The transformation of Chinese agriculture is generating huge potential implications for international agricultural markets, according to a major report issued last week that which says China's success in increasing agricultural production and in feeding its growing population in the past three decades "has been remarkable."
The report, the OECD-FAO Agricultural Outlook 2013-2022, deals with the world outlook for food production. However, it devotes a major portion to the history and prospects for China's efforts to attain agricultural self-sufficiency.
As fast as China has reformed its agricultural sector,its need for food has increased faster as its 13 billion people improve their incomes and demand higher-calorie diets. Import dependence has doubled from 3 percent to 6 percent from 2001 to 2011. The net trade deficit in agriculture and food widened further in 2012 to US$31 billion, up from US$18.5 billion, opening opportunities and expanding markets for food-surplus like the United States. Achieving high self- sufficiency for these commodities has been attained by importing other crops/products which compete for land. For example, China has become the world's largest importer of oilseeds, with a market share in 2011-12 estimated at 54 percent, accounting for more than 50 percent of consumption by 2011.
These imports have effectively freed some 28 million hectares of harvested land, as measured by oilseed yields. Similarly for cotton, sugar, and root and tuber crops, China's net import position has deteriorated as competition for land has been steered toward food security commodities.
For livestock products, China has maintained near self-sufficiency for all meats with net exports within 1-3 percent of domestic consumption. However, even with net trade at less than 1 percent of consumption, pig meat imports were some 600 000 tonnes in 2012; such imports are large in the context of global pig meat trade of about 7.8 million tonnes. In recent years, following China's melamine crisis and restructuring of its milk and dairy processing sector, imports of dairy products have increased substantially.
The country has also paid a huge price at the same time it has sought to reach agricultural self-sufficiency. Vast amounts of agricultural land in the country's most fertile growing regions have disappeared under urban development. Pollution has been overwhelming, as evidenced by a report in May that 44 percent of the rice samples in Hunan Province were contaminated with cadmium. That has spurred a run on rice in Hong Kong supermarkets by visiting mainlanders seeking to find safe products, much as they have done in the past over milk powder for baby formula.
Farmers have made production gains by pouring vast amounts of fertilizer and pesticides onto the soil which have washed into rivers and eventually into larger bodies of water, rendering them unusable.
Nonetheless, progress has been remarkable, with agriculture output growing by 4.5 times since 1980, contributing to substantially higher food availability.
In 2011, the Chinese economy, as measured by its gross domestic product (GDP), was almost 20 times larger in volume terms than it was in 1980. The agricultural sector, as measured by FAO's net agricultural output index grew by 4.5 times over the same period. The rapid growth in both national income and agricultural output has contributed to substantially higher national food availability and a much improved access to food. The details surrounding such success has many dimensions, including a changing policy environment, increased national investments, and improved factor productivity, all amid a rapidly changing rural, demographic and economic landscape, regional differences but also critically rising land and water constraints.
Cultivated land area fell from 129.8 million hectares in 1997 to 121.7 million hectares in 2008, a 6.2 percent decline. During the 10th Five-Year Plan (2001-2005) cultivated area decreased mainly due to planned ecological cropland conversion. However, the 11th Five-Year Plan (2006-2010) arrested this decline and established a legally binding minimum - a redline area of 120 million hectares.
"However, pressures from increased urbanization will likely prevent any expansion in arable area, and with multi-cropping rates near their maximum, competition for land will remain high," the report points out.
The quality of cultivated land is also deteriorating, with70 percent in low-yield farmland. Because of serious water and land erosion and soil salinization/acidification, land degradation has risen to more than 40 percent of the total arable land area. In the northern oasis agricultural area, salinization problems have become increasingly prominent. In the Ningxia Yellow River Irrigation area, salinization has become one of the important issues affecting agricultural production, and the northern part of Yinchuan saline-alkali soil affects more than 49 percent of the total cultivated area.
Second, wind erosion and desertification is increasing. Affected by global warming, reduced rainfall, depletion of surface runoff and groundwater levels, the northern region, especially the northern farming and animal husbandry areas, faces very serious soil wind erosion and desertification problems. Soil pollution has become serious in many areas.
