By Zheng Xingchen

Research Report Vol.19 No.5, 2017

I. Rationale Behind Zhejiang Province’s “Three-in-One” Integrated Cooperation

A challenge in agriculture is: how to organically integrate “unification” and “decentralization”, “unify” farmers by way of marketization on the basis of household-based contract system, fulfill the dual operation mechanism, and benefit all farmer households.

The rationale behind Zhejiang’s effort to promote the “Three-in-One” integrated cooperation of production, distribution and credit is: Oriented by reducing cost and risk and enhancing market competitiveness, coordinately promote the “bottom-to-top” market-based unification and “top-to-bottom” coordination and supervision, to promote coordinated sharing, upgrade farmer households’ market position, and increase their income. The center of this approach is to create a comprehensive service platform “of farmers, by farmers and for farmers”, promote farmers’ joint development through the market-based mechanism, provide key services urgently needed by farmers such as technologies, marketing and financing, and improve the governance mechanism of the integrated cooperation system through government coordination. Its main mechanism includes:

First, achieve the economics of scale by “bottom-up” labor unification and organization re-unification. With respect to the “unification” in agricultural production, the practice in Zhejiang is to promote organization unification on the basis of farmer households’ labor unification to leverage scale and organization advantages. On the one hand, such a practice can boost the scale effect and improve farmers’ market position, while enhancing their capabilities of investment and market exploration, such as their capabilities to invest in technical services, production and processing, and brand marketing; on the other hand, this practice can help better allocate cost, effectively allocate the rigid cost of agricultural production and operation, reduce farmers’ burden, while improving their capability of resisting operational risks by sharing internal risks, reducing transaction cost by internalization, and reducing cost by self-help and mutual-help mechanisms.

Second, support farmers by strengthening comprehensive services, especially marketing services. The development of rural cooperative organizations is oriented to serving member farmer households. As farmer households need comprehensive services, the comprehensive development of the service mode of rural cooperative organizations is an inevitable trend. There is also huge cooperation space between different types of cooperative organizations, because better services can be provided, and cost and risks can be better controlled by sharing customers and making their respective advantages complementary to each other. Through organization reunification, the professional production and operation scale of the cooperation system may exceed ordinary agricultural enterprises, and even the production scale of large agricultural enterprises.

Third, improve the governance mechanism for the development of the cooperation system through “top-to-bottom” supervision services. External coordination and supervision are required for unified organizations at various levels developed through organization reunification. The “bottom-to-top” election and authorization mechanism means that property right is highly decentralized, there is a potential principal-agent problem, internal checks and balances are subject to such factors as the professional capability of supervisors, interest distribution, and interpersonal relationship, with dissatisfactory actual effect, and therefore it is highly necessary to strengthen external supervision. Meanwhile, system service capabilities should be upgraded and a “top-to-bottom” centralized service guarantee platform is required.

II. Main Measures

The basic approach of Zhejiang for promoting the development of “Three-in-One” integrated cooperation is to improve the comprehensive services for farmers by innovating the mode of innovation organizations and governance mechanism according to the law of market competition. Zhejiang was the earliest to start pilot reform of agricultural production, distribution and credit “Three-in-One” integrated cooperation. In December 2006, Comrade Xi Jinping, then Provincial Secretary of Zhejiang, held an on-the-spot meeting on the construction of a provincial rural new cooperative economic system in Rui’an, Wenzhou, Zhejiang, to promote the popularization of the Rui’an “Three-in-One” mode across the province. Zhejiang has defined “farmers’ cooperative economic organization federation” as a non-for-profit social organization led by the CPC party committee and government, which aims at serving farmers and is “of farmers, by farmers and for farmers”. As a comprehensive social service provider between the government and market entities, it has four levels of organizational systems (provincial, municipal, county and township), providing production, distribution, and credit services. Over ten-plus years, the reform of “Three-in-One” integrated cooperation in Zhejiang has been strengthened and promoted, mainly as follows:

1. Introduce innovations in the production cooperation mechanism to promote specialized cooperation

By the end of March 2017, there were 48,688 farmers’ specialized cooperatives in Zhejiang with 1.22 million households as members of cooperatives, and 4.16 million non-member households, accounting for 60% of the total contracting farmers’ households. The measures taken include: First, organize farmers’ specialized cooperatives on the basis of family farms so that the efficiency advantage of family farm operation can supplement the efficiency advantage of cooperative service. Second, improve the demonstration of cooperative development and develop a dynamic management system with joint efforts at provincial, municipal and county levels to promote regulated management, standardized production, safe products, brand cultivation of operation and the improvement of members’ skills. Third, promote joint cooperation, and upgrade the level of cooperation; centering on the expansion of industry chains, upgrade the value chains, expand the scope of cooperative services, and launch registration measures and demonstration regulations for cooperative unions formed by specialized cooperatives as guidelines; the number of cooperative unions has exceeded 300, which provide such services as brand marketing, financial agency and E-commerce, offering full-course services to production cooperation, distribution cooperation and credit cooperation. Fourth, improve financial services for specialized cooperatives; launch the “Opinions on the Establishment of a Farmers’ Specialized Cooperative Credit System”, establish a credit rating index system to conduct credit rating of farmers’ specialized cooperatives across the province, as important references for rural credit cooperatives to extend credits to specialized cooperatives.

2. Establish farmers’ cooperative unions based on organization re-unification, and transform government functions

On the basis of specialized cooperation, to transform government functions, Zhejiang Province has embedded government services into the cooperation system. Farmers’ cooperative unions have been organized from bottom to top at township, county, municipal and provincial levels in line with the principle of voluntary participation, democratic management, and joint construction for shared results. Farmers’ cooperative unions at the county level and above are organized mainly with the support of supply and marketing cooperatives. Farmers’ cooperative unions at and above the township level are organized mainly with the support of agricultural public service centers. Agricultural cooperative unions at the county and township levels organize agricultural specialized cooperative unions by way of the joint stock cooperative system to run service entities and economic entities and jointly develop industrial integrated operation. Meanwhile, an external guiding and supervising mechanism has been established to provide professional guidance over technical expertise, cooperative finance, organization management and enterprise marketing, and establish an annual performance assessment system for agricultural cooperative unions, with results related to rewards or punishments.

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