Chen Xiwen

Research Report No 170, 2001

An important judgement of the stage of development of China’s agriculture was made by the Communist Party of China at the 3rd Plenary Session of its 15th Congress in October 1998: The situation of lasting shortage of major farm products including grain has changed into a situation of “rough balance in aggregate terms and surplus in years of bumper harvests”. This indicated that the contradiction of short supply of farm products in China has been basically solved and that a major turn will been seen in China’s agriculture that drove in the past at only quantitative growth of major farm products including grain. Ever since then, China’s agriculture has entered a new stage of development.

I. The increase of farmers’ incomes the essence of the Issue about China’s Agriculture and Rural Development at the New Stage.

To solve the contradiction of quantitative shortages of supply of major farm products including grain had been the goal dreamed of by generations upon generations in China. We can never overestimate the historical significance of the fulfillment of this goal to the development of the Chinese society and economy. Just before we got enough time to celebrate our achievement of “surplus in years of bumper harvests” in grain production, however, worrisome contradictions and problems began to crop up in growing numbers in China’s rural areas, the field that has been hailed as having won China’s very first success in reform. When people talk about the numerous contradictions in China’s economic life in recent years, the topic most often discussed would be that the incomes of farmers cannot grow and their burdens cannot be lightened. This indicates that people’s attention on China’s agriculture and rural development has been shifted from supply and demand of farm products to farmers themselves. It has been felt in every aspect of the social economy that the tremendous difficulties China now faces in increasing the incomes of farmers have become a big obstacle to the sound cycle of its national economy.

During the Ninth Five-Year Plan period, the growth of the incomes of Chinese farmers decelerated year by year: In 1996, the growth rate of the per-capita net income of Chinese farmers was 9 per cent. In 1997, it dived to 4.6 per cent. In 1998, it was 4.3 per cent, and in 1999 and 2000, it further scaled down to 3.8 and 2.1 per cent respectively. In the last three years of the Ninth Five-Year Plan period, the average annual growth rate of the per-capita net income of Chinese farmers was 3.4 per cent, less than half of the 7.2 per cent of the average annual increase in the dispensable incomes of the urban residents during the same period of time. As a result, the income gap between China’s urban and rural residents (the average per-capita dispensable income of its urban residents and the average per-capita net income of its rural residents) had widened from 2.47:1 in 1997 to 2.79:1 by the year 2000. What should be understood here is that this is just an averaging of the incomes of Chinese farmers as a whole. Under the circumstance of wide gaps between China’s different rural regions in social and economic development, any average figures would cover up numerous contradictions and problems (in the year 2000, for instance, the average per-capita income of farmers in Shanghai was RMB 5,596.09 yuan, more than four times the RMB 1,374.16 yuan earned by farmers in Guizhou Province). As the situation stands, it is necessary to look further into the seriousness of this problem.

1. An outstanding contradiction hindering increases in the incomes of Chinese farmers is the drop of earning from agricultural production.

The deceleration of the growth of the incomes of Chinese farmers in recent years is just a superficial phenomenon of the issue concerning their incomes. The seriousness of this issue lies, as a matter of fact, in the year-on-year decrease in the earning of the country’s agriculture as a whole. The table below shows the composition of and changes in the average per-capita net income of Chinese farmers in the last four years:

It is not difficult to see that although the average per-capita net income of Chinese farmers from production increased by RMB 142.27 yuan in the year 2000 against 1997, their net income from agriculture decreased by RMB 131.61 yuan, or 10.4 per cent, in the same period. In the three years from 1998 to 2000, the average per-capita net income of Chinese farmers from agriculture was on the decline from year to year, with the specific figure shrinking by RMB 30.25 yuan in 1998 from 1997, RMB 57.42 yuan in 1999 from 1998, and RMB 43.94 yuan in 2000 from 1999. According to statistics from a general survey of China’s agriculture, 59.3 per cent of the country’s rural households are ‘pure rural households’ (with all their working members mainly engaged in agriculture), and 18.2 are “concurrent rural households” (with the number of family members engaged in agriculture exceeding the number of those in non-agricultural sectors). Put together, they account for 77.5 per cent of China’s total number of rural households. It can be easily judged from this fact that as a result of a continuous fall in China’s agriculture production in 1998, 1999 and 2000, most of its rural households earning incomes mainly from agriculture suffered in reality a negative increase in their average per-capita net income.

It is exactly against this background that there developed the stern situation of an overall decrease in the average per-capita net income of the farmers in some of China’s agricultural provinces and the western provinces and autonomous regions with underdeveloped non-agricultural sectors. In 1999 and 2000, the average per-capita net income of the farmers in six provinces and autonomous regions decreased from previous years. Listed in the following table are the provinces and autonomous regions that reported the decreases and specific figures:

Liaoning, Jilin and Heilongjiang reported decreases in the average per-capita net income of farmers for two consecutive years, with the average per-capita net income of those in Jilin dropping by a total of RMB 361.1 yuan in the two years or 15.2 per cent in the year 2000 from 1998.

A fundamental factor leading to poorer agricultural earning in China is the changes that have taken place at its markets of farm products. Since the implementation of the policy of reform and opening-up, two major changes have taken place in China’s major source of agricultural incomes. From 1979 to 1984, almost all farm products were basically in short supply in China. As a result, increase in the incomes of the farmers was achieved mainly by way of increasing total output of products. Starting from 1984, the situation of short supply of major farm products has been improved to a great extent. By this time, increase in China’s agricultural incomes came mainly from rises in the prices of major farm products. Since the mid-1990s, however, a situation of excessive supply of most farm products has developed in China, and the prices of most farm products have risen above the price levels at international markets. For this reason, there has left no space for increasing output or raising prices. As a result, the net incomes of Chinese farmers have kept falling. It can be seen that the established way that has been adopted to increase agricultural incomes since China’s reform does not work any longer under the current situation of farm products markets, and that new trails have to be blazed in the drive of structural readjustment to the national economy if China hopes to increase its agricultural income and the income of farmers.

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