9. China
The share of support to agricultural producers in the People’s Republic of China (hereafter “China”) averaged 14.4% of gross farm receipts in 2020-22. This is three times higher than in 2000-02 but remains on par with average support (14.2%) between 2016 and 2019, when market interventions were reformed for soybeans, rapeseed, cotton and maize, and minimum purchase prices for wheat and rice were reduced. These reforms helped stabilise support levels after two decades of steady growth.
Between 2021 and 2022, reference prices rose faster than domestic prices in a context of increasing world prices, particularly for wheat, maize, milk, pig meat, and other meat products. Against this backdrop, producer support fell to 13.4% in 2022, the same level as in 2019.
Area payments to maize and soybeans increased since 2020 to boost production in these sectors and meet higher demand for feed. Area payments in the Agricultural Production Development programme increased, to offset rising inputs and production costs in 2022, and contributed to the overall increase in budgetary support.
Payments based on area planted have consistently increased since 2014 because of the recent reforms. However, Market Price Support (MPS) remains the main form of support, generated through both domestic price support policies and various border measures on imports. Overall, more than two-thirds of support to producers is in the form of potentially most-distorting transfers, a consistent pattern since 2000-02.
Producers of imported commodities (such as pig meat, milk, wheat, rice, cotton, soybeans, and sugar) benefited from transfers equal to between 9% and 53% of commodity receipts in 2020-22. Prices received by farmers were 15% higher than world prices on average in 2020-22. Higher domestic producer prices on average indicate an implicit tax on consumers, with a percentage consumer support estimate of –12.7% in 2020-22.
General services support amounted to 11% of total support to agriculture in 2020-22. It covered three main categories of services: public stockholding; development and maintenance of infrastructure; and the agricultural knowledge and innovation system. The General Services Support Estimate (GSSE) represented 2% of the value of agricultural production. The Total Support Estimate (TSE) for agriculture as a share of Gross Domestic Product (GDP) remained stable and relatively high at 1.8% in 2020-22.
The 2023 No. 1 Central Document reiterates the objective of annual grain production of at least 650 million tonnes. It also prioritises increasing maize yields, expanding the soybean cultivated area, and reducing soybean meal usage. It highlights the need for regulation and supervision of state grain reserves, international trade-partner diversification, technological innovation to improve seeds and agricultural machinery, and promoting “green agricultural development”.
As prices for grain and oilseeds increased following Russia’s war of aggression against Ukraine, two key soybean-producing provinces in northeast China announced their objectives to increase soybean area compared to 2021. To meet these goals, provincial governments provided soybeans farmers with additional area payments while the Ministry of Agriculture and Rural Affairs (MARA) released guidelines for alternating crops of maize and soybeans.
China provided subsidies in three rounds throughout 2022 to stabilise farm incomes and compensate grain producers for the increasing costs of agricultural inputs: CNY 20 billion (USD 3 billion) in March 2022; CNY 10 billion (USD 1.5 billion) in May 2022; and CNY 10 billion (USD 1.5 billion) in August 2022.
In June 2022, China issued the National Strategy on Climate Change Adaptation 2035. It focuses on four areas: (1) greater emphasis on early-warning systems and risk management; (2) sectoral adaptation tasks for agriculture and food security; (3) greater integration of national and regional adaptation strategies; and (4) strengthening financial support, scientific and technological support, and international co-operation for climate change adaptation.
China issued a national drought emergency plan in August 2022 as record temperatures and low water levels affected much of the Yangtze River region, especially Sichuan, Chongqing, Hubei, and Jiangxi provinces. MARA allocated CNY 300 million (USD 44 million) to 13 provinces as agricultural production disaster-relief funds to facilitate flood control and drought relief.
Several measures were introduced in response to international market changes. China introduced a quota for phosphate fertilisers exports in August 2022. It limits exports of phosphate fertilisers to 3.16 million tonnes for the second half of 2022 to stabilise domestic prices. In September 2022, the National Development and Reform Commission (NDRC) implemented a programme releasing 0.2 million tonnes of pig meat from national, provincial, and municipal reserves to stabilise pig meat prices.
The General Administration of Customs of China (GACC) ended required PCR testing and disinfection measures for COVID-19 in December 2022 (effective January 2023), which had applied to imported cold-chain foods and non-cold-chain goods. At the same time, China removed the requirement for foreign trade operators to register at local commercial authorities. Entities applying for import and export permits and quotas, and state trading enterprises will no longer be required to provide a registration record.
Since early 2000s, several strategies, plans and programmes were put forward across institutions, including MARA and the Ministry of Ecology and Environment, to strengthen the sector’s climate-change adaptation and mitigation actions. In this context, implementation of the National Agriculture Green Development Plan 2021-25 – a joint effort of various ministries and institutions – is a positive step towards mainstreaming and co-ordinating adaptation policy objectives across current and planned programmes, including better targeting of extension services for farmers.
