China's Economy in Transition: From External to Internal Rebalancing
Easing the transition to More Open Economy: China's Agricultural and Rural Policy
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Transcript of Easing the transition to More Open Economy: China's Agricultural and Rural Policy
Easing the transition to More Open Easing the transition to More Open
Economy:Economy:
China's Agricultural and Rural China's Agricultural and Rural
PolicyPolicy
Jikun Huang
Center for Chinese Agricultural PolicyChinese Academy of Sciences
Growth of GDP and Ag GDP (%)
0
1
2
3
4
5
6
7
8
9
10
1979-84 1985-95 1996-00
GDP AgGDP
Per capita rural real income
0
500
1000
1500
2000
2500
1980 1985 1990 1995 2001
Number of population under poverty in China, 1978-2001
(million)
0
50
100
150
200
250
300
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Poverty
Rural poverty incidence in China, 1978-2001(%)
0
5
10
15
20
25
30
35
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
I nci dence (%)
Shares of agricultural and non-agricultural GDP in China, 1970-2001
40
30 27
15
0
10
20
30
40
50
60
70
80
90
1970 1980 1990 2001
Agri cul ture I nd/ Servi ce
Share of non-agri employment of rural labor, 1981-2000 (source: CCAP)
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
Full timeFull time + seasonal
Full time + seasonal + part time
Source (%) of farmer’s income
0
10
20
30
40
50
60
70
80
90
Agri cul ture Non-Agri cul ture
Anti-Poverty Programs
• During 1984-1996: US$ 1-1.5 billion annually
• 1998: US$ 2 billion
• 2000: exceeded US$ 3 billion
• Poverty loans (52%), grants (17%) & FFW (26%) and other (5%).
Challenges:Gini coefficient in rural China, 1980-2000
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
1980 1985 1990 1995 2000
Per capita income in ruralBottom 10%:180%; Top 10%:407%
-500
500
1500
2500
3500
4500
5500
6500
7500
1980 1985 1990 1995 2001
Botton 10% Top 10%
Farmers : full time farming %
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Bottom 10% Low-middle High-middle Top 10%
Human capital or education is key for farmers to access to non-agricultural employment
Major policies affecting non-agricultural income growth
• Rural enterprise development:– Promoting “TVE” development in 1980s
• Credit and finance provided by local townships/ villages• Granted local land and low wage of rural labor
– Promoting private enterprise development in 1990s• Rural infrastructure development since late 1980s• Privatizing rural TVEs since middle 1990s• Promoting rural small town development since late 1990s
• Urban economic reform:• Reforming SOE in urban since early 1990s• Releasing migration constraints since middle 1990s
• External economy:– Attracting FDI and trade liberalization
• Pro-poor interventions• Agricultural development policies
Agri diversification -- output shares (%)
0
10
20
30
40
50
60
70
80
1978 1980 1985 1990 1995 2000
Crop
Li vestock
Fi shery
Output, input and TFP indexes: Rice (1979=100)
40
60
80
100
120
140
160
180
200
Output
Input
TFP
Major agricultural development policies
Institutional reform: land (in early 1980s) Allocated land equally to all households in the villages Land use right: 15 years in 1980-95 and 30 years in 1995-2025 After 2025: can be extended forever …
Irrigation improvement
Agricultural technology
Market reform since the late 1980s
Trade liberalization
Government rice procurement as total production
0
5
10
15
20
25
30
35
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Quota%
Rice price ratios: procurement vs market prices
0
0.2
0.4
0.6
0.8
1
1.2
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
P(Quota)/P(Market)
Implicit tax of grain (rice, wheat, maize) marketing (government procurement)
-10
0
10
20
30
40
50
60
70
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Billion yuan in 2000 price
Number of rural free market (10,000)
3. 3
4. 1
6. 1
7. 3
8. 3
9. 2
0
1
2
3
4
5
6
7
8
9
10
1978 1980 1985 1990 1995 2000
Agri commodities traded in free market (%)
8. 0 11. 016. 4
26. 1
56. 2
85
0102030405060708090
1978 1980 1985 1990 1995 2002
%
Dalian
Guangzhou (Shekou Port)
Maize price
Dalian
Fujian
Integration in Northeast China’s Markets(percent of markets that have integrated price series)
1991-92 1997-00 2001-2003
Corn 46 93 100
Soybean 56 95 95
WTO commitments: Market access
Tariff 2001 2004 Simple mean:
China: 21 % 17% Developing countries 20-50%
Trade weighted: China: 13 % SE Asia 16% Japan & Korea 53% Other Asian countries 24% EU 20%
China’s tariff: one of the lowest in the world
China’s agriculture:Tariff rate (%): 1992-2001 2004
0
5
10
15
20
25
30
35
40
45
1992 1998 2001 2004
Liberalization: Continuous of past trend, not just starting
China’s Agriculture:Nominal Protection Rates (NPR,%)
-20
0
20
40
60
80
100
78-79 80-84 85-89 90-94 95-97 98-99 2001
Rice Wheat Maize
Policy distortions: declining significantly overtime
NPRs (%):Soybean, rapeseed, sugar, and cotton in 2001
0
5
10
15
20
25
30
35
40
Soybean Rapeseed Sugar Cotton
NPRs (%):Japonica rice, Vegetable, Fruits and Meats in 2001
-30
-25
-20
-15
-10
-5
0
Japonicarice
Vegetable Fruits Beef Pork Chickenleg
Chickenbreasts
-8000
-6000
-4000
-2000
0
2000
4000
6000
85 86 87 88 89 90 91 92 93 94 95 96 97
Land i ntensi ve Labor i ntensi ve
Agricultural Trade Balance (million US$)
Concluding Remarks
Productivity growth resulted from R&D investment is essential for the agriculture to be competitive and a precondition for a successful economic transition
Agricultural diversification contributes to farmers’ income, healthy diversification needs substantial domestic market reform
Agricultural growth is important for farmers’ income growth, but substantial growth has to come from non-agri sectors
Concluding Remarks
Non-agri development needs significant public investment in rural infrastructure and education and government’s industrialization policies (i.e., migration/finance) in both rural and urban areas
Trade liberalization and FDI can facilitate the growth of and structural changes in economy
Growth is essential for poverty alleviation, but poverty alleviation and narrowing income disparity require more pro-poor interventions A challenge that China is facing