Economic reform in China began over 30 years ago in the late 1970s. The first phase of reforms involved the decollectivization of agriculture in response to poor agricultural performance and constant food shortages. Prior to reform, the structure of the agricultural system was large, communal farms. The change from collective farming to farming on an individual basis meant allowing farmers to make their own decisions regarding crops and livestock and led to a boom in production. China's agriculture has grown by over 4.5 percent per year on average since reforms, well above the growth rates in many other countries.
Before the reform period, China constantly faced food crises, and the restructured agricultural system completely turned that around. China has 22 percent of the world's people and only 9 percent of the world's land. However, they have managed to provide enough food for their population, despite some issues with resource scarcity. Additionally, China’s success does not stop at the domestic level. China is the world’s largest agricultural economy, if you draw up a list of number one producer of agricultural products, there's a long list where China ranks number one; such as in pork, wheat, rice, tea, cotton, etc.
Starting in the 1990s, the Russian agricultural sector also went through reforms; this period is mainly characterized by a shift from a planned economy to a market economy. In contrast, while China focused on making farms smaller, Russia chose to keep its large farms together and under corporate control. Improvement for Russia came from Russian agriculture moving in the direction not of smaller farms but rather toward even bigger enterprises and operations. Farms now had to use markets and use their own initiative to obtain inputs, determine their level of production, and sell their output. Russia essentially shifted to a market-based system; markets replaced central planning as the main means of allocating inputs and output levels.
Initially, the privatization of Russian farms did not have a positive effect on production level - struggling to be profitable in the new market economy, many farms had to rely on subsidies and other government assistance to survive. Success eventually did come and is attributable to multiple sources, one being simple changes in management and operation to increase efficiency and productivity. Another is the development of agroholdings, which today, appear to be setting the highest standard for Russian agricultural performance.
The Russian and Chinese agricultural sectors will continue to grow and each respective country will have to make the appropriate changes to keep these sectors relevant and competitive in the global economy. Russia and China have seen success with their agricultural markets for contrasting reasons and that success has created a unique set of challenges for each country.
China faces both economic and social factors. Overall land reform has seen a positive outcome. While a decrease in the size of farms resulted in increased prosperity and a boost in production, changes in the global economy threaten that success. China has been a member of the World Trade Organization since 2001, and since then there has been a rapid expansion of both agricultural imports and agricultural exports. But membership in the WTO means that these farms, no matter how small, are all operating very close to world prices. This economic factor in combination with the small plots of farmland makes it difficult for farmers in China to make a decent living. Additionally, farmers in China do not actually own their land, so addressing the issue of size will be tricky.
From the social perspective, the farming population is aging so there will be a decline in the rural work force, creating an additional challenge that China will have to address. Colin Carter of the University of California - Davis predicts that there will be a very rapid decline in the rural workforce as the aging population moves on, and a growth in farm size to the point where farmers can bring in machinery and take advantage of modern technology. China has made notable process with investing in biotechnology intending to apply it to agriculture.
Similar to when reforms occurred just 20 years ago, size of farms will most likely not be a major issue for Russia, but it does contribute to other more serious issues. For example, one of the main problems facing Russian agriculture is that the commercial support services and institutional infrastructure that a market-driven agricultural system needs remain seriously underdeveloped. This is partially due to the choice to privatize and maintain the large size of farms.
The Russian government is focused on maintaining and increasing the production and export of grain while simultaneously trying to reduce meat imports. With agroholdings becoming more prominent it should not be too difficult to maintain the success of Russian agriculture, specifically regarding grain production. Within 10 or so years, Russia could equal or even surpass the United States as the world's largest wheat exporter. Reducing meat imports on the other hand is slightly more complicated. This effort involves increasing subsidies to the livestock sector as well as trade protection via a restricted system of tariff-free quotas for meat imports.
