Agriculture

Agriculture in China experienced two drastic revolutions, first collectivization in the 1950s, and second the re-liberalization in the 1980s. Currently the focus of attention in economic policy has been shifted back to agriculture, with the plan to construct a "new socialist countryside" (shehui xin nongcun 社会新农村).

The 3.3 million traditional Chinese villages were organized autonomically. Being beyond the grip of the government, whose lowest level was the district (or county, xian 县), villages were organized and administered by lineage heads or village committees. This is still the case today, and there are 588,000 administrative units called "village" (run 村) and 31,700 townships (xiang 乡). The latter correspond to market towns around which villages are clustered in a distance of a day's walk or so. The traditional rural organization and China's economic organization in macro-regions was in the 1960s described by William Skinner (1964-1965). Even after thirty years of modernization, there are still 10% of villages consisting of brick-built houses with rammed-earth floors (all figures Naughton 2018: 260).

Agriculture under Mao

In the Maoist era, the village served as a source of funds for the construction of urban industry. Villages were obliged to deliver quotas of grain to the state and were paid at low, state-determined prices. Mao followed the Stalinist mode of exploiting the countryside for socialist construction, and for this purpose, the "production of grain was the key link" of agriculture (yi liang wei gang 以粮为纲). For this purpose, the planning commissions pronounced acreage targets and ordered the farmers of the fertile regions in southeast China to yield three harvests per year. This could only be reached by intensified irrigation and use of chemical fertilizer. Non-grain crops were critically neglected (apart from cotton), and regions not suitable for grain production were nevertheless forced to give up their specialization in favour to produce staple food.

The first step of collectivization was the pooling of land and common execution of farm work in mutual-aid production groups (nongye shengchan huzhu zu 农业生产互助组). Land redistribution in the early 1950s was relatively fair, and there was practically no peasant family not having land for their own needs. While most of the cultivated soil was soon becoming part of the commune, ownership of homes, management buildings, some animals, and small private plots, remained private. Private plots constituted 3-10% of the cultivated land (Naughton 2018: 262).

The accounting unit (kuaiji danwei 会计单位) in agriculture was from 1956 on shifted a level higher to agricultural production cooperatives (nongye shengchan hezuoshe 农业生产合作社). Different from other countries, agricultural cooperatives in China not only included the marketization of produce, but also farming itself. The cooperatives produced inputs, coordinated work, sold the output, and cared for public welfare, for which a special fund was created. Individual households received income in kind and cash.

The project of the Great Leap Forward (dayuejin 大跃进) shifted the accounting unit yet further upwards by the creation of people's communes (renmin gongshe 人民公社). The communes comprised up to 5,000 farming households, were planned to operate fully self-dependent, and replaced the regular bureaucratic administration level of the township. Workforce was organized in production teams (shengchandui 生产队) of about 30 households, and production brigades (shengchan dadui 生产大队) of about 200 households. Individual farmers earned work points (gongfen 工分) according to work input in time. The number of work points determined income, but most of it was paid out in kind rather than in cash, and thus many communes were largely run without money.

The paradigm for the organization of people's communes was the village of Dazhai 大寨 close to Xiyang 昔阳, Shanxi. In Dazhai, persons having performed less well were reprimanded publicly and had to undergo self-criticism. The principle "each according to his ability" (ge jin suo neng 各尽所能) was soon expanded to "each according to his need" (ge qu suo xu 各取所需), as it had been proposed by Karl Marx in 1875. This means that welfare was not any more distributed according to labour input, but on equal terms for everyone, and moreover, individually as "one wished (not: needed) to have".

In practice, keeping up a constant labour input and coordinating several dozens of households was more complicated than imagined. As economies of scale are hardly feasible with huge numbers of hand-working farmers, the communes tried other means of increasing the output, for instance, expanding the area of cultivated fields by consolidating scattered plots or bringing under the plough the tomb areas which are traditionally distributed between the fields. Construction like large-scale irrigation projects were carried out after the harvest in winter. The average farmer was working 200-270 days per year (Naughton 2018: 264).

The communes organized rural credit cooperatives (nongcun xinyong hezuoshe 农村信用合作社) and supply-and-marketing cooperatives (gongxiao hezuoshe 供销合作社), and – more important – provided and organized social services, medical service, kitchens, and schooling. Persons employed for these duties were also given work points. The communes had thus economic, social, administrative, and political functions. From around 1970, the state even penetrated into the private life of peasants by imposing birth-control measures with the wan-xi-shao system (see human capital).

Agriculture during the early reform period

The reformers of 1978 were aware that agriculture had suffered most under the Maoist economic pattern (particularly Anhui and Sichuan), and therefore slackened the reins for farmers first. Procurement prices were distinctly raised, and communes were allowed self-management, and could thus determine what they wanted to produce and could specialize in locally suitable crops. Yet in the early phase of reform, the central government continued to stress the prohibition of individual farming. Given free hand in management, many communes decided to distribute work points for output instead of for time of labour.

