China is prioritizing development of agricultural processing industry, according to an article in Farmers Daily last week. The plan is logical and elaborate, but relies on a host of subsidies, tax breaks, and coordination among officials in two dozen ministries and bureaus.
Officials are now working to develop agricultural processing and integrate primary, secondary, and tertiary industries as ordered by General Secretary Xi Jinping and Premier Li Keqiang and directed by a guidance document issued in December by the State Council.
While agricultural processing has already become a "pillar industry" in China's countryside with 81,000 enterprises and gross income of 20 trillion yuan, Farmers' Daily says the industry is still weak, is not in sync with the requirements of modern agriculture, and cannot adequately meet the needs of the changing structure of food consumption.
Farmers Daily says developing an agricultural processing industry is urgently needed to correct the mismatches in China's food system. China produces large volumes of generic farm products with few branded, quality or "green" products. Grain is produced predominantly in the north and shipped south, while vegetables are shipped from the south to the north, raising transportation costs. Special strains of crops or livestock for particular uses are few. Livestock production is not coupled to feed supplies. Processing companies are needed as intermediaries to pass market information from consumers to farm producers in order to ensure that farm output matches what consumers want. This, in turn, ensures that farmers can sell what they produce.
The State Council's document sets a goal of raising the ratio of value added in agricultural processing to 2.4 times the value added in farming by 2020. It also hopes to raise the processed proportion of agricultural products to 68%. The campaign will boost primary processing of grains, oilseeds, potatoes, fruit, vegetables, tea and mushrooms as well as higher value added processing. It also calls for utilization of processing by-products like straw from crops, rice hulls, wheat bran, oilseed meals, fruit and vegetable material, skins, bristles, bones and blood of livestock and fish bones and innards.
Farmers Daily complains that indigenous innovation is weak and industry is over-reliant on imports of technology. The strategy calls for innovating new technologies and figuring out how to disseminate the techniques to processors. Ideas include setting up technology exchange centers and a pilot program to make scientists shareholders in companies that use the technologies they invent. The plan calls for concentrating processors in industrial parks, matching up processing regions with final markets, and syncing up livestock with feed supplies. The campaign will incorporate ag processing in poverty alleviation efforts by locating processing industries in poor regions.
The ag processing strategy hopes to link up new family farmers, cooperatives and agribusiness enterprises through cooperative ventures and alliances.
The state council recommended that food processors be allowed to use the subsidy for agricultural machinery purchases to buy food processing equipment. Funds to support food processors should be expanded. Imports of equipment may be exempt from value added tax. Other value added tax and business tax exemptions are also recommended. Local authorities are urged to actively support construction of agricultural processing raw material bases, public infrastructure, logistics and delivery systems.
Banks are encouraged to steer loans toward agricultural processors via government loan guarantees. Processing enterprises set up by farmer cooperatives will be included in loan guarantee schemes. Use of assets like farm buildings, contracts, and accounts receivable as security for loans will be explored. Insurance will be introduced for guarantees of microloans. Policy banks will extend credit for agricultural processing.
Acquiring land in rural China is a headache because land is collectively owned and zoned for particular uses. The ag processing plan calls for including agricultural processors in land use plans and facilitating acquisition of land for agricultural industry parks. Arrangements for village collectives to hold equity shares in processing enterprises in exchange for land should be worked out.
Officials will encourage companies to develop quality management, food safety control, seek traceability system certification, and support companies in acquiring "pollution-free," "green food," organic, HACCP, and GAP certifications. They plan to promote brands, agricultural trademarks, and registration and protection of geographic indicators. A food export demonstration base program will continue to receive support.
Officials will try to increase the supply of technicians, managers and scientists to support the industry by encouraging institutes to establish food science and processing programs, setting up food business incubators, and encouraging rural-urban migrants to return to their hometowns to set up processing businesses.
