Xi's "New Journey" to a Strong Agricultural Country

Xi Jinping laid out his vision for building a "strong agricultural country" in the next phase of China's socialist modernization in the communist party's second century of ruling China. The "important speech" given at the December 24, 2022 Rural Work Conference in Beijing was meant to kick off a "new journey" in China's building of a "strong Socialist country" [English in Xinhua]. The speech was riddled with insecurities and contradictions as the country's growing demand for food clashes with the country's shortage of resources, lack of innovation and the leadership's insistence on Maoist dogma and self-reliance.

Xi's high-profile speech is unusual for the rural work meeting which is usually conducted with no fanfare. Xi also brought along his new henchmen Li Qiang, Wang Huning, Han Zheng, Cai Qi and Ding Xuexiang. Xi made outgoing Premier Li Keqiang--snubbed for Xi's new leadership team--give a speech extolling Xi's remarks. The Ministry of Agriculture and Rural Affairs posted a pledge by Minister Tang Renjian to study the speech carefully and another in which a series of officials praised the speech. 

Worries about food insecurity were front and center in the speech. The major issue for building a strong agricultural country identified in Xi's speech was to maintain a steady secure supply of food and important ag products. When Xi came to power he immediately espoused a new version of the food security strategy that jettisoned the 5% maximum import ceiling set in 1996. Xi's strategy includes vague slogans about maintaining basic self-sufficiency in grains, boosting domestic output through technology and allowing "moderate" imports. Under Xi's watch grain imports have nevertheless exploded. Imports of grains and soybeans (China's definition of staple foods) were equal to 23.6% of domestic grain output in 2021. Supplies of "nonstaple" foods like meat, milk, and vegetables have also become concerns. 

Note: China classifies cereals and soybeans as staple foods

One "new" initiative Xi announced is a campaign for a 50-million-ton increase in grain production capacity--an idea cut-and-pasted from a 2008 food security plan formulated during Hu Jintao's reign. The target equals a 7-percent increase from the 686.5-million-ton output in 2022. No time frame for achieving the goal was revealed. China has no new land available, so the strategy is to prevent further loss of farmland and boost the productivity of the existing stock of land. Moreover, authorities have pledged to cut back on excessive use of chemical fertilizer and pesticides. 

The 1.8-billion-mu (120 million hectare) "red line" for cultivated farmland must not be breached, and more money must be spent on bulldozing the countryside to build flat "high standard" fields with accompanying roads, irrigation canals and power lines. Reasonable profits for farmers must be maintained to encourage production despite ever-rising costs. Xi obliquely warns local officials they will be punished if they fail to meet food production targets. On the demand side Xi insists on reducing food waste.

Xi also pledged to pursue low carbon agriculture, but orders to boost grain yields are sure to require more carbon-based fuel and electricity for the foreseeable future. Xi didn't mention mechanization but other strategic plans emphasize mechanization with a focus on fully mechanizing rice transplanting and designing machinery for cultivation and harvest of hilly fields and intercropped corn and soybeans. "High standard" fields entail building roads to facilitate access by machinery, and diesel fuel and electricity are needed to power pumps and other mechanized irrigation equipment. Plastic sheets to mulch fields and cover cold frames are petroleum-based. Other pledges to automate livestock barns and greenhouses will boost electricity consumption and plans to concentrate pig production in the hinterlands, to supply vegetables to cities from far-flung production bases, and adding cold storage warehouses, trucks and rail cars throughout the supply chain also requires more fossil fuels. 

Despite his self-styled role as a leader of globalization Xi demands that China remain self-reliant in agriculture, North Korea-style. Xi said China cannot follow any other country's model, and Chinese food bowls must remain firmly in their own hands. Fast growth in crop yields are necessary to achieve greater production, but Xi proclaimed at the rural work conference three years ago that China cannot rely on imported seeds. Instead, Chinese companies must duplicate the expensive R&D done by multinational companies to develop their own seeds. Xi acknowledges the fragmentation and weak innovation in the seed industry by criticizing low-level duplication that characterizes much of the industry's R&D and calling for more cooperation between companies.

Xi has a plan to send city technicians, administrators, businessmen and students to rural areas to assist with revitalization and modernization that sounds like the Mao-era "sending down to the countryside" during Xi's youth.

Two decades ago urban Chinese residents were enriched by gifting them with cheap housing and allowing them to buy and sell properties at will. For rural people, Xi promised more tentative experimentation in trading of rural land rights for housing, farmland and commercial parcels. In his speech, Xi insisted that the collective land ownership and household land contracting system will remain in place and the fragmented distribution of plots made 40 years ago will remain frozen in place another 30 years. The rights to use the land are separated from the ownership rights, in theory allowing plots of land to be consolidated by family farms, cooperatives, trusts, and agribusinesses, but progress on this front has also been slow. Another of Xi's rural thrusts is to firm up industry chain links from farms to processors and distributors through rural industrial parks and towns or villages focused on growing, processing and marketing local specialty products.

What Xi didn't mention was how much it will cost for Chinese people to clutch their food bowls so tightly. A Ministry of Finance report in December 2020 told the National Peoples Congress that 16.07 trillion yuan (about $2.5 trillion) had been spent on agricultural and rural affairs from 2016 to 2019, with an annual growth rate of 8.8 percent.

Most of the rural spending is laundered through loans made by the Agricultural Development Bank of China, a policy bank that makes loans to finance grain, cotton and vegetable purchases and--in recent years--rural development projects. The bank's outstanding loan balance has grown rapidly and is now near $1 trillion.

Source: annual bank reports.

An unusually candid essay by a retired National Development and Reform Commission (NDRC) official two years ago fretted that many loans financing irrigation projects are in arears, funding for high standard fields is insufficient, and many field construction projects are built in a shoddy manner. He also voiced growing worries about a possible "landslide" in grain output that could result from farmers' shrinking net returns. Notably, the Commission still has not published its farm production cost and return data for 2021. The NDRC author called for finding ways to boost subsidies without violating WTO rules. 

The fragility of China's poverty reduction program--achieved by pumping huge bank loans into poor areas and twisting arms of companies to invest there--is reflected in Xi's directive to prevent villages and towns from slipping back into poverty.