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The Historical Transformation of China's Agriculture: Productivity

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The Historical Transformation of China's Agriculture: Productivity The Historical Transformation of China’s Agriculture: Productivity Changes and Other Key Features Liu Shouying, Wang Ruimin, Shi Guang, Shao Ting1 Abstract With the transition from rural China to the urban-rural China, the agriculture in China has experienced the millennium transformation. According to the analysis of sampled data from the National Bureau of Statistics conducted on 70,000 peasant households, agricultural labour productivity, which has been experiencing a long-term stagnation or even a decline, has been eventually increasing at a faster rate than land productivity after 2003. It also reveals the heterogenization of small farmers, the transformation of agricultural inputs from an excessive manual labour to a gradual growth in farm machinery, the expansion of scale of land management, the development of the rural land leasing market and the diversification of the agricultural management entities. Review of the historical transformation of agriculture helps to recognize the declining importance of agricultural land, the direction of the agricultural technological change, the path and the disposition of the agricultural system change and the adjustment of China’ rural policies. Key words: agricultural development model, changes in agricultural productivity, historical transformation of agriculture, JEL codes: N55,O13,Q15 I. The Issue For the long traditional rural society in China, the increasingly tense relationship between man and land is the main factor affecting peasants’ livelihood and economic transformation. With the rapid growth of the population, the slow development of the industrial and commercial sectors can hardly function as a pipeline to absorb the redundant rural workforce. A large amount of labour has been stranded for a long time in the agricultural sector. With the potential depletion of land reclamation and the constant decline of the ratio between man and land, the improvement in the land use frequency (Boserup, 2015) and land yield has become the basis of the traditional model of agricultural development (Chayanov, 19962). According to the empirical evidence provided by Perkins (1984), at least half of the grain output growth over six centuries (1368-1968) in China is attributed to the expansion of cultivated land, while the other half is due to the increase of yield per unit area. The continuously increased demographic pressure on the land has led to the emergence of Chinese agriculture with “growth but without development” (Huang, Philip C., 1992). In circumstances 1 Liu Shouying, Professor, School of Economics, Renmin Universitiy of China, Email:[email protected];Wang Ruimin, Research Associate, Institute of Economic Research, Chinese Academy of Macroeconomic Research,Email:[email protected];Shiguang, Associate Research Fellow, Development Research Center of the State Council,Email:[email protected];Shaoting, Associate Research Fellow, Development Research Center of the State Council,Email:[email protected]. The authors acknowledge the financial support of the Foundation of Ministry of Education of the People’s Republic of China (Grant No.16JZD024). 1 where agricultural labour productivity suffers stagnation or even decrease, we have no choice but to rely on a relatively effective division of labour in agriculture, to increase more intensive labour input so that the growth of total agricultural output can be achieved. Since the founding of P.R. China, the Communist Party has marched on this ancient rural society towards the process of industrialization. Based on the strategy of prior development of the heavy industry, to comply with the capital accumulation demand, it is necessary to artificially lower the prices of certain factors such as agricultural products to secure its supply (Lin et al., 1999). The monopolized purchase system for agricultural products, the people’s commune system for the production of collective organizations and the household registration system of farmers trapped in the collective land all worked as a systematic institutional structure towards the national development strategy. In the context of the institutional inefficiencies and the continuing deterioration of the land-man ratio, grain production growth was mainly supported by increasing land productivity. Firstly, intensively make use of chemical fertilizers and pesticides to increase the agricultural yield. Secondly, increase the multiple cropping index to improve land use efficiency. Between 1952 and 1978, the total grain output grew for about 86 percent, with an average annual growth rate of approximately 2.5 percent. The increase in grain yield mainly benefited from the growth in grain yield per unit area, which was around 90 percent, with an average annual growth of 2.8percent. The increase in grain yield per unit area made China’s grain production grow faster than population growth rate (1.9 percent). Unfortunately, the state-led transition has excluded farmers from the process of industrialization and urbanization. From 1952 to 1978, the land-man ratio in rural areas has dropped from 3.23 mu per capita to 1.89 mu3. The relationship between man and land in agriculture has further deteriorated and the agricultural labour productivity has fallen into stagnation. The real output per capita of the entire economy increased by 82 percent, the labour productivity improved by 58 percent, while an average decline of 0.2 percent showed in agricultural sector. The fall in the total factor productivity was even more serious. The incorrect development strategy, the inefficient agricultural system, and the tight attachment of farmers to the land have led to the transformation of agricultural China lagging behind the overall economic transformation. In the last century from late 1970s to mid 1990s, rural China has experienced a huge institutional and structural change. Firstly, the implementation of the household contract responsibility system greatly stimulated farmers’ enthusiasm and promoted the growth of agriculture. Between 1979 and 1984, the agricultural growth rate in China reached 7 percent. The rural reform generated a large amount of recessive surplus labour force. At the same time, the township and village enterprises set up in the collective land attracted a great deal of the surplus rural workforce. From 1985 to 1995, the township and village enterprises absorbed nearly 100 million of the rural labour force4. Based on the rural industrialization, the division of labour within the countryside has been brought into being. But farmers didn’t leave the village while they left the land, the rural transformation in China has not been thoroughly started. 2 Since the end of last century, with the impact of high-speed industrialization and urbanization tide, Chinese peasants were dragged into the torrent of trans-regional flow. The door between the urban and the rural was open. A large amount of rural population left their homelands and flooded into the cities. The annual migrant population from rural to urban areas was more than 15 million people (Tao and Wang, 2015). China suffered a major transformation from “rural China” to “urban-rural China” (Zhou, 2014). Under the pattern of a urban-rural China where “half are in cities and the other half are in rural areas,” the traditional model of agricultural development experienced a historical change. The relative price of agricultural factors changed dramatically. Chinese farmers, who had relied on high labour inputs to raise land yields per unit, begun to change their inputs structure, by significantly reducing the labour input and increasing machinery and capital investment in agricultural production. The agricultural development mode underwent historical changes from a traditional model of intensive labour inputs to improve land productivity to a modern agricultural development model mainly based on labour productivity. Based on sampled data collected from 70,000 peasant households by National Bureau of Statistics (NBS), this paper will analyse the key features of the agricultural transformation in China under the pattern of “urban-rural China”. The paper primarily focused on the changes of agricultural productivity from land productivity to labour productivity. Among the key features of historical transformation of agriculture, we will concentrate on the peasant household differentiation, agricultural inputs replacement and changes in the farm size and farmland lease market. In conclusion, we will give the policy implications of the agricultural transformation. II. Changes of Agricultural Productivity The transformation of agricultural China can be measured by many indicators such as the agricultural GDP, the amount of agricultural labour absorption, etc. But changes in labour productivity still symbolizes the transition from traditional agriculture to modern agriculture. It is the change in agricultural labour productivity which reflects the influence of relative price changes of agricultural productive factors and indicates the dividing line between different agricultural development models. 1. Productivity Based on Macro Agricultural Data From the macro agricultural data released by NBS of China, we can intuitively see that after 2000 the growth rate of agricultural labour productivity in China has been significantly higher than that of land productivity (see Figure 1 and 2). The most obvious change is that the growth of labour and land productivity began to diverge in 2003. Since then, the increase of agricultural labour productivity has approximately
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