The State Council document calls for a dozen or more types of support measures and specifies 25 different government ministries and bureaus for involvement in various aspects of the program. Farmers Daily warns that developing agricultural processing will not be easy:
Officials are now working to develop agricultural processing and integrate primary, secondary, and tertiary industries as ordered by General Secretary Xi Jinping and Premier Li Keqiang and directed by a guidance document issued in December by the State Council.
While agricultural processing has already become a "pillar industry" in China's countryside with 81,000 enterprises and gross income of 20 trillion yuan, Farmers' Daily says the industry is still weak, is not in sync with the requirements of modern agriculture, and cannot adequately meet the needs of the changing structure of food consumption.
Farmers Daily says developing an agricultural processing industry is urgently needed to correct the mismatches in China's food system. China produces large volumes of generic farm products with few branded, quality or "green" products. Grain is produced predominantly in the north and shipped south, while vegetables are shipped from the south to the north, raising transportation costs. Special strains of crops or livestock for particular uses are few. Livestock production is not coupled to feed supplies. Processing companies are needed as intermediaries to pass market information from consumers to farm producers in order to ensure that farm output matches what consumers want. This, in turn, ensures that farmers can sell what they produce.
The State Council's document sets a goal of raising the ratio of value added in agricultural processing to 2.4 times the value added in farming by 2020. It also hopes to raise the processed proportion of agricultural products to 68%. The campaign will boost primary processing of grains, oilseeds, potatoes, fruit, vegetables, tea and mushrooms as well as higher value added processing. It also calls for utilization of processing by-products like straw from crops, rice hulls, wheat bran, oilseed meals, fruit and vegetable material, skins, bristles, bones and blood of livestock and fish bones and innards.
Farmers Daily complains that indigenous innovation is weak and industry is over-reliant on imports of technology. The strategy calls for innovating new technologies and figuring out how to disseminate the techniques to processors. Ideas include setting up technology exchange centers and a pilot program to make scientists shareholders in companies that use the technologies they invent. The plan calls for concentrating processors in industrial parks, matching up processing regions with final markets, and syncing up livestock with feed supplies. The campaign will incorporate ag processing in poverty alleviation efforts by locating processing industries in poor regions.
The ag processing strategy hopes to link up new family farmers, cooperatives and agribusiness enterprises through cooperative ventures and alliances.
The state council recommended that food processors be allowed to use the subsidy for agricultural machinery purchases to buy food processing equipment. Funds to support food processors should be expanded. Imports of equipment may be exempt from value added tax. Other value added tax and business tax exemptions are also recommended. Local authorities are urged to actively support construction of agricultural processing raw material bases, public infrastructure, logistics and delivery systems.
Banks are encouraged to steer loans toward agricultural processors via government loan guarantees. Processing enterprises set up by farmer cooperatives will be included in loan guarantee schemes. Use of assets like farm buildings, contracts, and accounts receivable as security for loans will be explored. Insurance will be introduced for guarantees of microloans. Policy banks will extend credit for agricultural processing.
Acquiring land in rural China is a headache because land is collectively owned and zoned for particular uses. The ag processing plan calls for including agricultural processors in land use plans and facilitating acquisition of land for agricultural industry parks. Arrangements for village collectives to hold equity shares in processing enterprises in exchange for land should be worked out.
Officials will encourage companies to develop quality management, food safety control, seek traceability system certification, and support companies in acquiring "pollution-free," "green food," organic, HACCP, and GAP certifications. They plan to promote brands, agricultural trademarks, and registration and protection of geographic indicators. A food export demonstration base program will continue to receive support.
Officials will try to increase the supply of technicians, managers and scientists to support the industry by encouraging institutes to establish food science and processing programs, setting up food business incubators, and encouraging rural-urban migrants to return to their hometowns to set up processing businesses.
The State Council document calls for a dozen or more types of support measures and specifies 25 different government ministries and bureaus for involvement in various aspects of the program. Farmers Daily warns that developing agricultural processing will not be easy:
"Each level of agriculture department must actively fight to include agricultural processing industry development in local party committee and government agendas and to strengthen coordination among Finance, Development and Reform, and Ministry of Land Resource departments to actively push policy implementation so it will take root and bear fruit."
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