China Dream: Farms Without Farmers

Chinese propagandists breathlessly describe "unmanned farms" (无人农场) as "the new model for future agriculture," "the path to smart agriculture," and a solution to the problem of who will plant the crops in the future. They envision "farming without going to the fields" via an interconnected web of driverless tractors, seeding, planting and spraying equipment guided by satellites, drones, sensors, and irrigation pumps. China's ideal is to remove human decisions from the farming process by using sensors, big data, artificial intelligence, and other "smart" farming operations.

Chinese planners love schematics and fanciful engineering
drawings showing complex, colorful layouts.

China has been excited about "smart" farming for a while, but the unmanned farm idea seems to be new. A "Rural Revitalization Plan 2018-22"and a May 2019 "digital rural development strategic outline" called for development of smart agriculture, and the 2021 14th 5-year plan called for a digitized overhaul of agricultural production business and management using smart agricultural methods. In May 2022, China released a smart agricultural machinery technology road map. The 2020 plan for digital countryside included lots of plans for information technology and big data in farming, but the only reference to "unmanned farms" was a description of such farms in Europe, North America, Australia, Japan and South Korea. 

The first automated farms in China were built in 2018 in Shandong and Jiangsu Provinces. By the end of 2022 there were over 100 unmanned farm projects in 22 provinces covering 300,000 mu (20,000 hectares). The number doubled between 2020 and 2022. According to an "Unmanned Farm Development Report" issued in 2023 China's unmanned farming is in its initial stages of development in which government demonstration projects are set up on state-run farms to inspire wider adoption. The 5-year plan aims to "fully popularize" intelligent agricultural machinery and equipment for production of the main food crops in large contiguous fields in plains regions (that is, in flat places...presumably it's much more difficult if not impossible to implement full automation in hilly areas).

State farms in Heilongjiang and Ningxia Provinces are the featured models. Eight unmanned farms with nearly 20,000 pieces of smart farming equipment are operated by parts of the sprawling Beidahuang Group--the commercial arm of Heilongjiang's State Farm system along the Russian border. The project is supported by a collection of agricultural universities, the national meteorological satellite center, state-owned phone company China Mobile, real estate giant Country Garden (now in financial straits), several laboratories and an industrial park. 

The Ningxia Province State Farm group began its unmanned farm project in 2022 using 30,000 mu (2000 hectares) of farmland. In Hebei Province's Handan City they claim to have 25,000 mu operated as unmanned farms. Unmanned farming projects are also being set up by provincial and municipal agricultural officials in wealthy coastal regions of Zhejiang Province and Shanghai.

A model "unmanned" rice farm where no peasants work,
but lots of visiting rural officials stand around watching and taking photos. 

Liberation Daily said last month that the Shanghai government work report's plan to "build 30,000 mu of grain-producing unmanned farms" got a lot of attention. A Shanghai municipal plan for "high quality agricultural development 2021-25" aimed to set up digitized machinery management organizations and create 100,000 mu of unmanned grain farms. 

China is not a leader in smart farming; they are trying to keep up with developed countries. Liberation Daily said the project is inspired by a "new industrial revolution" involving big data, internet of things, and artificial intelligence propelling the "smart agriculture" era in Europe, America, Japan and South Korea. Foreign equipment will likely be excluded from China's smart farms, and the data collected will be walled off from foreign companies. China's national Beidou satellite navigation is mentioned as a core part of each unmanned farming project. Photos show Chinese-brand equipment. Liberation Daily emphasized that the value of the data collected by smart farming equipment may be even greater than the value of the farm products they produce. 

The unmanned farm project continues the century-old fascination of Chinese communists and their Soviet forebears with tractors, giant farms, and untested theories such as Trofim Lysenko's weird approach to breeding. The excitement over unmanned farms reflects a parallel contempt for troublesome peasant farmers who can now be replaced by young men with college degrees wielding tablet computers. The idea of eliminating labor from farming is appealing as China's population has tipped into decline and as its peasants age and lose interest in farming.

The unmanned farm concept also fits neatly into a new Xi Jinping-inspired "Thousand Village Demonstration and Ten Thousand Village Rectification" to overhaul the countryside by drawing up planned villages surrounded by vast fields, irrigation canals, electric lines and greenhouses.

Descriptions of the unmanned farm projects rattle off huge percentages of water, fertilizer, and pesticide that will be saved. They claim to be able to raise production by 10%. No one mentioned what might happen if the electricity fails, if the internet goes down, or if the system is hacked. There is no mention of the cost of purchasing, installing, maintaining the equipment, nor the cost of hiring operators.

The unmanned farms promise to increase farmers' income despite the prospect that none of them will be working on the farms anymore. 

China's ideal: a guy in spectacles running an unmanned tractor
from a cell phone.

China's rural bank problem

China's rural banks are a source of potential instability worrying leaders at this year's "two sessions" legislative conclave...and possibly a canary in the coal mine of a financial meltdown. 

Beijing Shangbao reported last week that finding an "orderly solution for risks in medium and small financial organizations is of the utmost importance in current financial work." Premier Li Qiang's government work report identified resolution of risks related to small and medium financial institutions alongside real estate and local government debt as keys to maintaining economic and social stability. Among small and medium financial institutions, rural banks have the most prominent problems.

China Banking and Insurance News reported that rural banks had nonperforming loans totaling 754.6 billion yuan at the end of 2022 and a nonperforming loan rate of 3.22%--more than double the rate for larger Chinese banks. Some rural banks have already refused to pay depositors, leading to protests. Authorities already undertook a huge consolidation of rural banks earlier this year. 

