Wednesday, February 20, 2019

"Document No. 1" Worries About Supply of Farm Products

China's Central Document no. 1 proclaims the importance of doing a good job on rural affairs work in 2019 in view of the challenges of "downward pressure on the economy" and "profound changes in the external environment." Communist leaders insist that emphasis on rural affairs must be unwavering to maintain the "ballast stone" role of rural people, agriculture and the countryside to respond to various challenges and "win the initiative."

The 2019 document announces ambitions to "decisively win the fight against poverty." It includes many ambitious reforms of rural land and governance institutions, promises to construct rural infrastructure, to make the countryside more livable, and to improve rural governance that are already underway. The document emphasizes that these initiatives are especially important this year because 2019 and 2020 are key years for achieving the "all-round relatively well-off society" and preparing for the Chinese communist party's 100th anniversary.

Concerns about maintaining supply of agricultural products are reflected at several points in the document, including a paragraph about safeguarding key commodities through "top-level design," setting up a system to maintain domestic supplies of each commodity, coordinating use of domestic and international markets and resources, and scientifically determining the volume of domestic commodity supply that must be maintained. The document asserts that rice and wheat "must be protected," corn production needs to be stabilized, and production capacity for cotton, oilseeds, sugar, and natural rubber needs to be firmed up. It advocates greater production of "commodities that are in short supply."
  • A soybean revitalization plan, a call for increased soybean planting, and a Yangtze River rapeseed production initiative reflect concerns about reliance on oilseed imports made more acute by the trade war. The document advocates production of tree crop oils--an idea that has come and gone intermittently since the 1970s.
  • The document calls for construction of "dairy bases," overhaul of small and medium dairy farms, upgrade of infant formula production, and expansion of corn for silage and alfalfa as fodder crops to support cattle.
  • A Xinjiang cotton base initiative is to be re-launched
  • A "dual high" sugar base is to cover the entire production region
  • The document calls for increased effort to prevent and control African swine fever in order to protect the industry's security.
  • The document promotes a recent strategy of creating local industries centered on local specialties fruits and vegetables, medicinal crops, bamboo, tea, nursery crops, and ethnic handicrafts tied in with rural tourism.
Agricultural policy features a series of dictates to maintain minimum amounts of cultivated land (120 million ha), grain planting (110 million ha), enforce "permanent farmland" (103 million ha), strengthen a "responsibility system" to reward and chastise provincial leaders for progress in grain production, and ensure that 53 million ha of high-standard fields are constructed by 2020. It calls for completing the delineation of "functional regions" for grain production and "protection regions" for other important agricultural products.

The document calls for designing a new agricultural subsidy system that is "adapted to WTO rules," protects farmers' income, and supports agricultural development. It specifically calls for adjusting and improving "amber box" policies (those limited by WTO rules) and expanding "green box" support (not limited by WTO rules).  Other domestic policy measures advocated:
  • Improve the minimum price policy for rice and wheat, giving a greater role to the market mechanism
  • Improve subsidy payments for soybean and corn producers
  • Subsidize farmer credit guarantees and cajole banks to increase farm and rural lending and give them lower reserve requirements as a reward. The document calls for rural lending quotas that sound like the U.S. Community Reinvestment Act.
  • Increase support for agricultural insurance, move ahead on pilot programs to insure farmers against income reductions and cost increases, and move forward on "insurance + futures" subsidy pilots.
  • Set up an award system for major grain-producing counties (this appears to tweak the existing grain transfer payment to give local officials stronger incentives to use money for grain production).
The document reiterates a strategy of relying on technology to raise production and correcting environmental abuses that went unchecked in past years when officials urged farmers to expand production without regard for external costs or depletion of resources.
  • Breakthroughs in agricultural technology are featured as a key driver to be nurtured by an elaborate agricultural R&D system that integrates companies and academic institutes and setting up agricultural science parks, innovation centers, demonstration zones, and technology alliances. The document emphasizes protection of property rights, attracting talent, and giving scientists rights to profit from their innovations.
  • A "digital countryside" advocates an "internet + agriculture" strategy, big data, intelligent farming, and e-commerce.
  • Programs to correct past abuses include a program to remediate heavy metal contamination in soil; protect black soil and reverse depletion of aquifers in the northeastern region; efforts to collect and utilize manure from livestock and poultry farms; and a plan to cut back on over-fishing and aquaculture in lakes, rivers, and coastal waters.
The document includes only two sentences dealing with international trade (in contrast to initiatives by the top leadership to expand imports of food to improve the standard of living in the country). The No. 1 Document advocates:
  • "Taking the initiative" to open channels to import products in short supply. This probably means maintaining tight controls over gradual increases, rather than passively allowing imports and foreign companies to flood into the country.
  • Greater diversity of import channels
  • More support for agricultural companies "going out" to invest abroad
  • Greater international cooperation with belt and road countries
  • Nurturing a group of multinational agricultural conglomerates
  • Increasing efforts to control smuggling of agricultural products
The document is rounded out with lengthy exhortations to keep the communist party in firm control of the countryside.
  • Village communist party branches are to be "battle fortresses" that are central to constructing rural infrastructure and institutions.
  • Officials are instructed to do well in "thought work," guiding rural people to practice socialist core values and consolidating the party's ideological positions in the countryside
  • Officials and news organs should propagandize the party's policies that benefit agriculture and rural areas
  • Officials should exhort rural "mass organizations" to discourage bad social practices such as extravagant marriages and funerals, sky-high bride prices, filial piety, and skimming off funds meant for support of the elderly.

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