Agricultural Policy Monitoring and Evaluation 2021

8. China

Support to agriculture

The share of support to agricultural producers in gross farm receipts in the People’s Republic of China (hereafter “China”) decreased gradually since 2016 after two decades of steady growth. This support averaged 12.5% in 2018-20, reflecting policy reforms with respect to market intervention for soybeans, rapeseed, cotton and maize, as well as to the minimum purchase price for wheat and rice. The nominal depreciation of the CNY against the USD since 2014 (after a long period of appreciation) is another factor influencing the evolution of price gaps and contributing to stabilising levels of market price support (MPS) in recent years. Payments based on planted area have consistently increased since 2014 as a result of the recent reforms, but MPS remains the dominant part of total support, generated through both domestic price support policies and various border measures on imports. Overall, more than two-thirds of support to producers are in the form of potentially most-distorting transfers, a consistent pattern since 2000-02.

MPS levels differ across imported commodities, while prices of exported commodities are not supported. With the exception of eggs, peanuts, and fruit and vegetables that are exported, producers benefited from large transfers accounting for between 10% and 60% of commodity receipts in 2018-20. Prices received by farmers were on average 10% higher than world prices in 2018-20. The higher domestic producer prices on average indicate an implicit tax imposed on consumers, with a percentage consumer support estimate of -9.6% in 2018-20.

Within the general services support estimate (GSSE), three categories attract the largest financial support: public stockholding, development and maintenance of infrastructure, and the agricultural knowledge and innovation system. However, the GSSE corresponds to only 14.1% of total support to agriculture in 2018-20, and at 3% relative to agriculture value-added the GSSE is below the OECD average. Total support to agriculture as a share of GDP (%TSE) has remained relatively stable since 2000‑02. At 1.6% in 2018-20, %TSE was nevertheless one of the highest among the countries covered, and about three times the OECD average.

Recent policy changes

Through the February 2021 No. 1 Central Document and the March 2021 14^th Five-Year Plan 2021-2025 for National Economic and Social Development, China stepped up the focus on food availability aiming to boost grain yields, increase support for the domestic seed industry and enhance digital technology use in agriculture.

China took a diverse set of measures related to the agro-food sector in response to the COVID-19 crisis, focusing on institutional measures, overall economic measures, support to agricultural production, information and co-ordination measures, and trade measures affecting the operation of supply chains. In support to agricultural production, the minimum support price for indica rice increased in February 2020 for the first time since 2014. The 14^th Five-Year Plan 2021-2025 targets further increases in minimum support prices for both wheat and rice. In May 2020, the National Development Research Council (NDRC) released a food security response plan to the COVID-19 pandemic restricting further shifts in farmland to non-grain crops use and consolidating the central government’s oversight of stocks in regions and provinces.

Since June 2020, China implemented measures to test for infectious SARS-CoV-2 material in domestic and imported food and food packaging. In December 2020, China introduced additional COVID-19 protocols at the border for agro-food transactions, which include testing and disinfection of agro-food products at border posts. It also established an online national traceability platform managed by the State Administration for Market Regulation (SAMR) operating in 13 provinces, where food companies have to report information on imported goods.

The three-year safeguard on sugar ended in May 2020 and the out-of-quota tariff dropped from 85% to 50%. Following the end of the safeguard, in July 2020 China introduced automatic import licensing for out-of-quota sugar imports.

The Regional Comprehensive Economic Partnership (RCEP) was concluded in November 2020. China’s schedule of tariff commitments foresees tariff reductions and phase-outs for selected agro-food goods such as meat products, while other commodities such as cereals are largely excluded.

Assessment and recommendations

• Recent reforms to replace intervention prices for key crops by direct payments based on area planted are a step in the direction of rebalancing the policy portfolio. This reflects China’s increasing policy orientation towards long-term productivity growth and sustainability. The reform of the maize purchasing and storage system towards direct payments eased the burden of public stockholding costs, which still represent the largest expenditure share in general services support. Such reforms could be gradually extended to include wheat and rice. Should direct payments to farmers be 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.

