China is launching a drive to halt the falling farming incomes which have followed rural expansion.

New strategies include restructuring the rural sector and speeding up farm produce processing and agro-technology development.

The persistent decline in the increase of farmers' earnings not only hinders the country's overall economic development, but could also undermine social stability in the countryside, officials and experts said.

The rising prices of agricultural products and rapid expansion of township enterprises have, since 1992, brought an annual increase in farmers' incomes of up to 9 per cent. However, the halcyon days ended in 1997, when nearly every major kind of farm produce appeared to be in oversupply and farmers found market prices spiraling downwards, making it difficult to sell their products.

The per capita annual income growth of the farmers plummeted to 4.6 per cent in the year, and the rate further plunged to the record low of 3.8 per cent in 1999, when the average annual net income of farmers stood at 2,210 yuan (US$266.3), according to the National Bureau of Statistics.

Since 70 per cent of the Chinese population live in rural areas, the rural market is the key to expanding domestic demands.

The sluggish growth in farmers' income has been a stumbling block to expansion, said Han Jun, director of the Rural Development Research Institute under the Chinese Academy of Social Sciences.

Between 1979 and 1984, rural consumption and increase in investment demands contributed 45.5 per cent to the country's overall economic growth. The ratio tumbled to 22.3 per cent in 1997, according to Han.

"As the prices of a large number of China's major agricultural products have neared or even exceeded those in the global market, it is simply impossible for the country to add to the coffers of the farmers by raising the farm produce prices by a large margin," said the senior researcher.

In March, the wholesale price for wheat was 1,209 yuan (US$145.66) per ton in China, while wheat futures in Chicago stood at 827 yuan (US$99.64) a ton.

With the incremental opening-up of the country's agricultural product market, cheap products from foreign countries may inevitably flood into China, he added.

Under this circumstance, it is crucial to readjust agricultural and rural industrial structures in an attempt to improve the farmers' livelihood and change the landscape in the country's rural economy, according to the director.

Production priority

For a long time, China had been caught in the spell of a shortage of major farm produce. As a result, the quantity of grain production received priority over the quality.

Even up to the present day, when China has accomplished a historical leap from a shortage of major farm produce to a surplus of grain and other products, the country still has to reap the bitter fruits left over from years ago, according to Han.

For example, since the goal of breeding seeds in the past was for high yield, China has millions of tons of ordinary wheat and rice stockpiled in its storage facilities nationwide.

Now, 500 million tons of grain are stored in the State grain depots and farmers' granaries, according to Du Ying, director of the ministry's Policy and Regulation Department.

However, increasing consumer demands require higher-quality, special wheat for the making of bread, cakes and biscuits and other higher-grade cereal products.

China's annual consumption of the special wheat for bread, cakes, noodles and biscuits stands at around 21.6 billion kilograms; however, the country is only able to produce 1.84 billion kilograms of the wheat for these purposes, according to a recent report on the Farmers' Daily.

The irrational crop-growing mix and agricultural structure could not realize an effective supply, partly creating a situation in which farmers can not reap more money even in bumper harvest years, with most of their products simply unmarketable, noted Han.

As the country has now bid adieu to the "economy of shortage," and people have shown a growing appetite for higher-grade and more nutritious agricultural products, it is even more imperative for the country to cut the growing area for crops that have dim market prospects, and reserve more acreage for efficient cash crops and export-oriented agriculture, Han proposed.

The country has scored bumper grain harvests in five consecutive years since 1995, with annual output exceeding 490 million tons, according to sources with the Ministry of Agriculture.

Earlier this year, Minister Chen Yaobang said poor quality rice varieties in the South, winter wheat grown south of the Yangtze River and spring wheat in Northeast China should be eliminated. More quality grains and grains for special purposes should be grown, he added.

However, despite the current oversupply of some major agriculture products, Du Ying claims the strategic restructuring should by no means undermine the country's endeavours to improve its cereal production capacity, given the ever-increasing demands of its growing population.

Better processing

In addition to agricultural structural readjustment, accelerating farm produce processing will also contribute more to the added value of the agricultural sector, thus benefiting the wallets of the farmers, both Han and Du agreed.

For years, China's agriculture, animal husbandry and farm produce processing industry have been separate in terms of production and management, which has hindered the development of agro-industrialization in the world's largest agriculture country.

Agricultural production and animal feeding is the de facto first "workshop" for the food industry, experts said.

The farm produce processing sector can guide and push the growth of agricultural and animal production sectors, according to Yang Jun, secretary-general of the China Council for Promotion of International Trade Specialized Sub-Council of Agriculture.

Accelerating the combination of the sectors will prompt agriculture to fine tune its production activities to the market conditions, he noted.

By vigorously expanding farm produce processing, China is expected to resolve the farmers' difficulty in selling their products, down-sizing stockpiles, and helping to reverse the downward trends in the prices of raw agricultural products, according to Han.

In the model Han proposed for co-operation between farmers and agricultural product processing enterprises, agriculture will become the "first workshop" where farmers-turned-''workers" grow what the market needs with financial and informational input from the businesses.

China's pending accession to the World Trade Organization also calls for the country to enhance its processing and storage capacity for labour-intensive agricultural products, so as to expand their shares in the global market, said Han.

Agricultural science and technology advancement, and improvement of the farmers' skills, is key to meeting the ever-rising demands of the country's growing population on high-quality farm produce.

In line with this, China's investment in application and dissemination of advanced agricultural technology will be increased in the years to come, according to sources with the Ministry of Agriculture.

New techniques, especially in water-saving, cost-effective technology, and variety in crops and breeds should be spread to more areas, said Han.

Chen Xiwen, director of the Rural Department under the State Council Development and Research Centre, said that in order to increase the income of farmers, China also has to simplify administrative structure in rural areas, and eliminate the random and irrational fees and measures often imposed on farmers.