Overall, long-term adaptation efforts, such as collaborative planning and multi-disciplinary research, could be better integrated with efforts to help farmers accommodate climate risks in the short term, and those backing incremental changes in the medium term. China could consider additional efforts to measure adaptation outcomes, such as assessing adjustments in production practices done in demonstration areas.
China’s Nationally Determined Contribution (NDC) recognises agriculture’s importance to its economy-wide emissions-reduction target (peak CO2 emissions by 2030) and its objective to achieve carbon neutrality by 2060, but no targets have been set for agriculture. Nevertheless, several sector-specific policy efforts aim to mitigate greenhouse-gas (GHG) emissions, and the monitoring of their impacts on GHG emissions should be improved against programme-specific targets. The National Agriculture Green Development Plan 2021-25 can play a role by providing the tools to monitor GHG mitigation practices at farm level and along the value chain.
Reforms introduced until 2016 to replace intervention prices for key crops with direct payments based on planted area are a step towards rebalancing the policy portfolio. This reflects China’s increasing policy orientation towards long-term productivity growth and sustainability. Replacing the maize purchasing and storage system with direct payments eased the burden of public stockholding costs, although these remain the largest expenditure in general services support. Such reforms could be gradually extended to include wheat and rice. If direct payments to farmers are maintained over a longer-term, the link between these payments and production decisions should be loosened, for instance by providing payments on a historical area basis, and ‘greened’ by making them conditional on environmentally friendly production practices.
To establish a solid framework for agri-environmental policies, China should define environmental targets adapted to local ecological conditions and strengthen monitoring mechanisms for the enforcement of environmental regulations. To this end, regular soil testing under the Soil Environmental Information Platform and Monitoring System (part of the 2019 Soil Pollution Prevention and Control Law) needs to be implemented and can set the stage for similar efforts relating to water use in agriculture. As water resource scarcity is projected to remain a major constraint to productivity growth in Chinese agriculture, further efforts are necessary to improve water management. More specifically, in implementing the 2021 regulation on groundwater conservation and protection, a comprehensive review of water governance could better define responsibilities, remove conflicts, and ensure effective policy implementation.
Public expenditures on general services increased but at a slower pace than support to individual producers and these have not kept pace with sectoral growth. Restructuring public expenditure towards general services can be achieved by scaling down input subsidies such as those to purchase farm machinery, and by ensuring that support through direct payments has only a transitory role in supporting farmers’ adjustment to a new market environment. Enhanced public investment in R&D can support more efficient use of variable inputs and reduce environmental harm. Further investments in sanitary inspection and control services will be necessary to implement the revised provisions of the Food Safety Law, the envisaged nationwide surveillance system for pests and diseases.
Reforms to land-transfer rules have contributed to the emergence over the past decade of large family farms, co-operative farms, and farms run by agro-business companies. To continue improving agricultural productivity, increased investments in education and training, and enhanced access to financial services should complement these reforms.
Overview of policy trends
The evolution of China’s agricultural policy objectives reflects the changing role of agriculture at different stages of economic development. In the 1950s and 1960s, the agricultural sector was taxed to support the industrial sector’s development. In the late 1970s, China initiated an important economic transformation process, implementing reforms towards a market-oriented economy including for the agricultural sector (OECD, 2005[1]; OECD, 2018[2]). More specifically, China implemented its first rural reform, the household responsibility system (HRS), during 1978-84. This dismantled the people’s communes and contracted cultivated land to individual households, mostly based on the number of people or labourers in the household.1
Until the late 1990s, agricultural policies focused on increasing food production, particularly grains, through the provision of fertiliser and other input subsidies to farmers. At the same time, policy actions targeted deregulation and diversification of marketing channels. Central and local governments increased support for irrigation.
Liberalisation of international trade started in the early 1990s with the relaxation of trade restrictions and allowing private traders to play a role in agricultural commodity markets. In the context of China’s WTO accession in 2001, the average import tariff for agricultural products fell from 42% in the early 1990s to 12% in the early 2000s.
In the 2000s, the growing income gap between urban and rural populations, and between developed and underdeveloped rural areas became an important policy issue. Increasing farmers’ income was made a key policy objective together with food self-sufficiency in several of the No. 1 Central Documents during the 2000s.2 Several new policies were introduced in this period to meet these objectives. These included minimum purchase prices for grains, and a system for temporary purchase and storage of production, as well as subsidies for agricultural materials, superior crop varieties, and agricultural insurance premiums.
Many of the No. 1 Central Documents also emphasised other policy goals, such as ensuring the quality of agricultural products and food safety, enhancing agricultural competitiveness, and protecting the agricultural ecosystem. In the early 2000s, China introduced agri-environmental payments under programmes such as “Grain for Green” (officially called the Returning Farmland to Forests Programme), converting grazing land to grassland, or Grassland Ecological Protection.