• Public expenditures on general services have increased, but at a slower pace than support to individual producers. More efforts are needed to restructure agricultural support towards public investment in research and development, and agricultural infrastructure. In particular, further investments in sanitary inspection and control services will be key to support implementation of the revised provisions of the Food Safety Law, the envisaged nation-wide surveillance system for diseases and pests, and ultimately the recovery of the pig meat sector affected by African swine fever. This restructuring of public expenditure can be achieved by scaling down input subsidies, such as the subsidy to purchase farm machinery, and ensuring that support through direct payments only has a transitory role in backing farmers’ adjustment to a new market environment.

• Reforms to land transfer rules contributed to the emergence of “new-style” farms, including large family farms, co-operative farms and farms run by agribusiness companies. To continue delivering expected outcomes, these reforms need to be complemented by investments in education and training, and improved access to financial services.

• 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. In this sense, the soil environmental information platform and monitoring system with regular soil examinations – under the 2019 Soil Pollution Prevention and Control Law – need to be fully implemented and can set the stage for similar efforts relating to water use in agriculture. More specifically, under continued discussions on the establishment of a national groundwater environmental monitoring system, a comprehensive review of water governance could better define responsibilities, remove conflicts, and ensure effective and efficient policy implementation.

• China’s Nationally Determined Contribution (NDC) recognises agriculture’s importance to its economy-wide emission-reduction target, but no sector-specific targets were set. Nevertheless, a number of policy efforts aim to mitigate greenhouse gas (GHG) emissions by focusing on fertiliser efficiency, less emissions from rice cultivation, and agricultural biogas production. Several plans were put forward across institutions to strengthen policies supporting the sector’s adaptation to climate change. In this context, the Ministry of Ecology and Environment could mainstream adaptation policy objectives across current and planned programmes, including better targeting of extension services for farmers. In addition, prior to any extension of insurance premium coverage, an evaluation of the performance of the subsidy to the agricultural insurance premium would assess its cost-efficiency and impacts on adaptation.

Figure 8.1. China: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 8.2. China: Drivers of the change in PSE, 2019 to 2020

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 8.3. China: Transfer to specific commodities (SCT), 2018-20

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Table 8.1. China: Estimates of support to agriculture

Million USD

	2000-02	2018-20	2018	2019	2020p
Total value of production (at farm gate)	270 118	1 472 294	1 362 576	1 434 460	1 619 846
of which: share of MPS commodities (%)	75.8	80.6	80.3	80.7	80.9
Total value of consumption (at farm gate)	281 331	1 556 683	1 423 557	1 527 298	1 719 193
Producer Support Estimate (PSE)	14 354	191 554	185 452	184 361	204 850
Support based on commodity output	7 329	129 674	122 776	122 910	143 336
Market Price Support1	7 329	126 680	118 609	120 504	140 927
Positive Market Price Support	11 162	128 433	120 370	122 168	142 762
Negative Market Price Support	-3 833	-1 753	-1 761	-1 664	-1 834
Payments based on output	0	2 994	4 167	2 406	2 408
Payments based on input use	5 684	20 475	22 917	19 244	19 264
Based on variable input use	1 414	4 305	5 568	3 671	3 675
with input constraints	0	0	0	0	0
Based on fixed capital formation	3 026	13 519	14 702	12 920	12 933
with input constraints	0	0	0	0	0
Based on on-farm services	1 244	2 652	2 647	2 653	2 656
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	533	26 700	26 181	26 946	26 974
Based on Receipts / Income	533	2 095	2 116	2 084	2 086
Based on Area planted / Animal numbers	0	24 605	24 064	24 863	24 889
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	370	12 484	11 254	13 092	13 106
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	370	12 484	11 254	13 092	13 106
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	438	2 221	2 324	2 168	2 171
Based on long-term resource retirement	438	2 221	2 324	2 168	2 171
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	5.2	12.5	13.0	12.3	12.2
Producer NPC (coeff.)	1.03	1.10	1.11	1.10	1.10
Producer NAC (coeff.)	1.05	1.14	1.15	1.14	1.14
General Services Support Estimate (GSSE)	11 861	31 643	35 838	29 530	29 560
Agricultural knowledge and innovation system	1 347	7 208	7 492	7 062	7 069
Inspection and control	349	2 581	2 114	2 812	2 815
Development and maintenance of infrastructure	3 424	6 232	8 351	5 169	5 174
Marketing and promotion	0	405	380	417	418
Cost of public stockholding	6 741	15 218	17 501	14 070	14 084
Miscellaneous	0	0	0	0	0
Percentage GSSE (% of TSE)	45.0	14.1	16.2	13.8	12.6
Consumer Support Estimate (CSE)	-8 512	-149 630	-133 514	-143 131	-172 246
Transfers to producers from consumers	-8 688	-135 617	-127 603	-128 655	-150 592
Other transfers from consumers	-1 119	-21 710	-14 276	-21 534	-29 320
Transfers to consumers from taxpayers	128	0	0	0	0
Excess feed cost	1 167	7 696	8 365	7 058	7 666
Percentage CSE (%)	-3.0	-9.6	-9.4	-9.4	-10.0
Consumer NPC (coeff.)	1.04	1.11	1.11	1.11	1.12
Consumer NAC (coeff.)	1.03	1.11	1.10	1.10	1.11
Total Support Estimate (TSE)	26 343	223 197	221 291	213 890	234 411
Transfers from consumers	9 807	157 327	141 879	150 189	179 912
Transfers from taxpayers	17 655	87 581	93 688	85 235	83 818
Budget revenues	-1 119	-21 710	-14 276	-21 534	-29 320
Percentage TSE (% of GDP)	2.0	1.6	1.6	1.5	1.6
Total Budgetary Support Estimate (TBSE)	19 014	96 517	102 681	93 386	93 483
Percentage TBSE (% of GDP)	1.4	0.7	0.7	0.7	0.6
GDP deflator (2000-02=100)	100	188	186	189	190
Exchange rate (national currency per USD)	8.28	6.81	6.62	6.91	6.90

