Cropland v. Tourism Conflict in Rural China

A crackdown on vacation homes disguised as greenhouses reveals China's clashing priorities: leaders say they want farm-related tourism to pump money into the countryside, but most of the land can only be used to grow crops that pay farmers a pittance. 

Last week China's Agriculture and Natural Resources ministries jointly published a list of cases where rural villas and vacation homes were disguised as farming structures. These have been demolished and reclaimed as farmland since authorities launched a campaign against such projects 4 years ago (see this blog's September 2018 post on greenhouse villas). The projects skirt strict zoning of rural land for agriculture by building hotels, teahouses and villas inside giant greenhouses or by disguising vacation cabins as sheds for field laborers. With scarce land and robust demand for bucolic vacations and getaways in the countryside, the projects are an easy way for rural villages to earn money.

Vacation cabins illegally built on farmland in Shanxi Province's
Linfen City discovered in 2021. Source: Economy Half-hour.

The two ministries published the list of six illegal projects to warn local officials of the  "zero tolerance" for illegally changing the use of land zoned for farming, and demonstrated the two ministries' resolve to investigate and punish those who fail to comply. The crackdown is part of Xi Jinping's orders to prevent the loss of farmland.

The list included projects that began as long ago as 2008 and two that were discovered in 2021, including a development of 8 fenced cabins for rent or sale in a Shanxi Province village and an ecological agriculture company in Fujian that had illegally built 4 cabins, a parking lot, wood plank road, and 3 wooden rest halls. A project in Heilongjiang's "Love the People" District built 18 of 158 greenhouses on "permanent farmland" and rented them out to vacationers. The Heilongjiang project had been remediated by officials in 2019, but renters had carried out renovations since then that prompted another intervention by officials. 

Rental cabin hidden inside an agricultural hothouse.

The Fujian project used less than an acre of cropland for constructing the illegal cabins, while a project in Henan Province involved about 74 acres. The perpetrators were rural agricultural companies and agricultural industrial parks run by villages and townships. Several of the projects were raided by carloads of officials. The perpetrators were punished with self-criticisms, party warnings, and fines.

The crackdown on rural vacation cabins clashes with initiatives to integrate the rural and urban economies and to beautify the countryside. Rural officials are urged to promote the rural tourism industry, but strict land-use zoning limits the supply of land that can be used for such projects.

A 2019 essay by a greenhouse-building company attributed the persistence of the "greenhouse problem" to pursuit of "short-term gain" by farmers and rural officials. Farmers frustrated by low earnings from farming see an opportunity to make money from their land by fulfilling city peoples' "country house dream," the essay explained. The essay observed that farmers often exploit regulations allowing greenhouses to contain extra rooms to house workers by turning those rooms into hostels and rental houses for vacationers. The essay claimed that the long-term interests of maintaining farmland for food security outweigh the short-term interests of farmers and rural officials actually profiting from the land.

The conflict comes into clear focus in a pilot program to build upgraded sheds in agricultural fields launched in 2018--same year as the crackdown on "greenhouse villas"--in the Baiyun District on the outskirts of Guangzhou. The project's aim is to build modernized structures to replace crude shacks haphazardly constructed from corrugated steel, plastic sheeting, bamboo and other materials to house workers in farm fields and store tools. Authorities say they have built over 5000 new farm sheds in the last 3 years. The aim is to standardize the sheds, clean up trash, prevent damage to farmland and improve rural scenery.

Upgraded field sheds look a lot like vacation cabins. Source: Baiyun District.

The new farm sheds in Baiyun District look quite a bit like the illegal vacation cabins built by the illegal projects described above, and it's not hard to imagine a project to construct such farm sheds on the outskirts of a wealthy city morphing into another disguised rural tourism development venture (funded with subsidies for the "pilot" project).

Baiyun officials ordered village and town leaders to use the new sheds only for agriculture, have zero tolerance for abandoned farmland, and not to change the use of land without approval. Village leaders were also instructed to clean up trash and waste in fields and  roadsides, and were urged to promote agricultural tourism and leisure and "creative experience agriculture." 

Not noted by the greenhouse designer's essay cited above is that farmers who control the land (temporarily) have no means of profiting from the "long-term interests." They cannot sell the land and can only mortgage it using the value of crops produced from the land. 

This "food security" policy prevents farmers from reaping the full commercial value of their land and prevents city people from achieving their "country house dream." 

China Cotton Bubble Pops

Chinese cotton prices have been in a downward spiral since May. In early July, the reported by the National Bureau of Statistics was down 17 percent from its March peak. Last Wednesday the September cotton contract on the Zhengzhou commodity exchange fell 7 percent and the yarn futures price fell 4 percent. A Ministry of Agriculture analysis last month pointed out that Chinese cotton prices are now at an unusually low level below the cost of cotton imported from the world market at a 1-percent "sliding scale" tariff.

This summer's price collapse reverses last year's steep gains when Chinese factories roared to life as the world emerged from lockdown, reviving textile orders. Analysts say Chinese textile orders evaporated in recent months as extended covid lockdowns in China closed many retail outlets in 2022. The demand hit was magnified as China's latest virus lockdowns came during the usual seasonal lull in demand. Companies are slowing their cotton purchases to an as-needed basis with a new cotton harvest set to come on the market next month. A U.S. ban on Xinjiang cotton products that came into effect last month put further downward pressure on Chinese textile production and cotton demand.

