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Home , Agriculture in China

China’s : Achievements and Challenges Colin A. Carter

market economy, and the results have starve the world, instead has been nothing short of phenomenal. been able to balance its domestic Persistent high food prices have supply and demand, with the excep- drawn renewed attention to the role Achievements tion of oilseeds. China’s agriculture of China in world food markets. Today, China produces 18% of the has made notable achievements in the There is concern that China will be last three decades. Will this continue? unable to keep expanding its food world’s cereal , 29% of the supply to meet growing demand for world’s meat, and 50% of the world’s After joining the WTO in 2001, meat, becoming more dependent . This success makes China has played a greater role in world on world food markets and driving China the world’s largest agricultural agricultural trade. China dramatically prices even higher. This article economy, and it ranks as the larg- increased its trade dependence in agri- reviews achievements made by est global producer of pork, , culture, and it is currently the fifth larg- China’s agriculture and highlights key , , , and fish. In fact, the est exporter and fourth largest importer challenges faced by that country in value of China’s agricultural output is of agricultural products in the world. agriculture. twice the U.S. total. See Figure 1 for China’s substantial increase in fruit and China’s share of world food produc- production was a major factor tion across various commodities. behind its agricultural export growth. With only 9% of the global sown With imports growing faster than area, today China produces about 20% exports during the post-WTO acces- of the world’s food—a miraculous turn- sion years, China reversed its long-time t has been over 30 years since around since the struggles faced by Chi- status as a net agricultural export- China abandoned its large com- na’s agriculture in the 1960s and 1970s ing country to that of a net importing Imunal farms. Each “farm” had under the collective farms. Despite country since 2004. As expected, with thousands of workers, assigned to predictions that China was going to liberalized trade and market forces at production brigades. The communes were run by inefficient and corrupt Figure 1. China’s Share of World Food Production top-down management, and state Pork monopolies procured farm production at fixed prices. The communal farm- ing system was a complete disaster, Eggs underscored by the 1959–61 famine Fruits&Veg when an estimated 30 million Chinese Cotton residents starved to death. The com- Rice munes were broken up in the late 1970s Wheat in favor of small, family-run plots Corn with profit incentives tied to produc- Chicken tion and market-determined prices. Beef The economic reforms that started in China’s agricultural sector in the late 1970s then spread to other parts of Milk the economy and we all know the rest of the story. China has enjoyed very Population strong income growth and has emerged Cultivated Land as a main driver of global economic 0 10 20 30 40 50 growth. moved China Percent from a top-down planned economy to a Source: Compiled from Food and Agriculture Organization (FAO) data.

Giannini Foundation of Agricultural Economics • University of California 5 Challenges Let us not forget that China remains a . In China 36% of the population still lives on less than $2 per day and most of these poor are in the countryside. Even though economic reform started in agriculture, non- agricultural economic growth has left the farm population to fall behind. The image we have of the new affluent Chi- nese consumers buying Gucci hand- bags in modern boutique shops does not apply to the nation’s farmers. Chi- na’s farms remain very small (approxi- mately 1 acre) and the work remains highly labor-intensive and difficult. Almost 300 million workers remain in agriculture, and most farmers remain Grain production in 2010 was 80% above the 1978 level in China, but the farms very poor, with per capita incomes remain very small and the work remains highly labor-intensive and difficult. about $1,000/yr—less than one-third work, China increased its imports of to their crops to try and overcome the of the average urban income. The pro- land-intensive agricultural products. limitations of scarce land and water. portion of agriculture in China’s GDP Most of the increased imports came In the 1980s and 1990s agricul- dropped from 28.1% in 1978 to 11.8% from soybeans and cotton. Today tural production in China grew by in 2010. Yet 38% of the labor force cotton and soybeans account for 43% of 5.3% per year, much higher than in remains in agriculture (see Figure 2), a China’s agricultural imports, a very con- other populous countries such as India ratio that is far too high given China’s centrated portfolio. China is the world’s and Indonesia. Most of this growth level of development. As a result, labor largest importer of soybeans and cotton, came through yield gains rather than productivity in agriculture remains low. accounting for 60% of global through increases in planted area. Raising farmers’ incomes is one imports and 40% of cotton imports. China boosted grain production by of the major policy challenges facing China’s agriculture is supporting a more than 50% during this time period. China’s policy makers today. This population of over 1.3 billion people Grain production in 2010 was 80% may require relaxing a long-standing today, compared to about 500 million above the 1978 level. Per capita food policy goal of food self-sufficiency. in 1950, on a relatively fixed agricul- supply in China rose from 2,328 calo- National goals require tural land base and shrinking water ries per day in 1980 to 3,029 calories in a very high grain self-sufficiency supply. The tale of China’s agricultural 2000, a 30% increase in just 20 years. percentage, and farmers typically success in meeting this challenge is China’s chemical use has earn less money growing grain com- two-fold. First, China has enjoyed very roughly doubled over the past two pared to other higher-valued crops. strong agricultural productivity growth, decades while pesticide use and mecha- Between 1981 and 2005, the percent- measured as the difference between nized inputs have increased even faster. age of people living below the poverty growth of agricultural output and the China has slightly less agricultural land line dropped from 84% to 16.3%. This growth of all inputs aggregated. Second, than the United States, but its chemi- was part of the success story. But the China has poured on farm inputs. cal fertilizer use is now double that of challenge is that China’s Gini coefficient China’s annual agricultural productiv- the United States. China uses about (a measure of income inequality) grew ity growth rate was 2.5% from 1970– one-third of the world’s nitrogen fertil- from 29 in 1990 to 42 in 2007, reflect- 2007, even higher than Brazil’s and izer and 31% of phosphate fertilizer on ing a strong increase in income dispar- much higher than in the United States its 9% share of the world’s agricultural ity within a relatively short period of (which is less than 1.5%). At the same land. Unfortunately, the strong growth time. Income inequality in China is now time, China’s farmers have intensively in chemical input use has resulted in similar to that in Mexico, but the irony applied more chemicals and fertilizer considerable agricultural pollution. is that China is a communist country.