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for China are: wheat, maize, rice, rapeseed, soybean, sugar, milk, beef and veal, sheep meat, pig meat, poultry, eggs, cotton, apples, groundnuts, peanuts, exported fruit and vegetables, and imported fruit and vegetables.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

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 with a direct impact on agriculture (OECD, 2005[1]; OECD, 2018[2]). 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 allocated increasing support for irrigation.

Liberalisation of international trade started in the early 1990s with 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 included among the key policy objectives together with food self-sufficiency2 in several of the No. 1 Central Documents3 during the 2000s. The importance of improving farmers’ incomes was reflected in the introduction of minimum purchase prices for grains, the temporary purchasing and storage system, and subsidies for agricultural materials, superior crop varieties and agricultural insurance premiums.

Moreover, many of the No. 1 Central Documents 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, China further promoted land reforms through the “three rights separation system” into village collective landowner rights, individual household land contract rights, and land operation rights. These aimed to consolidate farm operations and contribute to 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.

Reforms to the government-led temporary purchase and storage policy for cotton, soybeans and rapeseed at pre-determined prices were introduced in 2014-15, and 2016 for maize. For cotton, this was replaced by compensation 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, China also merged all subsidies on grain, seed and aggregate inputs into a single general income support payment. While wheat and rice remain subject to the minimum price procurement programme, support prices were gradually reduced between 2015 and 2019. In 2020, during the COVID-19 pandemic, the minimum support price increased for indica rice.

In 2017, China introduced a rural revitalisation strategy to close the urban-rural development gap. The rural revitalisation strategy foresees support to general services to increasingly contribute to the development of agro-food supply chains.

Table 8.2. China: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1978	Centrally planned economy	Centralised control of agricultural activities Collective and commune-farmer land systems Production, marketing and price controls, implicitly taxing agriculture Investments in irrigation systems and extension services State agricultural trading firms and high tariffs
1978-1999	Initial reforms to the centrally planned economy	Collective and commune land system dismantled, household responsibility system set up for land use Some deregulation of agricultural marketing State Grain Authority ensuring food availability and affordability to the population Public stockholding, food price subsidies to urban consumers Fertiliser and input subsidies
2000-2009	Improving farmers’ incomes and food self-sufficiency key policy objectives Further trade liberalisation	Increase in spending on agricultural research and development Technical assistance services Input subsidies, implicit credit subsidies Increasing allocations to the “Grain for Green” conservation programme Input and output markets increasingly allow private traders WTO accession in 2001, free trade agreements signed, reduction of tariffs Minimum purchase price system for grains Temporary purchase and storage policy established for selected commodities
2010-2014	Increasing support to agriculture	Increasing minimum purchase prices, and larger set of commodities covered by the temporary purchase and storage system Agricultural insurance premium subsidies
Since 2014	Policy efforts to adjust the price support system and respond to agricultural productivity and sustainability challenges	Continued reforms in land transfer rules National Agricultural Sustainable Development Plan 2015-2030 Agricultural support and protection subsidy payments per area 2017 National strategy on “rural revitalisation” Dismantling of price support systems for cotton, soybeans, rapeseed, maize; introduction of direct payments based on area Gradual decrease in support prices for wheat and rice during 2015-19; increase in support price for indica rice in 2020

