation system. At present, the corn circulation policy is being reformed on the basis of the former temporary purchase and storage policy, the key point being to change from in-price subsidies to out-of-price subsidies, with prices following the market. There is no problem with the general direction of marketization, but the key is how to protect the interests of grain farmers, which is the key to whether the reform can succeed. On the basis of the successful corn price reform, the reform of the minimum purchase price system for wheat and rice should be advanced in an orderly manner. The overall goal of the reform is to improve the market competitiveness of the grain industry on the basis of ensuring supply.