Technical Assistance Consultant’s Report Project Number: 46082 September 2015 PRC: Study on Modern Agriculture Demonstration Area Planning and Financial Support Mobilization – Policies on the Construction of Modern Agricultural Demonstration Areas to Achieve Agricultural Modernization Financed by the Technical Assistance Special Fund Prepared by the Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences Beijing, PRC For the Department of Development and Planning, Ministry of Agriculture This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. The Asian Development Bank TA No. 8126: Study on Modern Agricultural Demonstration Areas Plan and Financial Support Mobilization Policies on the Construction of Modern Agricultural Demonstration Areas to Achieve the Agricultural Modernization The Final Report Institute of Agricultural Economics and Development (IAED), Chinese Academy of Agricultural Sciences (CAAS) Subject Moderator: Jiang Heping Professor IEAD in CAAS Subject Participants: Zhan Lin Post Doctorate IEAD in CAAS Ai Hongjuan Doctor Graduate IEAD in CAAS Zhu Fushou Post-Graduate IEAD in CAAS Liu Xueyu Post-Graduate IEAD in CAAS Peng Chengyuan Doctor Graduate IEAD in CAAS Cui Kai Doctor Graduate IEAD in CAAS Study period of the subject: September in 2013 — March in 2015 Finish time of the subject: March in 2015 Contents 1. Status and Problems of the Modern Agricultural Development in China ................................................................................................................. 1 1.1 Status of the Domestic Development of Modern Agriculture in China ........ 1 1.2 Problems of the Modern Agricultural Development in China .................... 4 2. Analysis on Modes of National Modern Agriculture Demonstration Areas ....................................................................................................... 7 2.1 The grain industry chain-led mode ...................................................... 7 2.2 The financial service-led mode. ........................................................ 10 2.3 The leading enterprise-led mode. ...................................................... 14 2.4 Park-district-led mode .................................................................... 17 2.5 Industrial and commercial capital pull mode. ...................................... 20 2.6 Collective economy driving mode. .................................................... 24 3. Analysis on Agricultural Domestic Policies in Typical Modern Agricultural Demonstration Areas. ..................................................... 26 3.1 Analysis on land transfer policy. ....................................................... 26 3.2 Analysis on scale management policy ................................................ 28 3.3 Analysis on infrastructure construction policy. ..................................... 30 3.4 Analysis on agricultural science and technology innovation and application policy. 32 3.5 Analysis on Talents cultivation policy. ............................................... 35 4. Short Term policies to Promote Agricultural Modernization. .... 36 iii 4.1 Agricultural price support policy. ...................................................... 36 4.2 Agricultural subsidy policy. ............................................................. 38 4.3 Agricultural investment policy. ......................................................... 40 4.4 Agricultural science and technology innovation and application policy. .... 41 4.5 Farmer income support policy .......................................................... 43 5. Long Term Policies to Promote Agricultural Modernization .......... 45 5.1 Land transfer policy. ....................................................................... 45 5.2 The agricultural infrastructure construction policy ................................ 46 5.3 The policy to support moderate scale of agricultural operation. ................ 48 5.4 Agricultural resources and ecological environment protection policy ....... 50 5.5 The agricultural insurance policy ...................................................... 51 iv Policy Recommendations on the Construction of Modern Agricultural Demonstration Areas to Achieve the Agricultural Modernization in China 1. Status and Problems of the Modern Agricultural Development in China 1.1 Status of the Domestic Development of Modern Agriculture in China • The earliest concept of Chinese agricultural modernization can be dated from September in 1954 when the Premier Zhou Enlai delivered the government work report. In the report, he put forward the goal clearly to achieve the comprehensive modernization of agriculture, industry, national defense, and science and technology . The agricultural modernization includes the agricultural mechanization, the chemical application on agriculture, the agricultural water conservancy and the agricultural electrification. After reform and opening-up policies implemented, the agricultural modernization breakthroughs the limitations of the previous agriculture and gradually gets the scientific, commercial, intense and simple, socialized, organized and integrated content. Overall, since the adoption of the reform and opening up policy more than 30 years ago, notable achievements have been made in the adjustment of rural industrial structure in China. 1.1.1 The output of main agricultural products increased rapidly. Since the rural economic system reform began at the end of 1970s, Chinese agricultural economy has grown very rapidly. Measured by the index of net agricultural production made by Food and Agriculture Organization of the United Nations (FAO), China's agricultural average annual growth rate was 1.9% from 1961 to 1978. It reached 4.0% from 1978 to 2012, during which 3.2% for crop and 5.8% for animal products. During the period from 2005 to 2015, the growth rate of per personal agricultural output in China reached 3% which was 1.7% higher than that in the whole world. Protection of agricultural production is the most important issue facing China 1 modern agricultural development. Since the late 1970s, when the rural have begun the economic reform, agricultural growth is becoming extremely rapid. Using the FAO net agricultural production index, 1961-1978 China's agricultural output growth is the most stable, with an average annual growth rate of 1.9%, but from 1978 to 2012, the annual growth rate of 4.0%, crops yield an average annual rate of 3.2%, although lower livestock starting point, but with an average annual growth of 5.8%. Last decade, per capita agricultural output growth has declined, but still reached 3% annual growth rate, nearly double the 1.7 percent higher than the global growth rate (Figure 1). Figure1. Agricultural production in China Date Source: OECD-FAO Agricultural Outlook 2013 , 2013. Chinese food production (cereals, grains) was from 305 million tons in 1978 to 590 million tons in 2012, with an increase of 93%; 2-fold increase in cotton production over the same period; oil crops production increased five-fold; four-fold increase in sugar crop and fruit production increased to 34 times; despite a decline of arable land, but because of increased yields and cropping index , and crop production is still made a sizeable growth; in this period, the average annual growth in wheat yields of 2.3%, corn yields in were up 1.7% , 1.2% average annual growth in rice yields, soybean yields an average annual growth of 1.2%. Multiple cropping index increased from 1.4 in the mid-1980s to 1.8 in 2012; production of livestock products and aquatic products has increased significantly , compared with 1978, meat production increased by 8 times, dairy production increased by 16 times , water product output increased 11 –fold (Figure 2). 2 Figure 2. Production of major agricultural products in China Date Source: OECD-FAO Agricultural Outlook 2013 , 2013. 1.1.2 The industrial structure of agricultural continues is optimized. In 1978, the total output value in agriculture accounted for 28.2% of the nation’s GDP, which in industry accounting for 47.9% and in the third industry accounting for 23.9%. In 2013, the proportion of three main industries is 10.0%, 43.9%, 46.1%, respectively. Among the total output value in agriculture, the output of the traditional agriculture accounted for 80%, forestry accounting for 3.4%, animal husbandry accounting for 15.0% and fisheries accounting for 1.6%. In 2012, the proportion of the traditional agricultural output declined into 52.5%, forestry inclined into 3.9%, animal husbandry inclined into 30.4% and fisheries inclined into 9.7%. 1.1.3 The level of agricultural facilities and equipment is significantly improved. Irrigation and water conservancy infrastructures have improved significantly and the area of the effective irrigation in China reached 6168 million hectares in 2011 which increased by 37% compared with that in 1978. The level of agricultural mechanization develops rapidly and the agricultural mechanization degree was improved 7 times in China from 1978 to 2012. In 2012, the number of large and medium-sized farm tractors, rice harvesters and corn combine harvesters were 4.9 million, 510 million and 510 million, respectively. The mechanization rate of sowing and harvesting