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. Nevertheless, MPS accounts for more than two-thirds of PSE, followed by budgetary support for payments based on current area and input subsidies (Figure 8.4).

Figure 8.4. China: Level and PSE composition by support categories, 1993 to 2020

As a percentage of gross farm receipts

Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

Market price support is the main channel for providing 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 (TRQ) 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 respective minimum prices. Only grain of national grade 3 or higher4 can be purchased at minimum prices since 2018. However, in situations with large volumes of grain below grade 3, such as in cases of extreme weather events, provincial authorities can also purchase these under temporary reserves. Minimum price 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 are 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.

Other key budgetary programmes include: the agricultural support and protection subsidy, combining direct payments for grain producers, subsidies for agricultural inputs, and subsidies for improved seed variety, all paid on per unit of land basis; subsidies for purchases of agricultural machinery; subsidies for land consolidation; subsidies for farmland irrigation construction; subsidies for agricultural insurance schemes; subsidies for returning farmland to forests and excluding degraded grassland from grazing.

Public stockholding of grains and programmes supporting the development of agricultural infrastructure (including irrigation and drainage facilities) represent the most important categories of general services. Expenditures related to agricultural knowledge and innovation are also sizable.

China ratified the Paris Agreement on Climate Change on 3 September 2016. Its Nationally Determined Contribution (NDC) includes several commitments, such as: to peak CO₂ emissions by 2030 at the latest; to lower the carbon intensity of GDP by 60-65% below 2005 levels by 2030; to increase the share of non-fossil energy in the total primary energy supply to around 20% by 2030; and to increase its forest stock volume by 4.5 billion cubic metres compared to 2005 levels. In September 2020, China committed to achieving carbon neutrality by 2060. While the NDC explicitly mentions agriculture, land-use change and forestry, among other sectors, no specific net-emission target has yet been set for the agricultural sector. The only specific quantitative target set for agriculture relates to achieving zero growth in fertiliser and pesticide utilisation by 2020, which MARA reported as already achieved in 2018. Other broad objectives concern controlling methane emissions from rice fields and nitrous oxide emissions from farmland, promoting comprehensive utilisation of straw or reutilisation of agricultural waste (UNFCC, 2015[3]; Climate Action Tracker, 2018[4]).

In 2016, the State Council released the Work Plan to Control GHG Emissions, looking to strengthen policies controlling GHG emissions besides CO₂, such as methane and hydrofluorocarbons (HFCs). The plan targets reducing methane emissions in the agricultural sector and in municipal waste and sewage treatment (NDRC, 2017[5]).

The National Agricultural Sustainable Development Plan (2015-2030) sets the goals and paths in terms of natural resources protection, farming practices that are protective of the environment and a focus on production quality and efficiency. It sets priorities for different zones by taking into account the capacity of agricultural production, resource endowments, and ecological characteristics (MOA, 2015[6]).

Domestic policy developments in 2020-21

Several economy-wide and agriculture-specific policy documents issued in 2020 and early 2021 identified the priorities for the agricultural sector, marking an increased emphasis on food availability and digital technologies. In March 2021, the CCCPC released the 14^th Five-Year Plan 2021-25 for National Economic and Social Development. The Plan outlines specific key priorities in the area of 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 can also advance the development of green agriculture; investing in innovative farm technologies and smart agriculture systems, including with respect to seeds and animal breeding; and improving pest and disease control systems. In addition, as regards the acceleration of the “rural revitalisation” strategy, the Plan foresees increased investments in rural infrastructure and financial services, agro-food supply chains and agri-businesses, further rural land reforms, and diversification of income generation activities, such as through rural eco-tourism. At an economy-wide level, the Plan also promotes the “dual circulation” strategy.5

