China’s rural revitalisation strategy underwhelms

China’s new agricultural policy trajectory is disappointing. Finance and price reform are barely tackled while land reform struggles to find first gear, Tristan Kenderdine writes.

This week saw the launch of China’s first major policy announcement of 2018 – the annual agricultural work plan ‘Document Number One’. The plan spells out the major direction of not only agricultural production, but rural finance and regional market integration. A focus in 2018 on county, township and village-level governance systems signals an attempt to create a framework to ensure Chinese Communist Party (CCP) control of rural development while maintaining coercion through managed levels of autonomy.

This year’s plan – ‘CCP Central Committee and State Council Opinions on Implementing the Rural Revitalisation Strategy’ – is focused on developing and implementing a rural revitalisation, centred on local governance reforms.

The expected rhetoric of supply-side reform, poverty eradication, and ecological civilisation all make early appearances as well as the more practical professionalisation of farmers, high-quality farmland development, agricultural high-tech industrial zone systems, and increasing rural healthcare infrastructure and access.

‘Rich Peasants’ (富农) is a recurring phrase, as the 2018 Document attempts to construct a policy framework to ‘make farming an attractive job.’ The key to this strategy is a slated reinvention of the village, a policy-orchestrated countermovement to rural empowerment fused with rural capitalist productivity.

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The 2018 Document reiterates the policy direction agreed upon at the Central Economic Work Conference and lays out a path to staged rural revitalisation with milestones in 2020, 2035 and 2050. The Document also adheres to the ‘Two Centenary Goals’: the centenary of the Party in 2021, and the centenary of the People’s Republic in 2049.

For rural revitalisation, the 2018 Document is a roadmap for China reaching three goals: by 2020, to establish the institutional and governance framework to achieve a rural revitalisation project; by 2035, to complete the modernisation of rural areas and agriculture; and by 2050, to have equalised the countryside with urban areas, completing the rural revitalisation project.

The policy standout from this year’s Document is the ‘front-line commander’ system. County-level Party and State cadres are to be empowered to become the vanguard of rural revitalisation. There are 2,862 county-level divisions in China, three levels below the centre, but above township and village. As well as the County-level governance incentive reform, the 2018 Document details an expected pilot project on village self-government.

However, this is not a bold move towards greater local autonomy. Rather, it is an attempt to duplicate the industrial GDP-focused cadre promotion metrics in coastal jurisdictions. The message from the Party centre is this: rejuvenating the countryside is now your metric to promotion, let the rural tournament system begin.

Agricultural collectively-owned land reform moves glacially ahead in the plan with four major land reform developments: extending rural contract land leases; rural contract land management rights legalisation; separation of the Three Powers; and moving towards a land circulation regime.

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Extending rural contract land leases is big news for encouraging small-scale agriculture development.

The agricultural land tenure system is currently operating on 30-year leases from the state. The new plan announces that this system will persist for an additional 30 years, meaning that agricultural land-holders will have another 30 years of security, and cumulatively will have had 75 years of ‘reassurance.’

The Three Rights Separation (ownership, contract, and management rights) is a long-needed step towards the legalisation of agents involved in the collectively-owned land system. Separating these would relax Party control. It would also more clearly define the proper legal status of institutional actors as well as the rights to operate and manage agricultural land.

Zhang Xiaoshan, a researcher at the Chinese Academy of Social Sciences, wrote that the Rural Land Contract Law should be amended to clarify the legal status of the rural collectives that nominally own rural land. Zhang also recommended amending the Land Administration Law to allow for the unification of rural and urban construction land, which currently prohibits rural land to enter and circulate as a market good.

Ultimately, reform of collectively-owned land means moving towards a land circulation system for agricultural land. Steps towards this wholesale reform are already being taken through the careful marketisation of collective-owned construction land and rural homestead land mortgage reform.

The Document also sees more trade policy for agriculture. However, the focus is on one-way trade metrics and China’s trade competitiveness, rather than the opening of China’s markets to agricultural imports.

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Section 3.4 of the Document discusses developing an agricultural trade system with China’s Belt and Road partner economies, as well as export promotion and the international competitiveness of Chinese agricultural products. It also calls for China’s large grain importers and agribusiness State-owned Enterprises to play a greater role in setting the international trade order.

Price-reforms are conspicuously absent, though State procurement will not return as China progresses through an interim policy of ‘market-oriented acquisition plus subsidies.’

The ‘Insurance plus Futures’ pilot is continued without being expanded, though it gets a parallel pilot partner in ‘Contracts plus Insurance plus Futures.’ This new project aims to explore a policy mechanism to reinvent contract farming and integrate it into the domestic production and pricing system. Rather than blindly chasing government procurement, the market will be encouraged to develop contracts for the supply of agricultural commodities.

The move to contract farming is at least a step away from government procurement and towards market allocation of demand. However, as most agricultural finance half-measures in China, the seed of a future institutional path dependency has likely just been planted.

The 2018 Document says, “without the modernisation of agriculture and the countryside, there is no national modernisation”. The forthcoming ‘Five Year Plan on National Revitalisation of the Countryside 2018-2022’ will codify this new policy direction. It will centre on re-empowering ‘the village’ as part of China’s modernisation agenda – a village that has so far been left behind by the aggregate development project.

But the Party cannot simply use policy rhetoric to magically equalise China’s two great economic imbalances – the debt of the coastal to the inland, and the debt of the urban to the rural.

By not tackling the hard rural financial reform, not transitioning to a full-blooded price reform, and only flirting on the edges of land reform, this big middle-classing of the countryside is in danger of remaining toothless.