Dim Sums: Agricultural Markets in China

Zhejiang Province introduced new regulations allowing registration of rural mutual aid funds. The regulations were jointly issued by Zhejiang’s commerce bureau and provincial branch of the bank regulatory commission, and they took effect October 28. The mutual aid funds are described as a cooperative-style community banking organization that can take deposits, make loans, and perform settlement business. They can only do business with members, and business must be in the local community; they cannot form branch organizations. They can be established at the township level with minimum investment of 300,000 yuan (under $44,000) or at the village level with 100,000 yuan ($15,000). No member's share can exceed 10% of the value of stock; bank regulator approval is required if a member's share exceeds 5%. The article notes that farmers and small rural enterprises can "voluntarily" form mutual aid funds at the township or village level. This contrasts with the rural credit ...

According an online report , a forum on the "Farmer-Supermarket Linkage" program was held in Beijing on October 29, where the Ministries of Commerce and Agriculture signed memoranda of cooperation with Wal-Mart. This project promotes direct purchases of produce by supermarket chains from farmers (actually cooperatives or distribution centers run by farmers). Wal-Mart announced that it plans to involve 1 million Chinese farmers in its “farmer-supermarket linkage” project by the end of 2011. Since 2007, Wal-Mart has established 11 direct purchasing bases in 7 provinces. The bases cover an area of 150,000 mu [10,000 hectares] and 200,000 farmers directly benefit [10 farmers per hectare!] Wal-Mart’s International Business chief told a reporter, “The farmer-supermarket linkage program is representative of Wal-Mart’s development strategy in China. We want to bring our world-wide experience in farm product operations into China’s supply chain, spread scientific crop-production, envi...

The mantra of China's current administration is "scientific development." The implicit assumption is that all problems can be solved by science and technology. And it has to be Chinese technology, not from Dupont, Monsanto, Pioneer, or some other foreign company. This week, China's Ministry of Agriculture is trumpeting its ambitions to be a leader in science and technology. On October 26, a meeting on national agricultural science and technology innovation and dissemination work. The Minister of Agriculture, Sun Zhengcai, said China will strive to become a world leader in agricultural science and technology in the next 10 years or so, relying on science and technology with "Chinese characteristics" suited to the special situation of the country and the industry. The speech calls for support for creating agricultural innovations that increase the productive capacity of agriculture. An interesting phrase is the reference to independent innovation--not sure wh...

China is emerging as an interesting player in the world of "green" policy. China knows it has serious environmental/ecological problems, and the country has adopted all kinds of "green" measures. Not many people are aware of the extent of what China has been doing. On October 16, the Farmer's Daily described efforts to install an "ecological compensation system," apparently based on a conference held in Ningxia to discuss ways to improve the program. It's not clear how this works, but it seems to involve government funding to address deforestation and desertification problems, mostly in western China. They have plans to use tax incentives and arm-twisting of banks and companies to chip in funds in the future. According to the article, China started a pilot fund for central forest ecological efficiency compensation in 2001-04. Since 2005, the Ministry of Finance invested over 20 billion yuan, and the program covers 700 mllion mu of key ecological fo...

Each April local teams conduct surveys of a sample of farmers' grain sales, income, and on-farm stocks for the preceding 12-month period. The samples are small and results are released for only a few prefectures, but the surveys provide a small window into what's happening in grain markets. Like Chinese grain farmers under a microscope. I came across two articles--one from Suyu in northern Jiangsu and a second from Wenling in eastern Zhejiang. Farmers in both areas grow long-grain indica rice and short-grain japonica rice. In Suyu they also grow some wheat. The Suyu article emphasizes the effect of improved indica rice varieties. Traditionally, farmers here prefer japonica rice, but a new indica variety with high yield and improved taste has made inroads. Farmers have been switching to indica because it has lower production cost and the price is now about the same as for japonica. They're eating more indica rice too. The Suyu article also emphasizes the social changes. Most...