The 2021 No. 1 Central Document released in February 2021 proposes that local governments gain increased responsibility with respect to food security, for which China plans to set up a “national food security industry belt” connecting all key grain areas. The No. 1 Document also introduces the following objectives: maintain grains production at more than 650 million tonnes per year; increase land area for maize; support the production of rapeseed, peanuts and other oil crops; and boost the recovery of pig meat production while also increasing beef and sheep meat output. The No. 1 Document also emphasises the diversification of import sources of major agricultural products and the development of global supply chains for grains and other agro-food products. The development of digital technologies in agriculture and supply chains will be supported through 500 demonstration zones by 2025 and agricultural logistics hubs for cold chain (State Council, 2021[7]).

The agriculture-specific policy plans issued in 2020 address a wide range of areas from developing agro-food processing and the livestock sector to addressing food waste. In July 2020, MARA issued the National Plan for Rural Industrial Development 2020-25, which focuses on scaling up agro-food processing and developing rural services industries (MARA, 2020[8]). In addition, the State Council issued in September 2020 the “Opinion on Promoting the High-quality Development of the Livestock Industry”. The document encourages imports for ensuring meat supplies, but also sets self-sufficiency targets for selected livestock products without specifying a time horizon for their achievement: 70% for dairy; 95% for pig meat; 85% for beef and mutton; and 100% for poultry. While the document aims to address environmental degradation in these sectors, it nevertheless loosens the stringent agri-environmental regulations introduced in 2018 for delineating zones where livestock farms would be banned or limited (State Council, 2020[9]; GAIN CH2019-0205, 2020[10]). Last, a new high-level campaign against food waste was launched in August 2020, capping for instance the amount of food consumers can purchase in restaurants and food outlets (Financial Times, 2020[11]).

The Regulation for the Prevention and Control of Crop Diseases and Insect Pests entered into force on 1 May 2020. The key provisions of the regulation concern the establishment of a nation-wide surveillance system for diseases and pests (GAIN CH2020-0069, 2020[12]).

Starting 1 July 2020, farmers and agri-businesses transporting pigs are required to register transport information through a programme on the WeChat mobile application. The programme is managed by the national animal disease control authorities and aims to reduce the risks of African swine fever transmission by increasing traceability (MARA, 2020[13]).

The Guangxi provincial government introduced a three-year action plan for the mechanisation of sugar cane production.6 Farmers are provided up to CNY 403 (USD 63) per hectare for the purchase of machinery (GAIN CH2020-0054, 2020[14]).

China allocated CNY 4.6 billion (USD 650 million) to pig meat producers in counties with pig herds of more than 100 000 animal heads for the construction of waste treatment facilities and automatic feeding machinery (Xinhua, 2020[15]).

In July and September 2020, the MARA and the Ministry of Finance jointly allocated CNY 730 million (USD 117 million) to new disaster relief funds assisting agricultural producers in flood-hit regions (AMIS, 2020[16]).

On infrastructure, China allocated CNY 5 billion (USD 764 million) to build 14 000 on-farm cold storage facilities in 16 provincial-level regions, with a total capacity for storing 6 million tonnes of agro-food products (Xinhua, 2020[17]).

As regards agri-environmental measures, the Ministry of Finance allocated CNY 100 billion (USD 15 billion) over five years to consolidating water reservoirs in rural areas in order to ensure water supply for agricultural irrigation during drought periods (People Paper, 2020[18]). The Ministry of Water Resources and the Ministry of Finance also allocated CNY 2.5 billion (USD 0.4 billion) to 55 pilot counties to address water pollution in rural areas, including for agricultural activities (Xinhua, 2020[19])

Domestic policy responses to the COVID-19 pandemic

China took a diverse set of measures relating to the agro-food sector in response to the COVID-19 crisis, focusing on institutional measures, overall economic measures, supporting agricultural production, information and co-ordination measures, as well as trade easing and trade restricting measures affecting the functioning of supply chains (Cheng, Zhu and Wu, 2021[20]). In support to agricultural production, the NDRC raised in February 2020 the minimum purchase price for indica rice for 2020-21, the first time since 2014: from RMB 2 400 (USD 341) to RMB 2 420 (USD 343) per tonne for early indica rice and from RMB 2 520 (USD 358) to RMB 2 540 (USD 361) per tonne for mid-late indica rice7 (State Council, 2020[21]) (Teller Report, 2020[22]).

