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Agriculture takes center stage again in PRCs 2015 policy portfolio

China once again placed agricultural reform at the top of its policy agenda in its latest No.1 Central Document, released in February.

The No.1 Document is released annually and outlines key policy priorities for the year ahead.

For the twelfth year running, agricultural reform has taken center stage. The reason for this is simple: as one official puts it, “China has to feed about one fifth of world’s population from less than 10 percent of the arable land.”

There are two key issues facing Chinese agriculture. The first is productivity. China hopes to boost output levels and improve the efficiency of agricultural production by modernizing both agricultural methods, and the organization of its agricultural industry. This second point is especially important, since China’s farmland is currently divided in to a huge number of small plots. If the government cannot increase the size of these farms it will struggle to realize economies of scale through mechanization – it is not often cost effective to work small areas with heavy machinery.

The second key issue is that of rural development. Whilst boosting productivity, China is hoping to simultaneously raise living standards. This is problematic, since low wages are a key drag on living standards, but wage growth threatens output efficiency. Here the government is banking on measures to improve the diversity and sophistication of rural economies, encouraging farmers to expand in to the tourism industry, and returning rural-urban migrants to apply the skills they’ve learned in China’s urban metropolises to entrepreneurial endeavors in the countryside.

The ultimate success of these policies will depend on their consistent implementation. As is so often the case in Chinese affairs, caution remains the watchword in agricultural reform. 2015’s No.1 Document contains incremental advancements on prior years’ policy, but there is a solid basis for progressive change the Chinese plan. Time will tell whether this plan bears fruit.

To read more on the agricultural reforms being pursued in China, you can check out our recent case study on the subject here.

Posted in Agriculture.

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