In 2014, land reforms clarified village collective landowner rights, individual household land contract rights, and land operation rights through the “three rights separation system”. These reforms consolidated farm operations and spurred productivity growth. To control the conversion of farmland for non-agricultural use, a “red line” on arable land was set at no less than 124.3 million hectares in the 2016 Adjusted Scenario of the Outline of the National Overall Planning on Land Use.
The government-led temporary purchase and storage policy for cotton, soybeans and rapeseed at pre-determined prices was reformed in 2014-15, and in 2016 for maize. For cotton, this was replaced by deficiency payments covering the difference between pre-determined target prices and actual market prices. For soybeans and maize, it was replaced by direct payments based on area planted. In 2016 all subsidies on grain, seed and aggregate inputs were merged into a single general income support payment. While wheat and rice remained subject to the minimum price procurement programme, support prices were gradually reduced between 2015 and 2019. Since the COVID-19 pandemic, the minimum support price was increased again for indica rice and wheat.
A rural revitalisation strategy was introduced in 2017 to close the urban-rural development gap. This strategy relies on support to general services as a means to develop agri-food supply chains.
In March 2021, the Central Committee of the Communist Party of China (CCCPC) released the 14th Five-Year Plan 2021-25 for National Economic and Social Development. The plan outlines specific key priorities for agriculture modernisation:
enhancing food security, including by safeguarding a minimum arable land area of 120 million hectares
maintaining subsidies for grain producers and increasing minimum purchase prices for wheat and rice as appropriate
implementing high-standard infrastructure and conservation projects, which could also advance the development of green agriculture
investing in innovative farm technologies and smart agriculture systems, including with respect to seeds and animal breeding
In November 2021, the State Council issued the 14th Five-Year Plan for Promoting Agricultural and Rural Modernization 2021-25 setting the mid-term food security objective of maintaining annual production of grains at a minimum of 650 million tonnes and of meat at 89 million tonnes. The Plan also emphasises consolidating the achievements of poverty reduction in rural areas, supporting agricultural innovation and seed development, and conducting new surveys on agricultural production costs to adjust agricultural insurance programmes and subsidies.
At the end of the 1990s, China’s support to the agricultural sector mostly comprised budgetary allocations while market price support (MPS) was negative. Budgetary allocations went to input subsidies and general services to the sector. However, since 2002, MPS increased and became the main instrument to support agricultural producers. After 2009, China continued to increase its minimum support prices, leading to significant price gaps between domestic and international markets. Support to farmers increased until 2015, when reforms to commodities such as rapeseed, soybeans, cotton and maize contributed to lowering MPS. Fluctuations in producer support levels since 2019, particularly market price support (MPS), are linked to the evolution of international versus domestic prices. The increase in producer support from 2018 to 2021 was largely driven by a significant increase in MPS for grains and oilseeds against a backdrop of domestic prices rising faster than border prices. Minimum purchase prices for wheat and rice have gradually increased since the COVID-19 pandemic. Constraints in the supply of maize and soybeans for animal feed and groundnuts led to large increases in domestic prices and imports for these commodities in 2020 and 2021. In addition, domestic prices for livestock commodities such as beef or poultry meat have been increasing due to more demand for these products in response to tighter supplies of pig meat in these years. As reference prices increased faster than domestic prices in 2021-22, particularly for wheat, maize, milk, pig meat and other meat products, producer support decreased once again. MPS accounts for more than two-thirds of PSE, followed by budgetary support for payments based on current area and input subsidies (Figure 9.4).
Main policy instruments
Market price support is the main form of support to Chinese farmers. It is provided through both domestic price policies, such as the minimum purchase prices for wheat and rice, and trade policies including tariffs, tariff rate quotas (TRQs) and state trading.
The minimum purchase prices for wheat and rice are set every year by the National Development and Reform Commission (NDRC) in consultation with the Ministry of Agriculture and Rural Affairs (MARA), and other government institutions. Their application is limited to major wheat and rice producing provinces. The minimum purchase prices for wheat and rice are announced before sowing seasons, and only apply for several months after the harvest. The central government mandates that state-owned China Grain Reserves Corporation (Sinograin) and other state-owned companies undertake intervention purchases in case market prices fall below specified minimums. Since 2018, only grain of national grade 3 or higher can be purchased at minimum prices.3 However, in exceptional situations where there are large volumes of grain below grade 3, such as in cases of extreme weather events, provincial authorities can also purchase these under temporary reserves. Government procurement can begin only when the market price has fallen below the minimum price for three consecutive days and must be suspended when the market price rises above the minimum for three consecutive days. Ceilings on the volumes of grains procured at minimum purchase prices during a marketing year have been set at 37 million tonnes for wheat (since 2019) and at 50 million tonnes for rice (since 2020).
Budgetary transfers to specific commodities include compensatory and direct payments. Compensation payments cover the difference between pre-determined target prices and actual market prices for cotton producers and are a combination of output payments and area payments. Direct payments based on area planted are provided for soybeans and maize producers.