From 1981 on, the central government launched the household responsibility system (bao chan dao hu 包产到户), and until the end of 1982, nearly all farmers had returned to the old household farming system. The first contracts with the government had a term of 3 years, but most were then concluded on longer terms, and tied to land-use contracts with a term of 50 years.

As a result of liberation in farming, grain production increased dramatically, with an annual growth rate of 4% (Naughton 2018: 268). The same is true for other agricultural produce like cotton, oilseed or meat. Quite ironically, these increases occurred in spite of decreasing labour input, as measured in time. This means that farmers worked more intensely and had thus time for sideline production or work in the mushrooming rural industries. For procurement of staple goods, the state retained control over the grain quota and those of other key products like cotton and fertilizer.

Until 1985, the last 249 of once 54,300 communes (Zhou 2011: 27) were dissolved - only a few lonely ones are surviving today. As a result, the pre-commune administration with the township on the lowest level reappeared. In 1987, a preliminary law of villager's committees tentatively allowed election of committees for village residents, and in 1998, the Organic Law of Villagers' Committees (Zhonghua renmin gongheguo cunmin weiyuanhui zuzhi fa 中华人民共和国村民委员会组织法) extended this custom nationwide. Village elections thereafter were an important facet of grassroots democracy. On the other hand, the dissolution of the communes deprived communities of schooling and medical provision with its 1.5 million 'barefoot doctors' (chijiao yisheng 赤脚医生) and 3.5 million paramedics (Naughton 2018: 271) which had been organized and paid by the communes. This circumstance was a severe problem during the SARS crisis in 2003, during which peasants found no adequate medical treatment in the countryside.

While migrant labourers from the countryside were the bearers of China's economic miracle, the monetary transfers they sent to the countryside did not help to alleviate the difference in the standard of living between the rapidly modernizing cities and the countryside. For this reason, the village was the 'problem child' of the Hu/Wen administration. With the announcement of tackling the three problems in agriculture (sannong wenti 三农问题), a new policy for the countryside was initiated, enshrined in the slogan "give more, take less, and enliven" (duoyu, shaoqu, fanghuo 多予，少取，放活). In addition, the agricultural tax (nongye shui 农业税) was abolished altogether in 2005. The Eleventh Five-Year Plan (2006-2010) included the project of the "New Socialist Countryside" (shehuizhuyi xin nongcun 社会主义新农村).

The vanished medical system of the communes was replaced by the New Cooperative Medical System (xinxing nongcun hezuo yiliao 新型农村合作医疗). It consisted of a fund to which members as individuals contributed smaller amounts up to 150 RMB, while the subsidies by the government were slowly increased to 450 RMB per person and year (Naughton 2018: 273). Yet the coverage of real cost is still not generous. Moreover, skilled physicians are still scarce in the countryside. Apart from the medical system, the government pumped funds into the schooling system, made primary education compulsory and drastically increased funding per person for elementary and middle schools.

New attempts were made at reshaping settlement structures. Scattered settlements were to become denser, and new, multi-storied serial houses were to replace the traditional cottages. The government also subsidizes heavily the development of urban industries out of the township-and-village enterprises (TVE).

Farmers planning to migrate into a city were allowed to lease out their land to other families. Today, about 10% of land are rented out. Yet land markets have not developed because of institutional and legal obstacles.

The most critical problem of Chinese agriculture was to feed China's huge population. Traditional agriculture was quite sophisticated and generated such a formidable output that there was no immediate need for technical advance. Mark Elvin (1973) has called this situation the "high equilibrium trap": Traditional agricultural productivity had nearly reached the limits of what was possible without industrial-scientific inputs. Yet any population increase steadily reduced the surplus product above what was needed for subsistence. The measures of the planned economy and the transformation of labour organization into the commune models did not yield the expected growth in output, neither by increase of labour input, nor by the intensified use of fertilizers or investment in irrigation projects. In the 1960s and 1970s, large parts of the population were malnourished, and China was forced to import grain.

Moreover, the production of grain had absolute preference over other produce and thus reduced the diversity of agricultural production, like vegetables or oilseeds, not to speak of fodder production for animals.

Only the liberalization of agrarian policy, with incentives for producers, was able to set free the forces of agricultural production. Chinas produces today three times as much grain as before the Great Leap Forward, namely 620 million tons (Naughton 2018: 208). China is, as far as staple food is concerned, self-sustaining. Output in the countryside even increases while the workforce has been shrinking considerably and the share of the agricultural sector in the overall economy declined substantially.