Economic reform was critical for both the Russian and Chinese agricultural sectors. Russia and China took very different approaches in reforming their agricultural sectors to survive in a global, market-based economy. As both countries move forward is it undeniable that both will continue to be successful and dominant forces in the agricultural market. China chose individualization and government control while Russia chose privatization, but neither path has proved to be particularly superior, as both countries will need to continue to adapt and adjust as the economy continues to transform.
a global affairs media network
Russia and China: Agriculture Challenges
February 24, 2012
Economic reform in China began over 30 years ago in the late 1970s. The first phase of reforms involved the decollectivization of agriculture in response to poor agricultural performance and constant food shortages. Prior to reform, the structure of the agricultural system was large, communal farms. The change from collective farming to farming on an individual basis meant allowing farmers to make their own decisions regarding crops and livestock and led to a boom in production. China's agriculture has grown by over 4.5 percent per year on average since reforms, well above the growth rates in many other countries.
Before the reform period, China constantly faced food crises, and the restructured agricultural system completely turned that around. China has 22 percent of the world's people and only 9 percent of the world's land. However, they have managed to provide enough food for their population, despite some issues with resource scarcity. Additionally, China’s success does not stop at the domestic level. China is the world’s largest agricultural economy, if you draw up a list of number one producer of agricultural products, there's a long list where China ranks number one; such as in pork, wheat, rice, tea, cotton, etc.
Starting in the 1990s, the Russian agricultural sector also went through reforms; this period is mainly characterized by a shift from a planned economy to a market economy. In contrast, while China focused on making farms smaller, Russia chose to keep its large farms together and under corporate control. Improvement for Russia came from Russian agriculture moving in the direction not of smaller farms but rather toward even bigger enterprises and operations. Farms now had to use markets and use their own initiative to obtain inputs, determine their level of production, and sell their output. Russia essentially shifted to a market-based system; markets replaced central planning as the main means of allocating inputs and output levels.
Initially, the privatization of Russian farms did not have a positive effect on production level - struggling to be profitable in the new market economy, many farms had to rely on subsidies and other government assistance to survive. Success eventually did come and is attributable to multiple sources, one being simple changes in management and operation to increase efficiency and productivity. Another is the development of agroholdings, which today, appear to be setting the highest standard for Russian agricultural performance.
The Russian and Chinese agricultural sectors will continue to grow and each respective country will have to make the appropriate changes to keep these sectors relevant and competitive in the global economy. Russia and China have seen success with their agricultural markets for contrasting reasons and that success has created a unique set of challenges for each country.
China faces both economic and social factors. Overall land reform has seen a positive outcome. While a decrease in the size of farms resulted in increased prosperity and a boost in production, changes in the global economy threaten that success. China has been a member of the World Trade Organization since 2001, and since then there has been a rapid expansion of both agricultural imports and agricultural exports. But membership in the WTO means that these farms, no matter how small, are all operating very close to world prices. This economic factor in combination with the small plots of farmland makes it difficult for farmers in China to make a decent living. Additionally, farmers in China do not actually own their land, so addressing the issue of size will be tricky.
From the social perspective, the farming population is aging so there will be a decline in the rural work force, creating an additional challenge that China will have to address. Colin Carter of the University of California - Davis predicts that there will be a very rapid decline in the rural workforce as the aging population moves on, and a growth in farm size to the point where farmers can bring in machinery and take advantage of modern technology. China has made notable process with investing in biotechnology intending to apply it to agriculture.
Similar to when reforms occurred just 20 years ago, size of farms will most likely not be a major issue for Russia, but it does contribute to other more serious issues. For example, one of the main problems facing Russian agriculture is that the commercial support services and institutional infrastructure that a market-driven agricultural system needs remain seriously underdeveloped. This is partially due to the choice to privatize and maintain the large size of farms.
The Russian government is focused on maintaining and increasing the production and export of grain while simultaneously trying to reduce meat imports. With agroholdings becoming more prominent it should not be too difficult to maintain the success of Russian agriculture, specifically regarding grain production. Within 10 or so years, Russia could equal or even surpass the United States as the world's largest wheat exporter. Reducing meat imports on the other hand is slightly more complicated. This effort involves increasing subsidies to the livestock sector as well as trade protection via a restricted system of tariff-free quotas for meat imports.
Economic reform was critical for both the Russian and Chinese agricultural sectors. Russia and China took very different approaches in reforming their agricultural sectors to survive in a global, market-based economy. As both countries move forward is it undeniable that both will continue to be successful and dominant forces in the agricultural market. China chose individualization and government control while Russia chose privatization, but neither path has proved to be particularly superior, as both countries will need to continue to adapt and adjust as the economy continues to transform.
