Today, China leads the world in the production of grain, cotton, rapeseed, peanut, meat and fruit. Its grain output in 2005 reached 484.01 million tons, an increase of 3.1% from the previous year. Since 1978, the PRC government has granted various preferential policies to the Chinese agricultural industry. In 2004, in its bid to address the widening income gap and living standards between the urban and rural population, alleviate rural poverty, encourage grain production and increase agricultural productivity, the PRC government reversed its earlier stance of taxing theagricultural sector. Instead, subsidies, tax cuts and infrastructure spending were introduced.
A summary of the measures taken by the PRC government is as follows:
Direct subsidies
Provide small payments to grain farmers based on historical grain acreage; introduced in 2004. Subsidise purchase of high-quality seeds and agricultural machinery.
Agricultural tax cuts
Eliminate taxes on farmers.
Improved market infrastructure
Establish and support wholesale markets, commodity
exchanges and futures markets. Promote e-commerce and improve cold storage and transportation facilities.
Rural infrastructure investment
Fund water-efficient irrigation, drinking water, electrification projects, methane plants, a rural road network, antipoverty efforts, and develop “production bases” for grain or other commodities.
Loans for farmers and agribusiness
Direct rural credit cooperatives to extend more loans to farm households. Give preferential bank loans to selected agribusinesses that contract with farmers.
Land protection
Strictly enforce rules regarding conversion or sale of cropland for non-agricultural use.
Research
Consolidate and increase funding for research institutes developing crop and livestock varieties with improved quality and yields.
Food safety standards
Establish and enforce standards for chemical residues and other harmful substances in food. Establish animal disease monitoring and control systems and safe livestock feed production. Promote organic and “green” agriculture.
On 31 December 2005, the PRC central government issued the Several Opinions Concerning the Advancements Towards Constructing a New Socialist Countryside (“2006 Opinion”). The 2006 Opinion was numbered as the first document issued by the PRC central government for 2006. The document numbered as the first document issued by the PRC central government for each of 2004 and 2005 were also opinions in relation to rural development.This is believed to signify the strong policy emphasis of the PRC central government on ruraldevelopment.
After the issue of the 2006 Opinion, the NPC approved the full draft of the Guidelines for the 11th 5-Year Plan for National Economic and Social Development (the “Plan”) at the 4th Session of the 10th National People’s Congress concluded on 13 March 2006.
The Plan defines its primary objective to, inter alia, “promote efforts to increase the overall PRC grain output capacity to approximately 500 million tons, in order for the PRC to be self sufficient in grain production”. In order to achieve its aim, the Plan has prioritised (a) the provision of legal and environmental protection to arable land; (b) the acceleration of technological innovation; and (c) the upgrading of the agricultural industry’s infrastructure.
Farm equipment industry
As shown in the chart below1, the arable land area in the PRC has been declining since 1996, mainly due to wastage of land resources and the illegal acquisition of land for non-farming activities in the rural areas:
As part of the Plan, the PRC government has announced its policy intention to support the continued mechanisation of the PRC agricultural industry as a means to increase productivity and to raise rural income levels. The PRC government has encouraged development of the agricultural industry by investing funds and resources towards the advancement of technology and sciences related to the agricultural industry in order to improve the PRC agricultural industry’s international competitiveness.In conjunction with the Plan, the Ministry of Agriculture has also issued the “11th 5-Year and 2015 Plan for the Mechanisation Development of China’s Paddy Rice Production” (the “2015 Plan”). The 2015 Plan aims to increase the respective mechanisation and harvest rates for PRC paddy rice production from 6.8% and 29.3% in 2004, to 20% and 55% in 2010, and 45% and 80% in 2015.
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