The “Agricultural Production Development” programme combines a subsidy paid per hectare with direct payments for grain producers, subsidies for agricultural inputs, and subsidies for improved seed varieties.4 Subsidies are also available for purchases of agricultural machinery, land consolidation; irrigation, agricultural insurance, returning farmland to forests and excluding degraded grassland from grazing.
General services to the sector focus on public stockholding of grains and developing agricultural infrastructure (including irrigation and drainage facilities). Support to agricultural knowledge and innovation is also significant.
China ratified the Paris Agreement on Climate Change on 3 September 2016 and submitted its first NDC in 2016 and updated it in 2021. While there are no specific targets for the agriculture sector, the role of agriculture, land-use change, and forestry is recognised in it. The commitments covered by the updated NDC are to have CO2 emissions peak by 2030 and carbon neutrality by 2060; to lower the carbon intensity of GDP to 65% below 2005 levels by 2030; to increase the share of non-fossil fuels to around 25% of primary energy consumption; to increase forest stock volume by 6 billion m3 from the 2005 level; and to bring total installed capacity of wind and solar power to over 1.2 billion kW by 2030 (State Council, 2021[3]).
The 2016 NDC calls for achieving zero growth in fertiliser and pesticide use by 2020, which MARA reported as achieved in 2018. The NDC also sets broad objectives for controlling methane emissions from rice fields and nitrous oxide emissions from farmland, promoting efficient use of straw and agricultural waste (UNFCC, 2021[4]; Climate Action Tracker, 2021[5]).
The Soil Pollution Prevention and Control Law entered into force in 2019. The Law establishes systems for agricultural land classification management according to pollution levels and identified risks. The Ministry of Ecology and Environment together with the Ministry of Agriculture and Rural Affairs and the Ministry of Natural Resources are establishing a soil environmental monitoring system with regular soil examinations.
The 14th Five-Year National Agriculture Green Development Plan 2021-25, issued jointly by MARA, the NDRC, the Ministry of Science and Technology (MOST), the Ministry of Natural Resources (MONR), the Ministry of Ecology and Environment (MEE), and the State Forestry and Grassland Administration (SFGA) (State Council, 2021[6]), includes the following policy objectives and areas for action in the area of mitigation:
Reduce usage of fertilisers and pesticides and increase application efficiencies.
Build a green and low-carbon agricultural industry supply chain to improve agricultural production quality, efficiency and competitiveness by: setting up 800 green standardised agricultural product production bases, 500 standardised demonstration farms for livestock and poultry, and creating more than 1 800 agricultural brands; formulating and revising 1 000 industrial standards related to agricultural green production; supporting green, organic, and geographical indication certification of agricultural products (certified products should reach over 60 000 and the number of production enterprises should reach 27 000).
Carry out research and apply agricultural green production technologies such as soil improvements, waste recycling, and green processing; and research and develop green inputs such as efficient and biological fertilisers, soil conditioners, high-efficiency, low-toxicity and low-residue agricultural and veterinary drugs, feed additives, and degradable mulching films.
Improve compensation mechanisms for ecological protection and establish a price mechanism for green products.
Other policies and programmes targeting climate change mitigation in the agricultural sector include demonstrations of fertiliser reduction and efficiency enhancement, and research initiatives supporting GHG mitigation. Several forestry programmes, primarily involving increased afforestation and improved forest management, also support NDC objectives of increasing the forest stock volume and GHG emission reductions in the LULUCF sector. The Grain for Green programme, implemented since 2000, uses direct payments to incentivise farmers to re-establish forest and shrub vegetation on sloped cultivated land at risk of erosion.
A new regulation on groundwater use entered into force in December 2021. The regulation sets out specific rules for the use, conservation and protection of groundwater with the objective to enhance groundwater supervision and management. The regulation designates areas where the exploitation of groundwater is prohibited and entitles provincial-level authorities to address over-exploitation and pollution.
Climate change adaptation policies in agriculture
China’s agricultural sector faces growing risks due to extreme weather and shifting planting conditions brought about by climate change. China’s farming belts were hit by record temperatures and rainfall in 2022, with drought in the northern area of the country.
China implemented several climate change adaptation programmes starting in the mid-2000s. These programmes included support to implement water-saving techniques in arid areas; agricultural environment, water and soil conservation; water infrastructure for small agricultural plots; improved soil organic matter levels; animal genetic variety conservation; and conservation planting.
The 2014-20 National Strategy on Climate Change Adaptation introduced additional programmes and approaches for adaptation in agriculture. In the agro-food sector, the Strategy has focused on:
National research and development plans to define climate zones, adjust sowing dates and select appropriate crop varieties. A total 3 564 agricultural climate zones at provincial city and county levels and 5 303 extreme-weather risk zones were delineated.
Expanding irrigated area through the construction of irrigation systems, and small and medium-sized reservoirs.
Capacity building for disaster prevention and mitigation, including early-warning systems for drought, floods, and zoonotic disease outbreaks.