In city suburbs, farmland suffers pollution from sewage, garbage and other pollutants. Near mines, farmland suffers pollution from slag and harmful mining drainage. Farmland near factories suffers from pollution by industrial emissions and sewage. According to recent statistics, nearly 20 percent of the arable land in China is polluted to various degrees. These indicators suggest that productivity will be affected and that the costs of production may need to rise to repair environmental damage.
Arrayed against these problems, the rapid growth in both national income and agricultural output has contributed to substantially higher national food availability and a much improved access to food. Agricultural growth accelerated rapidly after the economic and rural reforms in the late 1970s.
Since 1978, China's production of cereals, coarse grains and oilseeds increased 93 percent from 305 million tonnes in 1978 to 590 million tonnes in 2012 with cotton output rising by a factor of 2, oil crops 5, sugar crops 4, and fruits by factor of 34. The sizeable gains in crop output have been achieved despite the decline in arable land area.
Over the period, yields have increased at trend rates for wheat at 2.3 percent p.a., maize at 1.7 percent p.a., rice at 1.2 percent p.a., and soybeans at 1.2 percent p.a. Multiple cropping - the ratio of total area sown to total arable area, reached a high in 2011 at 1.35. Production of livestock and fish products has increased significantly, meat by a factor of 8 times, milk 16, and aquatic species by 11 times with those from aquaculture growing by 31 times since 1978.
Real net investment in farm capital has increased at a trend rate of over 9 percent per year as the government has attached a high importance to improve and modernize agricultural production systems. The power of agricultural machines increased by over seven-fold in the past three decades. The number of large and medium-size farm tractors, rice transplanters and corn combines in 2012 were 4.9 million, 5.1 million and 2.3 million respectively. Mechanization in sowing and reaping has exceeded 55 percent, not only for wheat, but also for rice and corn.
Infrastructure for irrigation and water conservation has improved significantly. By 2011, the effective area with irrigation reached 62 million hectares, 37 percent above that in 1978. The development and improvement of infrastructure in irrigation and water conservation have enhanced the ability of preventing natural disasters, providing a solid foundation for assuring agricultural production capacity.
The contribution of scientific and technological progress in 2012 to growth in agriculture has reached 54.5 percent, doubling from 27 percent in the beginning of rural reform. Some important agricultural technologies have emerged with breakthroughs in some core technologies such as hybrid rice, corn, and rapeseed, and transgenic anti-insect cotton. The coverage of improved varieties of farm crops has now exceeded 95 percent in China. Agricultural science and technology has increased the prevention of plant and animal diseases and control for insect pests, thereby decreasing crop and animal losses. Through research and innovation, agricultural and renewable resources are better managed, promoting sustainable development, and resource conservation.
These changes have driven up rural incomes continually and living standards have been increased substantially. Based on constant prices, per capita annual income of rural residents in 2011 was ten times higher than that in 1978. The major factors that contributed to the income growth included higher agricultural growth, better wages income for migrant workers, higher incomes from non-agricultural activities in rural areas, the elimination of the agricultural tax and increased agricultural subsidies.
That has meant that poverty has fallen dramatically, from 64 percent in 1992 to 12 percent in 2009, enabling China to reduce its number of undernourished people from 254 million in 1990, or 21 percent of the population, to 158 million in 2010 despite the addition of about 196 million people to its population. As a result, China's per capita availability of calories and protein may be approaching the stable equilibrium levels for these components which are characteristic of OECD countries.
The food security situation in rural China has thus improved substantially, corresponding with the rise in living standards. In real terms, per capita annual income of rural residents in 2011 was 10 times higher than in 1978. With the growth of real incomes, consumption patterns have changed considerably.
For fishery products, China is a net exporter, and by far the leading fish exporter in the world. During the last few years, China has also increased its fishery imports significantly for both domestic consumption and for its fish processing industry, as a growing share of its fishery exports consists of reprocessed imported fish.
"The success of China's agricultural sector has been remarkable," the report notes. "However, recent developments in its market situation raise the questions about whether China's agriculture is at a fundamental cross road in its relationship with international markets and about how emerging forces will shape its development over the next decade. Much will depend on how rising constraints to China's agricultural production evolve, and in particular on the policy environment applied to the sector.
The Outlook projects a further opening of markets in the next decade, both for China, as for many other countries. As markets are increasingly integrated, global information sharing to support policy cohesion will be critical in best utilizing global resources to feed the world's population sustainably in the longer term.