China’s agriculture

‘They help take some of the risk out of a tremendously risky business,’ he said: Profile of China’s agricultural industry
China Economic Information
BEIJING — Following is a profile of China’s agriculture for the year of 2006 updated on Feb. 5, 2007.
China takes food supply security as its top priority for the country’s agricultural and rural economy development in the 11 Five- Year Plan period (2006-2010).
Despite the fact southwest China’s Sichuan province suffered severe droughts in 2006, the occasional natural disaster would not threaten the country’s food security.
The country’s grain production surpassed 490 million tons in 2006, marking a third year of consecutive growth since 2004. In 2005, grain output was 484.01 million tons, up 14.54 million tons or 3.1 percent from 2004. * Despite a bumper harvest in 2006, the prices of major grain crops, including wheat, corn and soybean, are on the rise, mainly due to government controls and the upward movement of prices on the international futures market.
Experts noted that production increase doesn’t necessarily lead to market oversupply, as grain stockpile by local government and state reserve granaries have surged by a large margin. Since Nov. 25, 2006, the government has allowed increases in the supply of grain by releasing some of its national stockpile to offset price hikes. * In addition, the agricultural products processing industry also imposed a rapidly rising demand on grain.
In 2006, civil affairs departments gave subsistence allowance valued at 4. 16 billion yuan (533 million U.S. dollars) to impoverished rural people, up 64 percent over 2005.
Per capita net income of rural resident increased 10.2 percent from 2005 to 3,587 yuan in 2006. Excluding price factors, the real income growth stood at 7.4 percent.
The Chinese government plans to improve the farmers’ self- development capabilities by providing tailored training to 100 million farmers, in a bid to maintain an annual income growth of more than 5 percent in the 2006-2010 period.
In the first eleven months of 2006, Chinese township enterprises realized a cumulated added value of 5.164 trillion yuan, up 12.88 percent year on year, among which 3.6820 trillion yuan was achieved by the industrial sector, and 704. 6 billion yuan for farm products processing industry, up 13.06 percent and 16. 57 percent year on year.
The sustainable and healthy growth of township enterprises is brought by rising fixed assets investment, export and favorable policies.
Township enterprises are encouraged to create more job opportunities for farmers and bring more profits to farmers.
The government will continue to improve agricultural scientific innovation and application in an effort to improve agricultural output and products processing efficiency.
The agricultural processing industry saw an average annual growth of 15 percent from 2000 to 2005. It has become an important means of providing employment opportunities and raising farmers’ incomes.
The country sets a 12 percent annual growth target for the agricultural products processing industry during the 2006-2010 period.
The output value of the industry is expected to reach seven trillion yuan (about 900 billion U.S. dollars) by 2010.
In the Jan.-Nov. period of 2006, the country saw its agricultural products import and export value increasing by 12 percent and 13.8 percent year on year respectively to reach 29.08 and 28.13 billion US dollars, with a combined trading turnover of 57.21 billion US dollars, up 12.9 percent over 2005, and trade deficit declining from 2005’s 1.23 billion dollars to 940 million dollars, down 23.5 percent.
Proportion of deep-processed farm products increased in the export. In the first 11 months of last year, export of primary farm produce was 14.36 billion US dollars, up 6.7 percent year on year, while export of deep-processed products reached 13.44 billion US dollars, up 23.1 percent, accounting for 48.3 percent of the total export of farm produce, up 3.5 percentage points.
China’s farm produce exports to the United States grew by 34.1 percent in the first 11 months of last year to reach 3.38 billion US dollars, and exports to the European Union were up 25.4 percent year on year to 3.92 billion US dollars.
Due to Japan’s strict new standards for chemical residues, export growth to Japan slowed to 3.7 percent in the first 11 months, much lower than the 9.4 percent growth in the same period of 2005.
China had 20,200 enterprises exporting farm produce in the first 11 months of 2006, up 16.8 percent year on year. Some 544 non-state enterprises made export exceeding 10 million US dollars each, up 21.4 percent year on year.
In the first eleven months of 2006, China imported and exported 632,000 tons and 1.0836 million tons of rice respectively, up 51.6 percent and 75.2 percent, marking a net export of 451,700 tons.
In the first eleven months of 2006, China exported 2.604 million tons of corn, down 67.5 percent year on year, among which 65.6 percent or 1.71 million tons was exported to South Korea. Meanwhile, China imported 64,000 tons of corn, up 34 times. The US is the major source for China’s corn import.
The government will increase investment on infrastructure projects in rural areas, including agricultural machinery, rural transportation, drainage and irrigation facilities, etc, in an effort to improve farmers’ living conditions and help build a harmonious society in rural areas.
China will build more agricultural processing bases for grain, oil plants, fruit, vegetables, livestock and aquatic products over the next five years.
China’s grain production surpassed 490 million tons in 2006, which marks a third consecutive output growth since 2004. Cotton production surged 17.8 percent over 2005 to hit 6.73 million tons in 2006.
The country’s husbandry industry kept a growing momentum in 2006, despite some epidemic situation occurred. It is expected that meat production and poultry egg production would hit 80 million and 29.50 million tons respectively in the year, up 4.5 percent and 3 percent over 2005.
The country now has arable land of 1.95 billion mu or 130 million hectares, with per capita arable land of 1.5 mu or 0.1 hectare, less than half of the world average. To make things worse, the limited arable land is likely to decrease in the future. Water possession is one quarter of the world’s average.
