Dim Sums: Rural China Economics and Policy

Chinese agriculture has long been starved of investment, but signs are that more capital will be flowing into agriculture in coming years as policymakers try to upgrade rural financial services and invest in big agricultural projects designed to modernize agriculture and raise productivity.

On February 18, the China Development Bank (CDB) and Ministry of Agriculture signed a memorandum of understanding for financial support of agricultural and rural development during the 12th five-year plan (2011-2015). CDB is a state-owned policy bank which mainly funds big infrastructure projects and state-owned companies, often with an overseas orientation. Loans supporting anti-poverty projects and agricultural "dragon head" enterprises have also been a small part of its lending portfolio for a while. The bank already has an agricultural and rural development loan portfolio of 19.47 billion yuan (nearly US$3 billion).


China Development Bank - Ministry of Agriculture signing ceremony for memorandum of agreement on cooperation in the 12th five-year plan

The memorandum commits the bank to support the plans to modernize agriculture during the five-year plan. Details are vague but the plan broadly entails moving toward an agricultural sector with more investment, better financial services, and Chinese companies investing overseas.

One of the new emphases is to improve rural financial services, including rural banks, insurance, and loan guarantee companies. No specifics are given, but CDB might make loans to these entities and provide technical advice.

The article makes references to investment in pilot demonstration projects. This likely entails CDB making loans to companies or local governments to build agricultural infrastructure like water/irrigation projects, reservoirs, livestock housing, "ecological" farms, seed companies, greenhouses, logistics and storage facilities, waste treatment, and research infrastructure.

CDB is also a chief supporter of China's "going out" strategy. It already has US$420 million in loans to Chinese agribusiness companies investing overseas. This agreement plans to add more support for such companies in order to "utilize overseas resources."