Chinese agriculture: US' market and rival as well?

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Last updated at: (Beijing Time) Saturday, February 28, 2004

Chinese agriculture: US' market and rival as well?

As Chinese economy sees a rapid development great changes are taking place in Chinese rural areas. Experts believe that China is a huge market for American agricultural products as well as a rival of American farmers in the international market.

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As Chinese economy sees a rapid development great changes are taking place in Chinese rural areas. Rozelle, a professor of agricultural economics at University of California-Davis, who has spent a long time in studying the development of Chinese rural areas, pays visits to China every year to conduct field survey.

At a hearing of witnesses on Chinese economy held by US-China Economic and Security Review Commission (USCESRC) Professor Rozelle points out that surprising changes have taking place in Chinese rural areas in the last 20 years and more. He says grain production per capita in China has reached the level of developed countries. The growing import and export indicate that China is now able to compete with other countries in global market. In the last ten years, more than 200 million rural people have found jobs in other industries and income of rural residents increased 5 percent every year.

So what kind of impact will these changes have acted on the US? Rozelle believes that China is a huge market for American agricultural products as well as a rival of American farmers in the international market.

China is a rival of American horticultural exporters

Rozelle says that as China has begun to blend into the international agricultural trade market, Chinese agriculture will one day become a force in certain international food markets. Labor-intensive produce like vegetables, fruits and livestock are produced in China with a cost of 30 percent lower than that in the US.

He believes that China will gradually become the number one rival for American horticultural exporters. Chinese agriculture will expand its market share in Asia and then will one day spread to the US. He says on the American market Chinese-produced honey, garlic and asparagus will eventually compete with the American produce.

Since 1978 when China began to adopt the opening-up policy thousands of township enterprises have emerged in Chinese rural areas. If we say Chinese countryside forms a threat to American economy as Rozelle puts it, then the threat comes from these township companies. These companies see a quick development and are mainly engaged in labor-intensive light industries.

Rozelle says these companies, which are privately owned, are set up by the villagers themselves. They usually have overseas investments as starting capital. He points out that these companies form the biggest threat to light industries in developed countries.

However Rozelle also points out that China is also a huge market for American produce. China is the largest soybean importer in the world far surpassing any other countries. We (Rozelle) estimate that in the near future China will become the largest corn importer too. Cotton and wheat import is also growing.

Future of Chinese agriculture depends on biological technology

Has China mastered the advanced agricultural technology? Rozelle says, judging from the past experience China did very well in this respect. The productivity of Chinese agriculture has kept on increasing since 1980 and has a yearly growth of 3 to 4 percent. Half of the increase comes from technological improvement.

Nevertheless, Rozelle affords Chinese agriculture with a warning. He points out that there are big problems in Chinese agriculture, of which the most serious one is the financial system. He says this financial system has lagged far behind the times. It is good for city-dwellers but it cannot route large governmental resources from the city to the countryside, nor can it channel these resources from the rich to the poor regions. Rozelle says the financial system in Chinese rural areas is outmoded, which is controlled by the government. It has accumulated a lot of non-performing loans and failed to find intermediary funds to drive the agricultural economy forward.

Rozelle holds the opinion that the future of Chinese agriculture depends on biological technology. He says that biological technology will greatly improve the productivity of Chinese agriculture. He points out that in 1999 the Chinese government spent about US$100 million in researching and developing biological technology of plants if measured in purchasing power parity. This figure has exceeded the total amount of investment in biological technology of the other developing countries. China has announced in 2000 that it would enhance the development in biological technology and spend US$500 million in the area by 2005. He says by the time China realizes this program the government will have to spend more money in biological technology than the US government.

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