China exported 31.03 billion U.S. dollars worth of farm produce in 2006, up 14.1 percent year on year, according to the Chinese Ministry of Commerce. As prices on world markets were much higher than domestic markets over the past two years, farm produce exports have been on the rise. The average export prices for garlic, apples, apple juice and canned mushrooms rose more than 20 percent last year.
China set three basic tasks for the country’s agriculture and rural economic development in the 11 Five-Year Plan period (2006-2010) . They are: ensuring an effective supply of farm products, increasing agriculture production efficiency and farmers’ income, and ensuring a harmonious development in rural areas.
As signaled from the central agricultural work conference in December, 2006, the development of modern agriculture is put top agenda of building a new socialist countryside.
Accordingly, the country will reform traditional agriculture, improve labor efficiency, resources utilization efficiency, and develop produce farm deep- processing industry through technology application, education and training, etc.
China set it a goal to reach a minimum grain plowing area of 103. 33 million hectares by 2010 and a combined grain production capacity of 500 million tons. Cotton production hit 6.80 million tons annually in 2006-2010. Production of oil plants and sugar plants reach 32 million and 120 million respectively.
Despite three consecutive years’ bumper grain harvest, the country still faces the possibility of a 4.8 mill

ton grain shortage in 2010, almost 9 percent of the country’s grain consumption,
according to the Study Times, a newspaper affiliated to the Party School of the Central Committee of the Communist Party of China.
China has set a 12 percent annual growth target for the agricultural products processing industry during the 2006-2010 period,
with output value of the industry expecting to reach seven trillion yuan (about 900 billion U.S. dollars) by 2010.
The Chinese government will extend its subsistence allowance system for poor rural people across the whole country in 2007. Currently, twenty-three provinces have already established the subsistence allowance system in rural areas benefiting 150.9 million people. The other provinces and autonomous regions, including Yunnan, Guangxi, Qinghai, Ningxia, Hubei, Xinjiang, Guizhou and Tibet, are expected to finish procedures for system.
In view of the country’s limited per capital agricultural resources, the country will mainly develop labor-intensive farm products, such as husbandry products and horticulture products. In the 2006-2010 period, export of labor- intensive farm products will maintain its competitive advantages.
The country’s Ministry of Commerce wants to see farm produce exports grow by at least seven percent a year so a total of 38 billion U.S. dollars will be reached in 2010.
In order to realize the goal set above, the country will try to consolidate its export position in traditional markets, such as Japan,
Hong Kong and South Korea. Meanwhile China will develop potential markets in ASEAN, EU and US, and explore emerging markets in the Middle East, South America, Central Asia, etc.
According to the country’s 11th Five-Year Plan (2006-2010) for agriculture and rural economy development, the country will make efforts to optimize agriculture industry, with breeding industry taking up 50 percent of the total agricultural output value and the value of farm produce processing industry 1.5 times that of agricultural output value.
Rural employment structure will be improved, with township enterprises providing new job opportunities for 2.5 million people annually and transforming an additional 5 million farmers per year to work in cities.
The government will not allow any more land reclamation at the expense of forestland or land reclamation that destroys lakes.
China will continue to implement the minimum purchase price policy on major grain products in key growing areas in order to strengthen the macro control of grain and promote steady development of grain production.
According to the Catalogue of Industrial Guide for Foreign Investment promulgated by the State Development and Reform Commission and the Ministry of Commerce revised on November 30, 2004, and effective as of January 1, 2005, China encourages foreign investment in the following field:
1. Improvement of low and medium yielding field
2. Planting technology, without social effects of pollution, of vegetables (including edible fungus and water-melon), fruits, teas and serial development and production of these products
3. Development and production of new breed varieties (excluding those gene- modified varieties) of fine quality, high-yielding crops such as sugar-yielding crops, fruit trees, flowers and plants, forage grass and related new techniques
4. Production of flowers and plants, and construction and operation of nursery base
5. Reusing in fields and comprehensive utilization of straws and stalks of crop, development and production of resources of organic fertilizers
6. Cultivation of traditional Chinese medicines (equity joint ventures or contractual joint ventures only)
7. Planting of forest trees (including bamboo) and cultivation of fine strains of forest trees
8. Planting of caoutchoucs, sisals and coffees
9. Breeding of quality varieties of breeder animals, breeder birds and aquatic offspring (excluding precious quality varieties peculiar to China)
10. Breeding of famous, special and fine aquatic products, as well as cage culture in deep water
11. Construction and operation of ecological environment protection projects preventing and treating desertification and soil erosion such as planting trees and grasses, etc.
Foreign investment to the following sectors is restricted:
1. Development and production of grain (including potatoes), cotton and oil- seed (Chinese partner shall hold the majority of shares)
2. Processing of the logs of precious varieties of trees (equity joint ventures or contractual joint ventures only)
Foreign investment is banned to these areas:
1. Cultivation of China’s rare precious breeds (including fine genes in plants industry, husbandry and aquatic products industry)
2. Production and development of genetically modified plants’ seeds
3. Fishing in the sea area within the Government jurisdiction and in in-land water
Major commodity grain production bases of China are Jilin, Heilongjiang, Shandong, Hubei, Hunan, Anhui, Jiangxi, Henan, Sichuan and Shaanxi provinces.