Xiao Junyan

Research Report No.032, 2002

General stability with slight growth was the overall feature of China’s rural economy in 2001. During the year, the environment for the rural economy was improved to certain extent. The state initiated a series of reform policies and measures to ease the peasant’s burden, reduce the barriers to the flow of surplus rural labor force, improve the trade conditions for farm products, promote the construction of small cities and towns and reduce the burdens of township and village enterprises. The structure of agriculture continued to be adjusted, the prices of grain and cotton were somewhat higher, more peasants went out to do non-farm work and, above all, the growth of peasant income began rising for the first time after three consecutive years of decline.

However, while some of the deep-seated contradictions accumulated in the past were not solved yet, some new contradictions emerged. First, the conditions for peasant’s income to grow in a sustained manner were inadequate. In 2001, peasant’s income growth ceased to fall and began recovering. This was of course due to the drastic adjustments occurring in the structure of agriculture. But the primary factor was that the state had, over the years, continued to stimulate domestic demand and support the demand for farm products and unskilled labor force. But it is hard to predict whether the state will continue to maintain the same intensity of support. Second, a new imbalance in grain demand and supply is becoming more possible. The total grain output in 2001 dropped to the level of 1993. If the output in 2002 declines further below this level, its impact on grain demand and supply will be hard to predict. Third, the local finance became more difficult, burdened with heavy deficit. Therefore, maintaining the economic and social stability at the grass-roots levels has become a major issue for the development of the rural economy. All these three problems deserve close attention.

I. The Basic Situation of the Rural Economy in 2001

(I) Agricultural production remained steady, structural adjustment continued, and some main products saw output increase while others witnessed the opposite

Compared with the previous year, the added value of agriculture rose by 2.8 percent in 2001, or 0.4 percentage points higher. Grain output totaled 452.62 million tons, down by 2.1 percent. Cotton output totaled 5.32 million tons, up by 20.4 percent. Meat production reached 63.4 million tons, up by 3.5 percent. Sugar materials totaled 87.9 million tons, up by 15.1 percent. Aquatic products reached 43.75 million tons, up by 2.3 percent. Oilseeds totaled 28.72 million tons, down by 2.8 percent. Poultry products totaled 22.88 million tons, up by 2 percent. Dairy products reached 10.29 tons, up by 12 percent. Vegetables totaled 445 million tons. The general posture of the structure of agriculture was that some products increased while others declined. Adjustments were the main feature, and growth was moderate.

The main features of the structural changes of agricultural production are as follows:

1. Grain output continued to fall on top of a 9 percent decline in the previous year mainly due to reduced area of cultivation.

In 2001, summer crops, early rice and autumn crops all saw their output fell below the previous year’s level. This was a rare phenomenon unseen for years. In this year, summer grain nationwide totaled 101.88 million tons, down by 4.6 percent or 4.91 million tons over the previous year. Early rice totaled 33.96 million tons, down by 9.5 percent or 3.56 million tons. Autumn grain totaled 316.78 million tons, down by 0.3 percent or 1.09 million tons. The decline in grain production was mainly due to reduced area of cultivation. Grain growing area nationwide totaled 106 million hectares, 2.1 percent or 2.3 million hectares below the previous year’s level. In particular, the growing area of summer crops was 4.5 percent less than that in the previous year, resulting in an output drop of 4.75 million tons, accounting for 97 percent of all the reduced grain output.

Another major feature of grain production in 2001 was the regional difference in output increase or reduction. The three northeastern provinces saw the output increase by 6.76 million tons. The northern provinces saw the output drop by 2.42 million tons on top of a considerable decline in the previous year. The northwestern regions’ output fell by 5.72 million tons. The south-central and eastern regions saw the output declined by 7.79 million tons due to substantial growing area adjustments.

2. The total output, cultivated area and unit output of cotton rise drastically, something unseen for years.

In 2001, cotton-growing area nationwide was 4.8 million hectares, up by 18.8 percent or 760,000 hectares more from the previous year’s level. The contribution of area expansion to the total output was 830,000 tons, accounting for 92 percent of the increased output. The unit output was 1,104 kilograms per hectare, 1.3 percent or 14.1 kilograms higher than that in the previous year. Two factors contributed to the increase of unit output. One was that although drought was pretty serious across the country in the year, it had little impact on this drought-resistant crop. The higher temperature in autumn and the late arrival of frost extended the growing time of cotton and were helpful to crop ripening. And the quality was mostly better than that in the previous year. The other factor was that science and technology played a visible role in raising unit output. In the main producing regions, drought and pest-resistant varieties were promoted vigorously and extensively. At the same time, new techniques were introduced. For example, plastic films were used to cover seedlings which were nurtured in nurseries and then transplanted to open fields. These new varieties accounted for 98 percent of the crop in Shandong and Hebei provinces, while the use of plastic films accounted for 75.3 percent of all the cotton fields in Hebei province, or 12.4 percentage points higher than that in the previous year.

(II) Peasant’s income growth ceased to decline and began bouncing back

Net peasant’s income growth rate in 2001 was 4.2%, or 2.1 percentage points higher than that in the previous year. This was the first rebound after three consecutive years of decline since 1997. There were three favourable factors behind the growth. First, the prices of bulk farm products were basically stable and in some cases were higher. And the market conditions were better. Second, the wage-related income of the peasants continued to rise. In 2001, as much as 23.3 percent of the rural labor force went out for non-farm occupations, or 2.4 percentage points higher than that in the previous year. In particular, inter-provincial flow of labor accounted for 45.8 percent of the total flowing labor. Third, the livestock industry became the main source of increased of peasant’s income.

The cash income of the rural residents in the first three quarters of 2001 had the following three characteristics:

1. Wage-related income continued to grow fast.

In the first three quarters, the per capita wage-related income was 537.8 yuan, 8.8 percent or 43.3 yuan higher than that of the same period a year earlier. In terms of wage-related income sources, the per capita income of those going out for non-farm work was 164.4 yuan, 9.4 percent or 14.1 yuan higher. That of those working in the enterprises in native places was 180.8 yuan, 7.9 percent or 13.2 yuan higher.

2. Farm income rebounded.

In the first three quarters, the per capita cash income of the peasants from selling farm products was 366.5 yuan, 6.4 percent or 22.1 yuan higher. The rise in farm income was mainly attributed to the price pickup of grain and other main crops. In the first three quarters, the per capita cash income of the peasants from selling grain was 173.4 yuan, 9.1 percent or 14.5 yuan higher than that of the same period in previous year. In terms of the quantities, the per capita quantity was 160.2 kilograms, 8.8 percent or 15.5 kilograms less than that in the corresponding previous period. Reduced grain sales resulted in a cash income decline of 16.8 yuan per person. In terms of prices, the aggregate average price of the grain was 1.08 yuan, 19.7 percent higher than a year before. Price rises contributed 31.3 yuan to the per capita cash income of the grain-selling peasants.

3. Livestock income grew fast.

In the first three quarters, the peasants’ per capita cash income from selling livestock products was 283.4 yuan, 8.4 percent or 22 yuan higher than a year before. One reason was the rebounding prices. The price for pork was 4.1 percent higher and those for poultry and eggs were respectively 6.1 percent and 6.2 percent higher than that in the same period a year earlier. The other factor was the higher peasant enthusiasm, which boosted poultry sales by 14.8 percent, beef and beef cattle sales by 20.3 percent and cow and goat milk sales by 33.5 percent. ...

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May 2002