Statistics show that 5.8 million tons of Chinese cotton was processed by gins during the 2021/22 marketing year as of July 14, but only 3.75 million tons had been sold. Analysts say 1 million tons from last year's harvest in Xinjiang remains unsold, and there is likely to be a similar surplus from the 2022 crop.

China's cotton reserve corporation has stepped in to buy up cotton for reserves this month as a means of sopping up excess supply, but the expected volume of 300,000-to-500,000 metric tons is not enough to solve the problem, analysts say. 

Processors are facing losses as prices fall below the cost of cotton they purchased after last fall's harvest. Xinjiang cotton-processor Xinsai Corporation reported a net loss of 58 million yuan in the first half of 2022, a reversal of its 4.6-million-yuan profit in the first half of last year. The company cited weak demand from European and U.S. companies and the U.S. ban on Xinjiang cotton for the losses. Companies are under financial pressure as they have large backlogs of inventory financed by bank loans.

China's farm policy bank, the Agricultural Development Bank of China, finances 60 percent of the cotton sold in Xinjiang. The bank has lent a cumulative 287.8 billion yuan (about $42 billion) since 2014 to finance cotton trade. In 2021 cotton held in reserves for 8-to-10 years was still being sold. The Bank reports adding to its cotton industry loan portfolio 14 billion yuan (over $2 billion) to finance land transfers for cotton farms and 156.9 billion yuan (about $25 billion) in antipoverty loans to support 181,900 poor people.

In fact, China's textile industry has been in slow decline for five years. Official figures show that production of yarn fell from 31.9 million tons in 2017 to under 26.2 million tons in 2020. The boom during 2021 was an aberration. The data show that April 2022 yarn production was down 8.9 percent from a year earlier and May production was down 7 percent.

Xi Jinping visited Xinjiang last week to show support for China's policies in the region. He visited a cotton farm and a museum run by the Xinjiang Production Corps to learn about its land reclamation and its historic role as a military garrison in the border region.

Xi Jinping in shades and always socially distanced. Officials outnumber farmer by 6:1.

Racism Rants Hide China's Feed Demand Problem

The Economist magazine provoked a furious reaction from China's State propagandists when it tweeted last week that the world's pigs consume more grain than all the people in China. Chinese State media conflated the adjacency of pigs and Chinese people in the same sentence to claim the Tweet was racist. Nearly everyone commenting on Twitter echoed the Chinese accusations of racism, thus successfully diverting attention from the inconvenient truth that China's hungry pigs (and chickens) are in fact contributing to tight grain supplies. 

On June 23, 2022 The Economist ran a brief story, "Most of the world's grain is not eaten by humans," subtitled "Nearly half of all grain is either burned as fuel or eaten by animals" to provide some perspective on this year's tight grain supplies and high food prices. 

China's stridently nationalist Global Times was outraged over The Economist's tweet that "In 2019 pigs ate 432m tonnes of grain, 45% more than the people of China did," claiming that the comparison implied that Chinese people are pigs. China Daily cited the tweet to warn that western countries should beware of the rise of racism. Tweets from Chinese State TV and China Daily (correctly labeled by Twitter as "affiliated with Chinese state media") intoned that "Humans don't write like that" and "The Economist magazine is clearly owned by a drove of pigs. Racist pigs." (Note that Twitter is banned in China and the subscription fee for the Economist is quite high.)

The Economist was chastened, explained that it did not intend to offend, edited the article and removed the tweet. The Global Times however, was not satisfied, criticizing The Economist's lack of apology and insisted that the magazine "...failed to convince Chinese netizens outraged by such racist and dehumanizing language." 

The claims of racism were meant to deflect attention from the fact that China is the largest grain importer and its livestock are indeed responsible for the country's skyrocketing grain imports. 

China's Agriculture Ministry data indicate that Chinese livestock did in fact eat slightly more than Chinese humans in 2021. According to grain supply and demand data in China Agricultural Development Report (2022-2031) released at the Ministry's April outlook conference, humans in China consumed 305 million tons of grains and soybeans in 2021, while animals in China consumed 308 million tons (242.45 million tons of grains and about 66 million tons of soybean meal).

During May 2022--in response to news about farmers cutting their wheat fields as cattle feed--Chinese state media outlet Yicai published an article titled "Behind the Wheat Silage Incident: Food Grain Surplus and Insufficient Feed Grain" observing that China has excess supplies of wheat and rice, but a growing deficit of feed grains. Yicai remarked, "Our country's agricultural supply and demand has a persisting conflict between an expanding deficit of grain for animal feed use and excess production capacity for food grain." Yicai noted that reserves of corn--the main feed grain--had been emptied out in 2020, while 50 million tons of wheat had been auctioned to flour, animal feed and livestock companies, and 20 million tons of rice had been fed to animals. 

What Chinese propagandists don't want the world to notice in this year of tight food supplies is that animals are responsible for their country's grain import boom. China's imports of major grains surged from under 20 million tons to about 65 million tons between 2019 and 2021. Corn, barley and sorghum--all used as animal feed--accounted for most of the surge. In addition, a large portion of imported wheat last year was used as feed. About half of China's 2021 rice imports was composed of broken rice which was probably used mainly as feed. This excludes the 95 million tons of soybean imports--about 70 percent of which ends up as animal feed. It also excludes nearly 2 million tons of hay imports last year and other items used as feed like whey products, dried peas, and cassava.

Source: Chinese customs data; calendar years.