Advancing Agricultural Supply-Side Structural Reform and Fostering a New Impetus for Agricultural and Rural Development (Excerpt)

By: Wang YangFrom:English Edition of Qiushi Journal July-September 2017|Vol.9,No.3,Issue No.32 | Updated: 2017-Sep-1 15:45
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In 2016, China continued its sound trajectory of progress amidst stability in agricultural and rural development. With annual total grain output ranking second largest in China’s history, 2016 saw China make major progress in agricultural restructuring. Moreover, rural income grew steadily, new industries and business models in rural areas developed robustly, and reforms in key areas continued, providing solid support for China’s economic and social development. However, it must also be noted that following profound changes of the macroeconomic environment and internal drivers, an imbalance between supply and demand of agricultural products became increasingly conspicuous, resource and environmental constraints became increasingly tight, and difficulties and challenges facing agricultural development and rural income growth became increasingly aggravated. In general, the principal contradiction in China’s agricultural development has shifted from insufficiency to structural inadequacy; it manifests mainly as a stage featuring the simultaneous presence of oversupply and undersupply. Agricultural and rural development are confronted by problems with both supply and demand, but particularly with supply, and these are mainly structural and institutional problems. To maintain the sustainable and stable development of agriculture, and to advance agricultural modernization, we must start from the supply-side by focusing efforts on institutional innovation. This will make supply-side structural reform the main thread running through issues concerning agriculture, rural areas and farmers thereby taking agricultural and rural development to a new level.

Terraces covered in canola flowers in Qingtian County, Zhejiang Province, have become an eco-tourist attraction. PHOTO BY XINHUA REPORTER XU YU

I. Accurately understanding the implications of agricultural supply-side structural reform

At the 2016 Central Economic Work Conference, General Secretary Xi Jinping noted the need to further agricultural supply-side structural reform as an integral part of supply-side structural reforms. He also stressed the need to adapt to the current shift from insufficiency to structural inadequacy, explore new institutional mechanisms, promote scientific and technological progress, optimize the structure of the agricultural sector, and improve agricultural production and management systems, thereby improving the quality, efficacy, and sustainable development of agriculture. This important directive not only gives clear direction to agricultural supply-side structural reform, but also clearly articulates its key goals and priorities, and thus, we must thoroughly implement it.

Agricultural supply-side structural reform both continues and also innovates and develops previous initiatives focused on agricultural restructuring and rural work. The previous initiatives mainly targeted the short-term quantitative imbalance of agricultural products; now we must focus on quality, efficacy, and sustainable development while promoting quantitative balance. The previous initiatives mainly considered the structure of agricultural production; now we must optimize the structure of agriculture and agricultural management and boost rural incomes while restructuring production. The previous initiatives mainly made adjustments within the scope of agricultural productivity. Now we need to focus on institutional reform and boost endogenous impetus, while developing productivity. Wide in scope and deep in effect, agricultural supply-side structural reform is a significant change in the principles of rural and agricultural development. Thus, we must follow the general requirements of the CPC Central Committee for advancing supply-side structural reforms, and innovatively take to task in accordance with the developmental reality of rural areas and the particular traits of agriculture, to further deepen agricultural supply-side reform.

First, we must ensure innovative institutions.

Regarding agricultural supply-side structural reform, “the basic approach is by deepening reforms,” using them to push agricultural restructuring. Innovative institutions will activate the latent potential of factors of production, release and develop rural productive forces, remake and upgrade traditional growth drivers, and foster new and stronger impetus.

Second, we must ensure major breakthroughs through market guidance.

Regarding agricultural supply-side structural reform, “the final aim is to satisfy demand.” To alter the current irrational agricultural supply structure and to better satisfy market demand, we must fully exert the role of the market in deciding resource allocation and enable market forces to guide agricultural restructuring, to reduce ineffective supply and increase effective supply. The government should place itself in the requisite position, playing its role by neither exceeding nor neglecting its duties. The government should strengthen policy guidance and supporting services to create a sound market environment.

Third, we must focus on raising quality and efficacy.

Regarding agricultural supply-side structural reform, “the top priority is raising supply quality,” which is essential to enhance agriculture’s overall efficacy and competitiveness. By upholding the principle of developing agriculture via raising quality, we expedite technological progress in agriculture and enhance the total factor productivity in agriculture. By upholding the principle of strengthening agriculture via raising efficacy, we promote the integrated development of the primary, secondary, and tertiary sectors and enhance the overall efficacy of agriculture, thus giving the agriculture a competitive edge.

Fourth, we must ensure green development.

Regarding agricultural supply-side structural reform, we must uphold a people-centered notion of development, respond to people’s concerns, and continually increase the supply of green and high-quality and sustainably produced agricultural products. We should embrace the notion that “lucid waters and lush mountains are as valuable as mountains of gold and silver,” drive the development of resource-conserving and environmentally friendly agriculture, and promote the integration and harmony between agricultural development, ecological balance, and environmental remediation.

Fifth, we must ensure the increase of farmers’ incomes.

