Dang Guoyang is a prominent researcher at the Rural Development Institute at China's Academy of Social Sciences. In an interview with Peoples Daily, Professor Dang observes that China's agricultural output has expanded at a remarkable pace since "reform and opening" (after 1978), but he is concerned that China's agricultural sector's international competitiveness has declined. Production costs are higher than those in developed countries, and Dang insists that this lack of competitiveness will affect Chinese agriculture's long-term development.
Ironically, the first problem Dang cites is high labor costs in Chinese agriculture. While daily wages paid by U.S. farms are 5 times higher than in China, U.S. labor productivity is 100 times higher on U.S. farms, says Dang. Consequently, the labor cost per unit of output is higher in China because so much labor is used.
Fertilizer and other inputs are another high-cost item in Chinese agriculture, says Dang. He attributes this to per-acre fertilizer application rates that are three times higher in China than in the United States.
Dang also cites China's lack of technological prowess. He says that 80 percent of new technologies are imported to China from developed countries.
Dang's prescriptions for improving competitiveness include:
- changing the agricultural technology model to emphasize rain-fed farming methods
- promoting family-operated farms as the foundation for a new model of organization for the agricultural industry
- raising the efficiency of government policy support for farms.
Professor Dang calls for limits on commercial investment in large-scale company-operated farms. He thinks rural families need some breathing room to develop commercial-scale farms large enough to operate with their own labor. Such "family farms" will be large enough to exploit size economies, but not so large that they reach the point of diseconomies of scale.
Dang thinks an industry composed of family farms can form a foundation for successful development of farmer cooperatives. Dang is critical of recent efforts to develop farmer cooperatives, observing that farmers actually have little interest in joining them and most are poorly managed. Dang blames the disappointing results of China's cooperative campaign on the tiny scale of household farms and a misguided emphasis among rural officials of starting as many cooperatives as possible.
With larger-scale farms, Dang said, farmers may see greater benefit from forming cooperatives and stoke enthusiasm for joining them. Taking it slow in forming cooperatives will avoid another problem--the scarcity of management and technical personnel to operate cooperatives. He recommends exploring ways of integrating commercial investors with farmer cooperatives in a way that brings benefits to both parties. Prof. Dang thinks effective cooperatives comprised of "family farmers" will give them more bargaining power over prices of inputs and sale of commodities.
Dang also seems to recommend that agricultural officials shed their obsession with irrigation and focus on how to improve production in dry areas.
Historically, China's major farm production regions were in the well-watered southern provinces which exported rice to the north. Now the balance has shifted to the drier northern provinces which have more flat land conducive to mechanization. Most of the northern fields do not have irrigation systems and must rely on rainfall. Prof. Dang says it is critical to find methods to raise productivity on rain-fed land.
Dang says agricultural officials wrongly denigrate rainfed farming as "depending on heaven for food." Dang points out that farming in developed countries is largely rainfed. He says that irrigation accounts for about 30 percent of labor used in Chinese farming--another source of high costs. According to Dang, irrigation costs have increased a lot in recent years for many wheat producers in northern China.
He advocates paying more attention to disseminating techniques that raise productivity for farmers in dry regions. An example is a "plastic sheeting, dual furrow" technique used with good results in areas of Gansu and northern Shaanxi Provinces where annual precipitation is 400 mm or less.
Dang's call for improving competitiveness is even more urgent than he lets on. Prices of most major Chinese commodities have already climbed above international prices. A new OECD/FAO outlook report for the next ten years anticipates that global farm prices will remain low for the next several years after record harvests in multiple countries. Thus, to ensure profits for its high-cost producers China will struggle to keep its prices elevated above world prices for years to come and will need to erect more and more trade barriers to stop imports from flooding into its market.