In April 2009 the State Council ordered a nationwide check to find out the actual level of grain inventories. There were 10 government departments involved and thousands of provincial, prefecture, and county people involved. The check was carried out in response to rumors that warehouses supposedly filled with grain were actually empty. The results show that at the end of March 2009 national state-owned grain enterprises held inventories of 450.8 billion jin (225.4 million metric tons in unmilled grain). This is in line with figures revealed previously. The inventory surpassed half of the 2008 harvest (roughly 6 months of consumption). The March date was presumably chosen because it precedes the summer grain harvest and inventories would be near their seasonal low. This total appears to be central government reserves. There are also provincial and county-level reserves. It does not include private sector reserves (probably much smaller). Usually there are surveys of on-farm reserves c...

The dollar is sinking. That tends to happen when you print vast amounts of your currency and drive interest rates to zero. Making matters worse, Australia and some others are starting think maybe it's time to start raising interest rates. Can you hear the great sucking sound of currency leaving the U.S.? What no one seems to be talking about is the U.S. dollar is taking the Chinese yuan down with it. The dollar has not depreciated substantially against the Chinese yuan because Chinese monetary authorities won't let it do so. They have kept the exchange rate pegged at near 6.84 yuan per dollar since July 2008. That means as the dollar goes down it takes the yuan with it. The U.S. dollar has depreciated by about 13% against the Euro since February, but the yuan has depreciated by 13% against the Euro as well. That means bargain vacations at the Great Wall and cheaper adoptions of Chinese orphan girls for Europeans. But how can the currency of the country that supposedly is leadin...

On September 27, the Ministry of Commerce issued documents announcing an antidumping investigation of imported chicken products originating in the United States. The investigation covers broiler products of chicken products. In case you're wondering, this includes HS codes 02071100、02071200、02071311、02071319、02071321、02071329、02071411、02071419、02071421、02071422、02071429 and 05040021。 On September 30, an article posted by the National Food Quality and Safety Supervision and Testing Center trumpets "Emerging Problems with Imported Food From the United States." A google search shows the article was carried on dozens of Chinese web sites. According to the article, testing by Chinese inspection officials have been catching an increasing number of food products from the United States. Of a 154-name “black list”, 39 problem products came from the United States. Of those, 12 were frozen pork and frozen chicken meat. "Lean meat powder" (probably ractopamine which is leg...

Everybody knows that Chinese farmers have been moving to cities in greater numbers and renting out their land to others in recent years. But nobody really knows the extent of renting out land. A short article by Wu Zhigang published in the annual report of China's Research Center for Rural Economy (RCRE) provides a good set of statistics on land renting from a large national sample of rural households. Better yet, they survey more or less the same farmers every year, so the data can show us whether farmers are increasing their rental of land. From 2003 to 2008, more and more farm households transferred land. About 8% of all rural households subcontracted land to others in 2003. That share fell in 2004 (coinciding with the introduction of farm subsidies that year), but it rose to over 8% again in 2006-07 and reached 9.8% in 2008. The rise reflects increasing departure from agriculture. The share of all rural households who subcontract land from others has been fairly steady at about...

Recently, there have been reports of labor shortages in China's coastal manufacturing regions. A Sept. 30 article in the Farmers Daily provides some good economic analysis of the emergent labor scarcity. The article notes that a July report from Zhejiang Province said employers were only able to hire 354,000 of the 603,000 they wanted, and a Shenzhen's labor shortage increased form 23,000 in April to 60,000 in June. The author asks, "Where did all those people go?" Moreover, there are seemingly contradictory reports of many rural workers who can't find satisfactory work and other factories who have no problem finding work. The author argues that China doesn't have a shortage of labor; it has a shortage of cheap labor. The recent experience of factories hiring workers as commodities at rock-bottom wages is not the future of China. Rural Chinese people are gaining more skills and higher expectations for their lives. Moreover, they have more choices. There are mo...