China to Speed up Agricultural Modernisation, Food Safety Efforts

26 February 2015

Ensuring food safety and modernising the domestic agriculture sector are among China’s key priorities for this year, Beijing has said in its flagship annual policy statement, known as “No.1 Central Document.”

The document, which was jointly released by the Central Committee of the Communist Party of China and the State Council at the beginning of February, calls for reforms and innovation in agriculture to tackle falling agricultural productivity and growing concern over China’s future food supply.

It is the 12th year in a row that the document has focused on agriculture and rural issues. The shift began in 2004, with the declared objective of increasing the incomes of people in rural areas.

Over the years the focus on agriculture has remained, while shifting from plans aimed at enhancing agricultural productivity to water management reforms. Since 2012 the emphasis has been on speeding up rural reform and agricultural modernisation. (See Bridges Weekly,8 February 2012 and13 February 2013)

“The document provides a long term vision of agricultural policy in China” and is consistent with the priorities of the last few years, Andrzej Kwieciński, Senior Agricultural Policy Analyst at the Organisation for Economic Co-operation and Development (OECD), told Bridges.

Compared with previous years, this latest document puts more emphasis on environmental protection, food safety, and strengthening rule of law, said Kwieciński.

Agriculture, rural areas, farmers in focus

The document highlights some of the challenges facing China’s agricultural sector, including surging production costs, shortages of agricultural resources, excessive exploitation of natural resources, and worsening pollution.

“The cost of rural production has continued to rise quickly,” Chen Xiwen, Deputy Head of Central Rural Work Leading Group and Director of the Office of the Central Rural Work Leading Group, told reporters earlier this month.

Chen cited difficulties, for instance, in advancing rural development due to limited resources and environment-related restrictions, as well as the difference between domestic prices for major agricultural commodities relative to the international prices, the latter of which tend to be lower.

“Solving these problems will be a major undertaking in our rural work,” Chen continued.

The Chinese government has long provided price support to farmers who produce wheat, rice, maize, cotton, and some other commodities, Kwieciński commented, effectively providing an incentive to over-produce.

Meanwhile, international prices for these goods are considerably lower, providing an incentive for buyers to import these goods rather than buy them domestically.

Prevailing low prices for grains and other food commodities in international markets over recent months have prompted an increase in China’s food imports. According to official data cited by Xinhua News Agency, China imported 19.5 million metric tonnes of cereals in 2014 – a record year-on-year increase of 33.8 percent. During the same period, its grain imports topped 90 million metric tonnes.

Beijing is now attempting to move away from this minimum price system toward a more market-price focused scheme for cotton and soya beans, the OECD analyst noted. If successful, this strategy could later be extended to wheat and rice.

The document lists five aspects and 32 points for detailed government work on reforms related to agriculture, rural areas, and farmers.

Investment, subsidies to promote rural development

In order to promote rural development, public and private investment are encouraged to help improve infrastructure, including irrigation systems, transportation, and energy networks, as well as to provide rural public services.

To increase farmer income and narrow the large disparities between urban and rural areas, the document outlines various specific measures, such as improving the pricing mechanism for agricultural products and improving the efficiency and effectiveness of agricultural subsidy policies.

Moreover, the government will intensify farm subsidy spending, with grain producers in particular receiving more direct payment – continuing a trend towards rapidly-growing farm support in recent years.

However, China’s most recent farm subsidy notification to the WTO places all of this support under the “green box” category, meaning that these subsidies are not supposed to cause more than minimal trade distortion. Therefore, they are allowed without any limit in the current WTO regime.

According to that notification, submitted by China in 2011, product-specific payments, which are considered trade-distorting, were well below 8.5 percent of the value of production – the ceiling that China committed to respect when it joined the WTO in 2001. (See Bridges,19 October 2011)

However, this notification only includes official data up to 2008, and more recent information has not yet been filed at the global trade body. Analysts and trading partners alike have questioned the lack of current data on Beijing’s levels and composition of agricultural support.

The No.1 Central Document does not provide any figures or estimates on the amount of investments and support that will be channelled to agriculture. In fact, it only gives broad policy directions and it remains to be seen how it will be implemented in the coming months.

Prioritising food safety

The Chinese government has said that, in order for the domestic agricultural sector to remain competitive in this day and age, modernisation should not just prioritise improved productivity, but also focus on environmental sustainability and food safety issues.

“Although the country is self-sufficient in its most important food crops, it has paid a huge price for its intensive farming practices,” Chinese Prime Minister Li Keqiang recently wrote in the Chinese Communist Party journalQiushi.

The Chinese premier cited excessive fertiliser and pesticide use as among the practices that were putting both food safety and the environment at risk.

To address these challenges and ensure food security and safety, which the government says is a top priority, the policy document highlights the designation of permanent basic farmland, high-quality farmland development, soil fertility conservation, and improvement of farmland.

Other plans include innovation in agricultural investment and financing mechanisms, follow-up or supporting projects for medium- to large-scale irrigation facilities, water-efficient technology, and achieving breakthroughs in environment-friendly production systems.

ICTSD reporting.

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