Agriculture in China today

The scarcity of land in China determines the mode of production. There are barely other ways of increase production than to invest more labour into the available land, for instance, by use of fertilizer, intensified irrigation, or cultivation techniques like double and triple cropping, intercropping or relay cropping. The decisive measure to increase the output was the triad of factors known as parts of the "Green Revolution", namely improved seeds, chemical fertilizer, and intensified irrigation. The concept of the Green Revolution goes back to the International Rice Research Institute founded in 1960s.

Even if these factors had already been successfully applied in traditional Chinese agriculture, the aspect of science and technology was new, for instance, in the shape of hybrid or genetically changed seeds (high-yield varieties), or mechanized irrigation. The seed production and distribution system in China, initiated by the Chinese Academy for Agricultural Sciences (Zhongguo Nongye Kexue Yuan 中国农业科学院), is the largest one in the world. China spends more funds on agro-technical research than any other country. The development of resistant varieties allows the reduction of pesticides. Cultivation methods are today better adapted to the local conditions like during the Maoist era.

The amount of manure used in Chinese agriculture shrank substantially (even if organic fertilizer contributes positively to long-term fertility) and is being replaced by synthetic ammonia and urea fertilizers. Overfertilisation and eutrophication is a widespread problem in China.

Mechanized irrigation likewise plays an important problem, all the more as the rapidly expanding cities became competitors for ground water. Overexploitation of water resources is rampant. A further problem is the widespread use of pesticides and the pollution of soil and aquifers with toxins like heavy metals.

All these factors reduced the amount of labour needed to yield a higher output. While mechanization was a typical method in the US (or the Soviet Union) to increase production, chemicalization was the solution for China, for a special reason. Even if labour was abundant in China (and land scarce), the booming economy in the urban areas inflicted on agricultural labour the problem of high opportunity cost. Particularly during the two decades after 1990s, nearly half of the agricultural population of about 400 million migrated to the cities in search for better-paid work or worked in TVEs nearby. As a result, farming became less labour-intensive, and fertilizers and mechanical tools (including large tractors) began to play a dominant role, while labour input decreased.

If analysing the output of Chinese agriculture by the production function, it can be seen that total factor productivity plays a great role since the Reform Period, with an annual growth of more than 6%. Even if China has twice as many workers per hectare as the world average, Chinese farmers apply five times as much chemical fertilizers as the global average (Naughton 2018: 292-293).

Having solved the problem of staple food, Chinese agriculture has a drive for diversification and is able to supply the needs of a modern society, with less vegetable protein and carbohydrates and more animal products, including milk, eggs and meat, and non-food products like flowers. Substantial amounts of land are used for the cultivation of fodder, not food. Also, the composition in grain production shifted away from "rustic" millet and sorghum to rice and wheat with their finer tastes. Part of fodder, mainly in the shape of soybeans, must be imported. Yet China exports quite a few agricultural products, mainly aquatic products, vegetables, flowers, and tea.

The infrastructure of transport and marketing also changed substantially and now includes feedlots, slaughterhouses, marketing networks with refrigerated trucks and warehouses. Yet the small-scale pattern of agriculture with traditional family business still prevails.

China's agricultural policy followed a typical pattern. Poor economies usually tax agriculture as the only or most important source of government revenue. When the economy grows, the government begins to tap other sources and neglects agriculture or even subsidizes it.

Around 1995, China abandoned the procurement system by which farmers had to deliver a quota of their grain to the government, and concurrently gave up a price subsidy system which made Chinese grain much cheaper than world market prices. From then on until just after the WTO entry, Chinese grain prices concurred with world market prices, and the Chinese government did everything to adjust the prices, even at the cost of stockpiling grain which was in the end lost to the market. Having overcome the financial crisis of 2007, China began to subsidize grain prices, which are now above world market level. Self-sufficiency in grain production is one of the three targets of agricultural policy in China, the others being the question of subsidizing farmers, and land maintenance. Yet the way by which this target is achieved drains funds from other areas and impedes the progress towards marketization.

Direct subsidies were distributed to grain producers according to acreage, alloted to project subsidies for the purchase of machinery or seeds, and paid out for individual commodities like grain, soybeans, rapeseed or cotton.

In order to prevent soil speculation and preserve agricultural land, the Chinese government decided in 2006 to maintain 120 million hectares of agricultural land. In 2009, a land survey was carried out whose results were used to redefine or confirm questions of ownership. Owners (individual farmers or collectives) have the right to rent out land to others, but not the right to sell it, as long as it is marked as agricultural land. Other types of land can be converted into land for industrial use or for public projects.

The protective policies were quite successful and can be seen in the modest decline of the GINI coefficient. This trend helps to generally support the living conditions of farmers. How future agriculture might look like is unclear, but the trend towards more sustainable ways of production – with regard to the ageing farming population as well as to the environment – must be intensified. A first attempt it this direction was the "Grain for Green" (tui geng huan lin 退耕还林) movement initiated in 1999. It aimed at replacing farmland in erosive terrain by wasteland (or "forest", as in the slogan).