Cutting circulation costs

China's Cabinet has released documents twice in four months requiring distribution costs be reduced. The high costs of circulation and distribution have not only caused the prices of many products, farm products in particular, to rise, they have also resulted in rural goods producers not benefiting from the higher prices.

The fewer the links in the distribution chain and the lower the costs, the more profit rural producers will make. Their unwillingness to grow vegetables and grain or raise livestock is because of the shrinking profits they receive. When they do engage in production after prices rise, the unreasonable charges or unnecessary links in the distribution chain, again compromise what they should have earned.

This has become a vicious cycle. And as a result, the prices of rural products have been continually rising while the profit margin for growers has become thinner and thinner.

The central government this time adopted 10 measures, including exempting urban wholesale and retail markets for rural products from the taxes imposed on land use and realty development for three years starting from Jan 1. Priority will be given to the construction of such markets when it comes to the use of land. The measures will also cut unnecessary and unreasonable charges for vehicles transporting rural goods.

Logistic costs accounted for 18 percent of GDP in 2005, while in developed countries it was only about 10 percent. That the retail prices of rural products can be a dozen times their purchase price from growers also points to the necessity of making the links between rural producers and the final markets for their goods fewer and cheaper.

Of the 10 measures, one requires that rural wholesale and retail markets should have some space reserved for villagers from suburban areas to sell their fresh products free of administrative charge.

Transparency is important. All the charges such as the fees levied on retailers in the rural product markets and the tolls trucks transporting rural products have to pay should be made public so there are no opportunities for abuse of power.

The new measures are targeted where the problems really lie. But effective supervision is needed to make sure that local governments put them into practice.

(China Daily 12/28/2012 page8)