6 Giannini Foundation of Agricultural Economics • University of California Income growth and urbanization, Figure 2. Change in China’s Employment Structure and the resulting changes in dietary patterns, particularly in developing 80 1978 countries like China, have important 70 2009 implications for food consumption and 60 agricultural trade. Urbanization leads 50 to a decrease in calorie consumption 40 per person, but greater demand for processed food products. Low-value Labor Force Percent 30 staples, such as cereals, account for 20 a larger share of the food budget of 10 the poor while high-value food items, 0 such as and meat, are a larger Agricultural Industrial Services share of the food budget of the rich. Source: CNSB, China Statistical Yearbook So rising incomes are usually associ- be improved in the north. Pricing of Suggested Citation: ated with increased demand for meat, surface water and groundwater could horticultural, and processed food prod- play a greater role in the allocation. Carter, Colin A. 2011. "China’s Agriculture: Achievements and Challenges." ARE ucts. In turn, increased demand for China’s farmland essentially belongs Update 14(5):5-7. University of California meat will result in increased demand to local governments, a holdover Giannini Foundation of Agricultural for feed grains and protein meals. For from the commune era. This means Economics. instance, China’s per capita incomes that land cannot be bought or sold by farmers, only leased. This raises a have more than tripled in the past Colin Carter is a professor in the Department 20 years and, as a result, some dra- number of policy issues with respect of Agricultural and Resource Economics at matic changes in food consumption to the transition of China’s agricultural UC Davis and the director of the Giannini have taken place in that country. sector towards a more modern indus- Foundation. He can be reached by email at Per capita meat consumption has try. Lack of land ownership discour- [email protected]. more than doubled in the last 20 ages investment and consolidation years in China. Meeting increased into larger and more efficient farms. demand for meat and other dietary Land-use rights are now attached to For additional information, changes will continue to be a chal- village residency, discouraging per- the author recommends: lenge for China. This will require manent out-migration from agricul- ERS/USDA Briefing Room - China http://www.ers.usda.gov/Briefing/ more water supplies because it takes ture and keeping farm incomes low. china/ about 2,000 liters of water to produce 1kg of wheat, compared to about Conclusion 16,000 liters of water for 1kg of beef. China’s agriculture has made remark- Today, much of China’s agriculture able achievements since 1980, but there is very -dependent. With 20% remain critical issues. Grain security is of the world’s population and 7% of still at the center of government policy its fresh water, China faces important and this serves to discourage the pro- water issues. Agriculture uses 76% of duction of higher-valued horticultural the country’s water, but it is facing crops, thus taxing farmers. Resource greater competition from urban areas. scarcity (especially water) and agricul- In the relatively dry northern region, tural pollution are major problems that the water availability per person is are resolvable but require immediate only a quarter of that in the south. Yet action. The rural-urban income gap the north is where almost half China’s and land tenure are also significant population lives, and where most of issues. There seems little doubt that its , wheat, and vegetables are China will become more reliant on grown. Groundwater is intensively land-intensive food imports, but at used in the north, but not in the south. the same time it will expand exports This means that water efficiency must of labor-intensive food products.

Giannini Foundation of Agricultural Economics • University of California 7