Water-conservation projects, including infrastructure to connect feeder canal systems and key irrigation projects, management of groundwater over-exploitation, promoting water conservation and control in agriculture in the Yellow River Basin, developing high-efficiency dry farming in arid and semi-arid areas, and improved flood storage and reservoirs.
Better weather monitoring and alerts via a new agricultural climate-resources survey and defining regional climatic maps for agricultural production zones. The network layout of agricultural meteorological observation facilities was improved and provides disaster information by region and disaster type. The drought and flood disaster prevention system was improved, along with grass-roots-level monitoring and the early-warning network for animal and plant epidemics and pests.
Technology transfer to promote “green development” of agriculture. This includes disseminating technologies that reduce agricultural inputs and improve efficiency, promoting water and fertiliser integration, and establishing a system for the collection and use of agricultural waste such as straw, agricultural film, pesticide packaging waste, and livestock and poultry manure.
A subsidy for insurance fees covers selected crops and livestock commodities. Under the programme, the cost of insurance is shared by the central government, local governments, and farmers. The programme covers rice, wheat, maize, oilseeds (rapeseed, groundnuts), cotton, potato, highland barley, sugar, hogs, cows, yak, and Tibetan sheep.
The National Agricultural Sustainable Development Plan 2015-2030 sets goals and approaches to protect natural resources and encourage sustainable farming practices. It targets improved production quality and efficiency by setting priorities for different zones according to their capacity for agricultural production, resource endowments, and ecological characteristics (Ministry of Agriculture and Rural Affairs, 2015[7]). Moreover, 220 high-standard dry-farming and water-saving agricultural demonstration areas were established in dry farming areas in north and northwest China to demonstrate and promote technologies such as: water storage and soil moisture conservation; rainwater harvesting and supplementary irrigation; ridge tillage and furrow irrigation; soil-moisture based on on-demand irrigation; water-saving irrigation; water and fertiliser integration; drought and stress resistance; and water-resource efficiency.
The Cotton Sustainable Development Programme was introduced in 2021. The programme provides online training to farmers and other stakeholders in the value chain on sustainable production standards.
The Ministry of Ecology and Environment, the NDRC, and MARA jointly issued the National Strategy on Climate Change Adaptation 2035 in June 2022. The strategy builds upon the 2014-20 adaptation strategy in four areas: (1) greater emphasis on early-warning systems and risk management; (2) sectoral adaptation tasks for agriculture and food security; (3) greater integration of national and regional adaptation strategies; and (4) strengthening financial support, science and technological support, and international co-operation on climate adaptation (State Council, 2022[8]). The national adaptation strategy considers geographic characteristics and spatial planning to ensure implementation is tailored to a variety of contexts. In this sense, the Strategy’s implementation focuses on economic and ecological zones, including Beijing-Tianjin-Hebei; Guangdong-Hong Kong, China-Macao Greater Bay Area; the Yangtze River Delta; the Yangtze River Economic Belt; and the Yellow River Basin. The Strategy foresees the following areas for action:
Optimise the pattern of agricultural resource use by adjusting and optimising the planting structure and crop variety distribution, and selecting and breeding high-yield, high-quality and stress-resistant crops.
Strengthen the climate-change-adaptation and disaster-mitigation work system for agriculture by improving disaster monitoring and early-warning and response mechanisms, and disaster-diagnosis technologies and standards; preparing disaster-mitigation plans for different regions and extreme events; and strengthening the training of agricultural producers in disaster prevention, mitigation, and adaptation techniques.
Enhance the climate resilience of agricultural ecosystems through soil and water conservation, and ecological protection; conservation tillage in suitable areas; agro-forestry activities in mountainous areas, and intercropping systems; chemical fertilisers and pesticide reduction and efficiency; and construction of climate-change-adapted germplasm conservation bases and seed banks to protect endangered species of agricultural plants and animals.
Establish a climate-change framework adapted to food security objectives by improving monitoring and forecasting of supply and demand, and risk-estimation systems for food production and production-potential in major areas; strengthening arable-land protection and quality; and improving the agricultural weather-service system and risk-sharing mechanisms, gradually promoting weather-index-based insurance, and exploring agricultural-insurance mechanisms.
Domestic policy developments in 2022-23
China released its No.1 Central Document for 2023 in mid-February 2023, focusing on continued rural revitalisation. The No.1 Central Document calls for more effort to stabilise production and ensure the supply of grain and key agricultural products, boost the construction of agricultural infrastructure, strengthen support for agricultural science, technology and equipment, reduce rural poverty, and to promote the development of rural industries.
Food security remains a top priority. The 2023 No.1 Central Document reiterates the objective for an annual production of grains of at least 650 million tonnes. It also prioritises increasing maize yields, expanding the soybean cultivated area, and reducing soybean meal usage. The document highlights the need for:
infrastructure development related to soil and water conservation and disaster and animal disease prevention
technological innovation, including biotechnology, to improve seeds and agricultural machinery
promoting “green agricultural development”. In this sense, it notes for the first time in a key policy document the need to “establish a monitoring system for agri-environmental protection” and to “issue regulations on compensation for ecological protection”.