Whether or not the supply system is optimized and supply efficiency is improved, and particularly whether or not farmers’ incomes are increased and farmers are benefited will determine the success of agricultural supply-side structural reform. The fullness of the farmers’ wallets is an important criterion for gauging the effectiveness of reforms.

Pushing agricultural supply-side structural reform is a profound change concerning issues related to agriculture, rural areas and farmers that will determine the long-term development of agriculture. Therefore, we must stay on the right track and meet the following three basic requirements. Firstly, we must ensure that grain production capacity does not drop. Safeguarding national food security is top priority and on this we cannot drop our guard. In advancing agricultural supply-side structural reform, we must maintain overall stability of grain production, to avoid fomenting widespread expectation that grain production will be reduced and prevent the resonant effect this may cause. We must implement the strategy of enhancing China’s grain production capacity by relying on land, science, and technology. Grain output is allowed to fluctuate year-on-year, but we must ensure the stable and strong growth of grain production capacity. Secondly, we must ensure the trend towards rising farmers’ incomes does not reverse. Increasing their income is a key indicator of a moderately prosperous society. There might be teething issues with agricultural supply-side structural reform. Nevertheless, we must ensure farmers do not lose out, their incomes continue to grow, and the urban-rural income gap won’t widen again. Regarding agricultural support and protection, methods can be optimized as long as they make them stronger and not weaker. Thirdly, we must ensure rural stability is not undermined. When adjusting policies and introducing measures, we must give full consideration to many factors, especially farmers’ ability to cope with changes, and also the reality that agricultural production is mostly carried out by individual households. Thus, by maintaining the appropriate pace and intensity and taking all factors into consideration, we will introduce policies and measures covering all rural households, guaranteeing the general stability of rural areas. We also must respect farmers’ wishes and never resort to coercion or arbitrary decisions.

In conclusion, pushing agricultural supply-side structural reform must happen on the basis of guaranteeing national food security and focusing closely on changes in market demand. By aiming to increase farmers’ incomes and ensure effective supply, by moving towards improved quality of agricultural supply, and by taking the fundamental approach of mechanism reform and institutional innovation, agricultural supply-side structural reform will optimize the structure of the agricultural sector, and agricultural production and management systems; enhance land productivity, resource utilization rate, and labor productivity; and promote a shift in the mode of agricultural and rural development from overdependence on resource consumption that merely satisfies quantitative demands to one that pursues green, sustainable development that pays more attention to satisfying qualitative demands. In advancing this reform, we must emphasize two aspects – adjusting the supply-side structure of agriculture and deepening related reforms. By adjusting the supply-side structure, we bring agricultural development to a new level. By deepening reforms, we advance structural adjustments and quickly foster new drivers for agricultural and rural development.

II. Working hard to accomplish the major tasks of agricultural supply-side structural reform

To advance agricultural supply-side structural reform, we must first improve, rectify, and optimize the structure of agriculture. Now and in the period ahead, we should focus on the following six tasks.

First, adapting to market demands and optimizing product structure

To make coordinated adjustments to the structure of agricultural production, we must build a ternary structure to strike a balance in developing cereal, cash, and feed crops by following the basic principle of “stabilizing cereal crops, optimizing cash crops, and expanding feed crops.” Stabilizing cereal crops means stable production of rice and wheat, continued reduction of corn production in areas not suitable for planting corn, and increased production of high-quality food grade soybeans, tubers, and other cereals. Optimizing cash crops means optimizing the variety, quality and regional distribution of cash crops and raising the value and efficacy of horticultural crops. Expanding feed crops means expanding the production of high-quality forage grasses such as silage corn and alfalfa by adhering to the principle of “determining the acres of feed crops according to the number of grazing livestock.” We must give prominence to improving the quality of agricultural products, devote major efforts to increasing the production of improved cultivars, strengthen oversight of the entire agricultural production and distribution process, and promote standardized agricultural production, branded marketing and green development. Moreover, we must quickly develop competitive and unique agricultural products, endeavor to upgrade unique industries, and develop and use new raw edible materials and foodstuffs that are both medicinal and comestible, to create more room for growth in the value of agricultural products.

Second, developing moderate scale agricultural operations and optimizing operation structure

Expanding the scale of an operation can provide a firmer foundation for increasing effective supply. Doing so makes it easier to overcome a range of problems, such as the difficulty of disseminating agriculture’s latest findings and technological advancements, the difficulty of supervising the quality and safety of agricultural products, and the low comparative returns of agricultural production. By way of transferring land-use rights, establishing joint stock partnerships, allowing farmers to cultivate land in place of land holders, and entrusting land to cooperative associations or large farmer households, we can boost the development of various forms of scaled operation, such as those based on land transference, on converting land into shares, and on providing agricultural services. We must ensure large scale operations will raise the incomes of average farmer households; this is especially important in poverty-stricken areas to lift farmers out of poverty. Developing various forms of moderate scale operation and optimizing their structure is a long-term process. This makes it necessary to have appropriate policy support and pilots to follow. Yet, we can neither launch vanity projects nor force policy implementation via administrative orders.

