Chinese officials are desperate to funnel investment into the countryside following an investment collapse in 2019 that was exacerbated by the covid lockdowns in the first quarter of 2020. China's Ministry of Agriculture and Rural Affairs (MARA) bragged that fixed asset investment in agriculture grew by 18.2 percent in January-November 2020 as the Government poured money into the countryside to achieve "rural revitalization" and an "all-round moderately well-off society" this year. The ag investment growth was much faster than the overall growth of just 2.6 percent for the first 11 months of 2020.
According to MARA, the complex economic situation and pressure from the covid virus in 2020 prompted seven government departments to issue an opinion on accelerating agricultural and rural investment to overcome shortcomings in rural areas. The government's strategy includes direct spending on infrastructure and agricultural subsidies, ordering local authorities to draw up lists of investment projects, setting up credit guarantee companies and subsidizing the guarantee fees, and cajoling companies to make investments in the countryside.
What the Ministry didn't reveal was that the recent farm investment boom followed a collapse during 2019 and the first quarter of 2020. Nor did they reveal that agriculture receives less than 3 percent of all investment--less than half the sector's share of GDP.
|Source: China National Bureau of Statistics.|
Monthly fixed asset growth data published by the National Bureau of Statistics shows a big turnaround during the second half of 2020, with "primary sector" fixed asset investment up 18.2 percent from a year earlier in November. Investment in agriculture plummeted 25.6 percent in January from the previous year during China's covid-19 lockdown. The declines eased in February and March while the lockdown was still on, and began to accelerate after the lockdowns began to be lifted in April.
The signs of sputtering in China's economy in 2019 are mostly forgotten now as the country has been the first to emerge from covid lockdowns. China's fixed asset investment in agriculture had been stagnant throughout 2019, with average growth for the year at 0.6 percent. Investment in the livestock sector was down 3.6 percent in 2019, investment in primary processing was down 8.7 percent, food manufacturing was down 3.7 percent, and investment in food service was down 14.9 percent, according to the China Statistical Yearbook.
The late 2020 growth in agricultural investment is the strongest since early 2018. The strongest growth in 2020 investment is in hogs (up 157%) and poultry (up 41%)
Agriculture has a lot of catching up to do. Agriculture's share of China's fixed asset investment has been stuck at 2-to-4 percent since figures were first released in the early 2000s. The share maxed out at 4 percent in 2016-17 but collapsed to 2.3 percent in 2019. The surge of investment in 2020 bumped up the agriculture share marginally to 2.6 percent for January-November 2020. The agriculture share of GDP is 7.1 percent. Agriculture's share of China's employment was 25 percent in 2019. Thus, the sector is still operating with very little capital, and the sector is still highly labor-intensive.
|"Primary industry" shares of GDP and fixed asset investment (excluding rural households).|
The lengthy list of investment priorities include:
- modern seed industry
- animal and plant disease protection
- firming up supplies of grain, hogs and other major ag products
- fresh and chilled agricultural storage
- modern agricultural industry parks, "strong agricultural industry" towns, and industry clusters
- nonpoint pollution control in the Yangtze River economic belt
- livestock and poultry manure resource utilization projects