Early March 2022, China allocated CNY 1.6 billion (USD 253 million) to promote winter wheat cultivation in the five main producing regions as well as other regions that were most recently affected by delayed planting caused by heavy rainfall. At the end of March 2022, the Ministry of Finance allocated another CNY 2 billion (USD 315 million) to support the cultivation of its winter wheat crop in 11 main production provinces.
In April 2022, China suspended wheat auctions one month earlier than in 2021 due to tighter supplies. In 2022, it released overall 0.5 million tonnes of wheat per week from reserves in weekly auctions, compared with 4 million tonnes per week in 2021. In March 2023, China restarted auctions of old rice crop stocks for feed use to rotate out older stocks, to provide alternatives to maize as feed grain supplies remain tight, and to temper rising feed grain prices. The estimated volume of old stock rice to be auctioned is of 18 million tonnes, less than half the amount on offer in 2021 and 2022. The grain state-owned enterprise Sinograin announced it plans to increase its grain storage capacity by 30 million tonnes from 2021 to 2023, boosting the company’s capacity by one-third. Moreover, in September 2022, China instructed farmers to reduce the soybean use in animal feed by 30 million tonnes, or opt for other feeding alternatives, to reduce pressure on soybean import costs and curb inflation.
The State Council approved for 2022 an increase in the minimum support price (MSP) for wheat by CNY 40 (USD 6.3). This is consistent with increases in MSPs for wheat since the COVID-19 pandemic, in support of domestic grain production.
In July 2022, to assist ginners holding high-priced inventories, China initiated a purchase plan of cotton produced in Xinjiang for state reserves. As of August 2022, the government purchased 45% of the quantity available.
In September 2022, the NDRC implemented a programme releasing 200 000 tonnes of pig meat from national, provincial, and municipal level reserves with the objective to stabilise pig meat prices. Since 8 September 2022, the NDRC auctioned more than 127 000 tonnes of frozen pig meat reserves at the national level.
In June 2022, the provincial government of Yunnan issued a three-year plan (covering 2022-24) to modernise its agri-food industry. For sugar, the plan foresees maintaining Yunnan’s sugar cane acreage at around 3.5 million mu (233 333 hectares), achieving sugar cane production of 17 million tonnes, and achieving a sugar production of 2.5 million tonnes by 2024. Various support programmes are provided for inputs such as seeds and mechanical equipment, as well as for sugar cane millers to increase profitability by enhancing the use of by-products. In September 2022, the provincial government of Guangxi announced continuing the three-year programme introduced in 2020 providing subsidies to sugar cane planting and harvesting, seed development, field management, pest and disease control. The programme will also provide support to crop insurance, sugar futures trading, as well as sugar cane transportation and sugar processing.
In August 2022, China issued a national drought emergency plan as record temperatures and low water levels affected the region spanning much of the Yangtze River, with Sichuan, Chongqing, Hubei and Jiangxi provinces reporting severe impacts. Although none of the affected regions are major soybean producing areas, the extreme heat and drought are expected to lower soybean yields. On 16 August 2022, MARA allocated CNY 300 million (USD 44 million) to 13 provinces as agricultural production disaster relief funds to facilitate flood control and drought relief.
The Agricultural Development Bank of China issued CNY 2.14 trillion (USD 297 billion) of loans in the first three quarters of 2022. This includes loans for the purchase of summer and autumn grains seeds, seed developments and upgrade of farmlands.
Domestic policy responses to Russia’s war of aggression in Ukraine
As prices for grain and oilseeds increased following Russia’s war of aggression against Ukraine, two leading soybean-producing provinces in north-east China, Heilongjiang and Inner Mongolia, announced plans to increase soybean area by 10 million mu (0.7 million hectares) and 4.3 million mu (0.3 million hectares), respectively, compared to 2021. To meet these objectives, provincial governments provided soybeans farmers additional subsidies of CNY 2 000 per mu (USD 19 per hectare). MARA also released guidelines for alternating crops of maize and soybeans, targeting different regions, and set an objective of reaching 1 million hectares covered by 2023. Henan and Shandong provinces are providing subsidies of CNY 3 000 per mu (USD 29 per hectare) to incentivise intercropping.
China provided subsidies in three rounds throughout 2022 to stabilise farm incomes and compensate grain producers for the increasing costs of agricultural inputs: CNY 20 billion (USD 3 billion) in March 2022; CNY 10 billion (USD 1.5 billion) in May 2022; and CNY 10 billion (USD 1.5 billion) in August 2022. Similar to initiatives addressing impacts from the COVID-19 pandemic in 2020-21, these programmes would be implemented as part of the “Agricultural Production Development” subsidy, paid per hectare.
Trade policy developments in 2022-23
In 2022, the General Administration of Customs of China (GACC) announced that under the China-New Zealand free trade agreement (FTA), China would remove special safeguard measures on imports of New Zealand milk, butter, and cheese starting in 2022.