Third, optimizing regional structure on the basis of comparative advantage

Planting crops in the most suitable region not only lowers costs and enhances output efficacy, but also guarantees high-quality products. We must further clarify the roles and development priorities of different regions on the basis of their available resources and regional advantages to push the factors of production towards the most suitable regions for production. This is the key to develop the following three kinds of regions. The first kind is for producing grains such as rice, wheat, and corn. We should demarcate these regions according to both the functional zone plans and the competitive agricultural products distribution plans, and quickly improve grain cultivars, and grain production facilities and technological equipment. The second kind is conservation regions for guaranteeing the output of major agricultural products such as soybean, cotton, rapeseed, sugar cane, and natural rubber. In this kind of region we should continuously improve production conditions and support farmers to develop production. The third kind is regions for producing specialty agricultural products. While working faster to formulate plans for developing this kind of region, we must establish assessment standards, reform technology systems, and introduce supporting policies, to encourage the development of this kind of region.

Fourth, accelerating scientific and technological innovation and strengthening the impetus for agricultural development

As agricultural development shifts from being quantity- to quality-oriented, we must adjust the direction and focus of scientific and technological innovation and push for innovation of agricultural technology systems and a technology roadmap. We must make practical changes away from merely pursuing high yield, work faster to breed new cultivars that are high-quality, customized, nutritious, and healthy, and promote improved varieties of agricultural and livestock products that are competitive and unique. To adapt to the increasingly pressing need to lower cost and reduce energy consumption, we must develop and promote green and high-efficiency agricultural technologies and technologies integrating agricultural mechanization with agronomy. We must transform food processing technologies to make the processing of agricultural products more able to satisfy demand and raise their added value. Vital to pushing innovation in agricultural science and technology is tapping into the enthusiasm of scientists and technicians. We must improve the management system for scientific and technological innovation and improve incentives for scientists and technicians that effectively disseminate agriculture’s latest findings and technological advancements, to ensure that agricultural scientific research projects are chosen according to market demand and that scientific and technological achievements are spread throughout rural areas.

Fifth, spurring integrated development and optimizing industrial structure

Stressing the development of processing and distribution, we should further extend industrial chains, improve value chains, and enhance the overall efficiency of agriculture. Relying on resources such as beautiful natural scenery, idyllic landscapes, and folk culture, we must devote ourselves to developing rural tourism, leisure agriculture, and forest conservation. On the basis of current developments in agriculture, we must emphasize greater profits along the whole agricultural industrial chain and optimize rural industrial structures, to boost the strength of primary industries, the quality of secondary industries, and the vitality of tertiary industries. Catalysts are required to bolster the optimization of rural industrial structure and the in-depth integration of primary, secondary, and tertiary industries. Modern agricultural “industrial parks,” “science and technology parks,” and “start-up incubators” are not only important platforms providing capital, science and technology, talented personnel, and projects for rural development, but also major bases for promoting entrepreneurship and innovation in rural areas. We must work hard to develop these parks and use them as “accelerators” that push the development of modern agriculture and foster new impetus for rural development.

Sixth, implementing green production and promoting sustainable agricultural development

To make the most of the rare opportunity of the relatively loose supply-demand relationship of major agricultural products like grain, we should quickly move to green production to put an end to inappropriate production methods, resolving to retire overcapacity and put in order that which needs to be put in order. “Retiring” is for the sake of better “engaging.” Better resources and improved environment make agricultural production capacity more sustainable. Particularly important for green production is the frugal use of water in agriculture. Taking the frugal use of water as a significant target and strategy, we should improve national policy support for agricultural water conservation, and devote greater efforts to renovating and building key irrigation and drainage projects for large- and medium-sized farmlands. This will spread water-saving technologies and equipment into farmlands, push the overall reform of agricultural water pricing, and impassion farmers to save water.

The process of adjusting the agricultural supply-side structure is at once a process of optimizing the structure of the agricultural sector and its production and management systems, and also a process of exploring China’s own approach to agricultural modernization. Based on the reality that agricultural resources are insufficient, we must improve the product mix and regional structures through promoting green and innovation-driven development. We must establish specialized grain producing regions, conservation regions for guaranteeing the output of major agricultural products, and regions for producing specialty agricultural products to improve the supply and quality of agricultural products. These will safeguard food security to satisfy people’s ever-growing demands, and improve the production setup of our characteristically Chinese modern agricultural sector. Based on the reality of the large number of farmers, we must promote both the integration of the planting, breeding, and processing industries, and combine production, processing, and marketing. By developing industrial parks, science and technology parks, and “innovation incubators,” we will extend industrial chains, push industrial integration, and raise value along the entire industrial chain, to create ripe opportunities for farmers to share profits and earn higher incomes, and improve the industrial setup of our modern agricultural sector. Based on the reality of small scale agriculture, we must encourage farmers to participate in cooperative use of land, converting land to shares, and land transference, to gradually expand the scale of agricultural operations, and speed up the specialization of agricultural services, the regionalization of production, and the concentration of industries. This will create advantages of scale in agricultural services, regions, and industries, making agriculture stronger and more competitive, and improving the management setup of our modern agricultural sector.

Wang Yang is Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council of the People’s Republic of China.

(Originally appeared in Qiushi Journal, Chinese edition, No.6, 2017)