Economic Observation of China (Volume 2, 2005 Issue)

Author: Wang Dongjing
Publisher:
Publish Date: 2005-06-01
Features: Safety: Focusing on Large-Scale Operations
China has a population of 1.3 billion, and "food" is of paramount importance. Therefore, the Party and government have always attached great importance to food security. The discussion in academia on this issue is also diverse, with varying opinions. It is unnecessary to elaborate on academic views; anyone with some understanding of economics knows that ensuring food security relies on two main principles: one is protecting arable land, and the other is encouraging farmers to grow more grain. Arable land is a scarce, non-renewable resource. If it is not protected and is recklessly seized, the supply of grain will undoubtedly be disrupted. However, if arable land is protected but grain cultivation is not profitable, farmers will be unwilling to grow it, making food security a mirage, like eating cake for hunger. Two figures can be cited as evidence: In the past decade, when farmers' enthusiasm for growing grain was high, the annual grain output reached 522.52 million tons, while when it was low, it dropped to only 430.65 million tons, a difference of 81.78 million tons. This shows that the supply of grain is closely linked to farmers' enthusiasm for growing it. No one starts something without profit. To boost farmers' enthusiasm for growing grain, they must be made profitable. In recent years, the government has introduced many measures to help farmers increase their income. However, looking back, these measures can only address symptoms, not the root cause. For example, agricultural industrialization, encouraging farmers to engage in deep processing of agricultural products. Undoubtedly, farmers who run processing plants can indeed increase their income. But the problem is that not every farmer can set up a processing plant. Most farmers still rely on growing grain and cannot afford to start factories, meaning they cannot benefit from industrialization. Another example is the adjustment of the agricultural industrial structure, allowing farmers to grow whatever is profitable. In theory, it is acceptable for farmers to adjust the structure themselves, but if the government interferes, it often backfires. Economics has a supply and demand principle: when supply is insufficient, prices rise; when supply exceeds demand, prices fall. Structural adjustment is no exception. For instance, in the early days, some farmers in Northeast China grew traditional Chinese medicine and made a profit. As a result, the county government encouraged everyone to grow it, leading to an oversupply, a sharp drop in prices, and farmers losing everything. This shows that structural adjustment is not the government's responsibility. In recent years, the government has introduced some policies to protect farmers' interests and reduce their burdens. First came the reform of fees into taxes, then direct subsidies for grain production, and later the reduction or elimination of agricultural taxes. These policies have been a rare blessing for farmers. Unfortunately, while the government is reducing farmers' burdens, the prices of agricultural inputs have also risen. The benefits brought by these policies have been offset by higher production costs. Farmers' income increase is, and in some regions, it has even decreased. According to the author's investigation in Fugou County, Henan Province, in 2004, farmers' income from grain production increased by 37 yuan per mu due to policy support, but due to rising input costs, their expenses increased by 40 yuan per mu compared to the previous year, resulting in a net loss of 3 yuan per mu. What is even more troubling is that the government's policy support for farmers has nearly run out, leaving little room for further income growth through policies. As early as two decades ago, Comrade Deng Xiaoping said that rural reforms should have two leaps: The first leap is the implementation of the household responsibility system; the second leap is the implementation of large-scale land operations. Why large-scale operations? Without them, farmers' income can only stagnate year after year. Now, each farmer has an average of 1.5 mu of land. On this 1 mu and 5 fen of land, no matter what the farmers grow,