In February 2022, MARA signed a phytosanitary protocol with Myanmar for expanding maize exports to China. In March 2022, GACC granted market access to Mongolian dairy products, including milk, cheese, and whey powder. In the summer of 2022, the GACC also lifted a ban on cattle imports from Lao PDR that had been in place due to lumpy skin disease.
In June 2022, GACC published the announcement regarding the “Implementation of Conditional Retrieval Facilitation Measures for Imported Seed”. This allows qualified importers to retrieve seeds at customs for storing in approved facilities prior to the official release of quarantine laboratory test results.
In September 2022, China published an updated Agricultural Product Quality and Safety Law, which entered into force on 1 January 2023. This covers a range of issues relating to risk management and standard development, places of origin, production, sales, supervision and administration, and legal liabilities. It removes references to geographic indications. Producers and operators engaged in the cold chain logistics of agricultural products must follow regulations and relevant agricultural product quality and safety standards, strengthen the innovation and application of cold chain technology, and quality and safety control, and implement regulations on cold chain logistics, agricultural products and their packaging, means of transportation, and operating environments.
On 30 December 2022, China removed the requirement for foreign trade operators to register at local commercial authorities. Entities applying for import and export permits, quotas, and state trading enterprises will therefore no longer be required to provide a registration record.
Building on the results of pilot programmes, GACC, NDRC, and the Ministry of Commerce (MOFCOM) implemented from 1 January 2023 the electronic data online verification of three quota certificates: the “Agricultural Products Import Tariff Quotas Certificate of the People’s Republic of China”, “Fertiliser Import Tariff Quota Certificate” and “Non-tariff Quota Preferential Tariff Rate Quota for Imported Cotton”. The NDRC and MOFCOM will no longer issue paper quota certificates, but instead issue electronic quota certificates, and transmit the electronic data to customs. The applicant goes through the import customs procedures with the electronic quota certificate, and customs verifies this by comparing the electronic data of the quota certificate and the electronic data of the customs declaration form.
On 29 December 2022, the State Council Tariff Commission (SCTC) announced its annual tariff adjustment plan for 2023. As of 1 January 2023, China will calculate MFN tariffs on certain frozen poultry products by applying a tariff on the import value (i.e. ad valorem) rather than by volume. China will also temporarily lower import tariff rates for various cheese products (from 12% to 8%), various types of nuts (new tariffs ranging between 5% and 12%), and sunflower seed (from 15% to 9%). The temporary applied MFN import tariff rate for cashew nuts will be further lowered to 5% in 2023. The temporary import tariff rates for orange juice, which had been previously raised to 18% in 2022, increased again in 2023 to 20%.
On 3 October 2022, China restricted the export of maize starch owing to concerns about local supplies. In this context, the government required companies to suspend shipments with the objective to stabilise prices and contain inflationary pressures.
Trade policy responses to Russia’s war of aggression in Ukraine
On 25 May 2022, the GACC and the Ministry of Agriculture in Brazil signed a Protocol on Phytosanitary Requirements to allow maize imports from Brazil. This follows China’s strategy in diversifying its import sources for key commodities.
In August 2022, China introduced a quota limiting total phosphate exports to 3.16 million tonnes for the second half of 2022. In October 2021, state-owned enterprises producing phosphate were required to stop exports until at least June 2022. In addition, China implemented a quota limiting total phosphate exports to 5.5 million tonnes for the second half of 2021. In October 2021, China also restricted exports of all fertilisers by introducing a new requirement for inspection certificates to ship fertilisers.
Trade policy responses to the COVID-19 pandemic
Between September and December 2022, in order to promote epidemic prevention and control for non-cold chain goods at the port, the GACC adjusted the completion requirements for relevant items of the “Customs Declaration Form for Imported Goods of the People's Republic of China” and the “Recording List of Imported Goods at Customs of the People's Republic of China”: a newly added declaration item of “preventive disinfection” was included (i.e. disinfection of places and items that may be contaminated by pathogenic microorganisms when there is no clear source of infection).
On 28 December 2022, GACC removed PCR testing requirements and disinfection measures for COVID-19 that had been applied to imported cold-chain foods and non-cold chain goods. This change took effect on 8 January 2023.
China has the world’s largest population and the second largest land area. It is an upper-middle income economy, with a GDP per capita – adjusted by PPP – close to 83% of the average of countries covered by this report (Table 9.3). However, while counting almost 20% of the world’s population, it has only 7% of the world’s potable water and 10% of the world’s agricultural land. China is thus a resource scarce country, which results in severe competition between agriculture and other users of land and water resources.
Agriculture remains an important part of China’s economy. It accounts for 24.4% of employment, but its 7.6% share of GDP indicates that labour productivity is significantly lower than in the rest of the economy. Even if rural incomes are growing at high rates, they remain at around one-third of those in urban areas.