Two groups of rural banking institutions were set up in reforms 2 decades ago meant to clean up an earlier financial mess and to address the lack of lending for rural small businesses and farmers. A sprawling system of "rural credit cooperatives"--largely insolvent in the early 2000s--received injections of state capital and were merged into provincial or regional "rural commercial banks" and "rural cooperative banks." A network of village and town banks were set up by urban banks and foreign banks.

The fundamental problems of a small, fragmented rural customer base with few liquid assets persisted, and the countryside is riddled with debt.  Financial experts say rural Chinese banks would be unviable without subsidies. Many are plagued by mismanagement and economic slowdown in rural regions; the pandemic tipped many into crisis. With paper-thin margins, rural banks were tempted to offer high-yield financial products outside their rural mandate. Some went bust; some managers fled the country with bank funds in their suitcases.

There are likely a lot more problems lurking in rural China's finances. A hot topic at last year's "two sessions" was a report revealing that Chinese villages were in debt to the tune of 900 billion yuan (about $125 billion). Based on a 2019 Ministry of Agriculture survey, news outlet Yicai called the debts "heavy baggage" for village collectives and a potential "stumbling block to rural revitalization." Another outlet confirmed that its investigations found debts were common in villages all over the country, in both rich and poor areas. A Sichuan Daily article 4 months ago reported that a survey of 48 villages showed persistent problems with village debt despite a 12-year campaign by provincial authorities to resolve the debts. A local official in Shandong Province wrote that "village debt is a microcosm of rural social conflicts and problems." Debts arise from failed village-operated pig farms and other business ventures, road-building projects, covid control, poverty alleviation projects, and decades-old obligations for unpaid taxes.

The Agricultural Development Bank of China (ADBC)--a government-run rural policy bank--likely has a higher nonperforming loan rate than it claims. ADBC has participated in 3 rounds of the China banking regulator's pilot program that moves bad loans to take them off the books. ADBC was created 30 years ago to finance procurement and storage of grain, oilseed and cotton and has broadened its portfolio to include rural development and industrial parks. ADBC's soaring loan balance seems worrying. The ADBC loan book reached 8.79 trillion yuan ($1.23 trillion) in 2023, up 1 trillion yuan each of the last two years and triple the balance 9 years ago. ADBC lending has grown much faster than the agricultural sector. The ADBC loan balance is now 93% of the annual value of agricultural GDP, up from 46% in 2013 and 33% in 2004.

Source: annual reports of Agricultural Development Bank.

In 2022 ADBC lent 407.8 billion yuan to finance procurement of grain, cotton and oilseed purchases and 94.6 billion yuan to finance 23 million metric tons of imports. ADBC said it financed 64 percent of China's grain purchases in 2022. Interest on ADBC's loans is largely paid by government subsidies for holding reserves, but recent loans are probably underwater due to falling grain and oilseed prices. The value of grain purchased at high prices in 2022 has shrunk with grain prices falling, so it will be impossible to repay the principle on the loans by selling the grain. Income from giant grain logistics projects, poverty alleviation and construction of apartment buildings to resettle displaced rural people is unlikely to be sufficient to repay the interest or principle. 

More People Are Dying in China, Stats Bureau Says

We know Chinese folks don't want to have babies, but it turns out Chinese people are dying in unprecedented numbers as well. An extra 11.3 million people died in 2023. Males and rural people are disappearing at the fastest rates. 

China's birth rate was record-low in 2023 but its death rate was also record-high as its population plunged by 1.48%, according to the National Bureau of Statistics. This is the second year China has reported a drop in population (last year it dropped 0.06%). The plunging birth rate is the main factor pushing China's population over the cliff's edge, but China's people are also dying faster. 

China's birth rate fell to 6.4% in 2023 as the country recorded 9.02 million births. That was down more than half from the rate in 2016 and almost 17 percentage points less than the 1987 peak of 23.3%.

China's death rate has been more stable than its birth rate, but there's a clear upswing in deaths over the last 3 years.  

Source: Data from China's National Bureau of Statistics and 2023 Statistical Communique.

The death rate was steady before suddenly creeping up to 7.18% in 2021, 7.37% in 2022, and 7.87% in 2023. These are all record highs. China's death rate was 6.4%-6.6% during 1980-2005 and bumped to the previous record of 7.14% in 2011 before reaching an average of 7.07% during 2015-20.

For some reason Chinese people have been dying in greater numbers over the last 3 years. We can calculate the "excess deaths" by comparing the actual number of deaths with the number that would have occurred if Chinese people had continued dying at 7.07% per year as they had done during 2015-2020. China's statistics bureau reported 111 million deaths in 2023, but only 99.8 million would have died at the rate recorded during 2015-20. That's 11.3 million "excess deaths" in 2023. The calculations show "excess deaths" increased year by year, from 1.6 million in 2021, to 4.3 million in 2022, and 11.3 million in 2023. The 65-and-over folks comprised 14.2% of the population in 2023.

The aging of China's population does not explain the surge in the death rate. The proportion of people aged 65 and older was already rising (from 10% to 12.6% during 2015-20) without causing an increase in the overall death rate.  

China's population decline is hitting men more than women. In 2023 China's male population declined 1.74 million but its female population declined by only 340,000. The same disparity between male and female population change occurred in 2022 and 2021. The statistic bureau's data indicate that China lost 3 million males between 2020 and 2023 and gained 910,000 females over those 3 years. (The 2020 data look implausible, probably because that year's census provided some surprises that were massaged by the statisticians.)

China appears to be losing people mainly in the countryside. The population in cities and towns went up 12 million in 2023, but the rural population went down by 14 million. This is the first year that losses in the countryside exceeded gains in urban population. 

So it looks like there has been a rural disease epidemic striking mainly rural men, unreported civil war in the countryside, or a wave of executions of rural men. Or maybe the migrants who fled to the U.S. border were counted as dead. What's happening China?