Crop production represents 66% of total agricultural output and its composition has changed significantly over the last decades, driven by the shift towards higher value-added agricultural products such as fruit and vegetables. While the average farm size remains less than one-hectare, large-scale production has been developing rapidly, including among co-operative and corporate farms. North and northeast provinces have seen more rapid farm consolidation than other regions, as increased labour mobility and the transfer of land among farmers over the past three decades have led to adjustments in the farm structure. Livestock production originates mostly from larger-scale commercial units (OECD, 2018[2]).
Real GDP growth averaged 4.6% in 2020-22 (Figure 9.5). After the COVID-19 crisis and following a period of gradual slowdown in economic growth since 2012, China experienced one of the strongest economic growth rates among G20 economies, supported by strong industrial activity and a boost in exports against a backdrop of increasing demand in other major economies. Despite those signs of improvement, economic growth decelerated to around 3% in 2022, as activity in China was held back by continued lockdowns and a wave of COVID-19 infections. Unemployment only slightly increased since 2020, as the economy was supported by the COVID-19 fiscal support policies. Following inflation above 2% in 2019 and 2020, when food inflation was driven by higher pig meat prices due to the African swine fever outbreak and related supply constraints, inflation rose again in 2022 against a background of increasing international commodities price and increasing input costs.
China has consistently and increasingly been a net agro-food importer since 2003, but agro-food exports have been growing over the last two decades. While agro-food exports stabilised since 2018, agro-food imports have been increasing at a higher rate during this period. The significant increase in agro-food imports since 2020 has been driven by higher imports of grains and oilseeds, particularly maize and soybeans, as well as higher pig meat imports. Primary products used as inputs in the domestic food industry dominate China’s agro-food imports, representing 44% of the total in 2021. In turn, primary and processed products for final consumption are key export categories, accounting for 70% of total agro-food exports (Figure 9.6). Over the last two decades, China has developed into the largest importer of agricultural products in the world. With rising consumption and limited capacity to increase its domestic production due to arable land and water scarcity, China increasingly meets its demand through imports. In this context, its agricultural policy setting – including price and storage measures for some commodities – can have important impacts on world prices.
Agricultural output growth in China averaged 1.7% in 2011-20, on par with the world average (Figure 9.7). This has been driven by growth in total factor productivity (TFP) of 1.6% per year, higher than the global average and largely attributed to farm consolidation and increased mechanisation of production. The contribution of primary factor growth to agricultural output growth (0.2%) is slightly lower than the world average (0.4%).
The sustained growth in agricultural output is exerting pressures on natural resources such as land and water. While nutrient surplus intensities for nitrogen and phosphorus have been declining over the past two decades, these remain at high levels, particularly for phosphorus relative to the OECD average (Table 9.4). Agriculture remains the main user of water, accounting for 61.6% of total water abstraction, well above the OECD average. Water stress is more than twice as high as the OECD average.
References
[5] Climate Action Tracker (2021), “Countries: China”, http://climateactiontracker.org/countries/china.html (accessed on 15 January 2019).
[7] Ministry of Agriculture and Rural Affairs (2015), National Agricultural Sustainable Development Plan 2015-2030, http://www.moa.gov.cn/zwllm/zwdt/201505/t20150527_4619961.htm (accessed on 10 January 2019, in Chinese).
[2] OECD (2018), Innovation, Agricultural Productivity and Sustainability in China, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264085299-en.
[1] OECD (2005), OECD Review of Agricultural Policies: China 2005, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264012615-en.
[8] State Council (2022), National Climate Change Adaptation Strategy 2035.
[6] State Council (2021), Fourteenth Five-Year Plan for National Agricultural Green Development, http://www.gov.cn/zhengce/zhengceku/2021-09/07/content_5635867.htm (accessed on 15 December 2021).
[3] State Council (2021), Responding to Climate Change: China’s Policies and Actions, http://www.scio.gov.cn/zfbps/32832/Document/1715506/1715506.htm.
[4] UNFCC (2021), China First NDC - Updated October 2021, http://www4.unfccc.int/submissions/indc/Submission%20Pages/submissions.aspx.
Notes
← 1. Although ownership of land remained collective, control and income rights belonged to individuals under the HRS, with a land contract term of 15 years. When this ended in the late 1990s, the second term was extended to 30 years.
← 2. Self-sufficiency was interpreted to mean that China should produce 95% of its own grain requirements. The Chinese self-sufficiency rate for grains is defined as the total production of wheat, coarse grains and rice divided by total domestic consumption of these crops (OECD, 2005[1]). The No. 1 Central Document is the most important policy document in China, issued jointly by the Central Committee of the Communist Party of China (CCCPC) and the State Council. This document determines the most important policy issues and focus of the year. Issues related to agriculture, farmers and rural areas have consistently been selected as the topic of this document since 2004.
← 3. The quality grade standard is divided into five grades plus a ‘sub-standard’ category.
← 4. This programme was previously called the “agricultural support and protection subsidy”.