The fiscal support policies put in place for small and medium-sized enterprises (SMEs) in February and March 2020 also covered agri-businesses through: deferred tax payment; extended loans repayment periods; tax and social contributions exemptions for SMEs in difficulty (China Banking and Insurance Regulatory Commission, 2020[23]; MOFCOM, 2020[24]). In May 2020, China introduced a new economy-wide stimulus package of CNY 4.8 trillion (USD 0.74 trillion, or 4.5% of GDP) to address the consequences of COVID-19 on the economy. Key measures include extension of unemployment insurance to migrant workers; tax relief and waived social security contributions; and investment in infrastructure, including in the agricultural sector (IMF, 2020[25]).

In March 2020, MARA signed co-operation agreements with the China United Insurance Group and the Agricultural Bank of China to ensure the availability of financial services for farmers and agribusinesses (SNSJ Agri China, 2020[26]).

In February 2020, MARA, the NDRC and the Ministry of Transport supported the creation of domestic “green channels” for transporting feed from feed producers to livestock farmers facing logistical bottlenecks due to the COVID-19 quarantine restrictions (MARA, 2020[27]). Central and local governments also supported e-commerce as an alternative channel for the purchase and distribution of agricultural inputs. Platforms such as Pinduoduo or Alibaba’s Taobao marketplace facilitated this for seeds, fertilisers, sprinklers, and other agricultural machinery (Reuters, 2020[28]).

In February 2020, China Energy, China Coal and Shaanxi Coal companies were requested to prioritise supplies to coal-based fertiliser production, while companies including PetroChina, Sinopec and China National Offshore Oil Corporation (CNOOC) were asked to prioritise supplies to gas-based fertiliser producers. China National Agricultural Means of Production Group Corp. (CNAMPGC) and Sinochem were requested to build up domestic stocks of potash fertiliser (Argus Media, 2020[29]).

On 22 May 2020, the NDRC released a food security response plan to the COVID-19 pandemic (AMIS, 2020[30]). The plan first targets the stabilisation of the grains crop area and in this sense, the State Council released in November 2020 a directive issued to all local governments restricting further shifts in farmland to non-grain crops. Local governments are responsible for the monitoring of crop areas through satellite remote-sensing technology (Bloomberg, 2020[31]).

The COVID-19 food security response also includes an improved management of grain reserves and expanding warehousing capacity. Subsequently, in December 2020, China published a new draft law on the management of its grain reserves, extending the central government’s oversight to stocks in regions and provinces. The new law stipulates how the regional and provincial reserve volumes should be set and the commodities to be included, as well as when they can be released. The Chinese Government indicates that reserves should only be used in cases of grains shortage, significant price swings, or major natural disasters (World Grain, 2020[32]).

In addition, the May 2020 response plan on food security focuses on rebuilding the pig herd affected by African swine fever and diversifying imports of selected agricultural products and inputs, particularly soybeans, meat, seeds and fertilisers.

As regards agro-food supply chain policies, since June 2020, farmers selling fresh products through e-commerce platforms benefit from subsidised electricity prices for cold storage as well as from subsidies for building storage equipment (China Daily, 2020[33]).

China started to gradually close all live poultry markets as of July 2020 (Xinhua, 2020[34]). As regards consumer measures, around 45 000 food emergency supply outlets were established throughout the country since the onset of the pandemic (State Council, 2020[21]).

Trade policy developments in 2020-21

On 19 May 2020, the Ministry of Commerce (MOFCOM) introduced 80.5% anti-dumping and countervailing (AD/CV) duties on barley imports from Australia. On 26 March 2021, China introduced anti-dumping duties between 116.2% and 218.4% on Australian wine for a period of five years8 (Global Times, 2021[35]).

The three-year safeguard on sugar terminated in May 2020 and the out-of-quota tariff dropped from 85% to 50%. The in-quota rate remains at 15% for the tariff rate quota (TRQ) amount of 1.954 million tonnes, which covers less than half of China’s annual sugar imports. With the conclusion of the safeguard, MOFCOM introduced in July 2020 automatic import licensing for out-of-quota sugar imports. Similar to soybeans or palm oil, only approved companies (including both private and state-owned enterprises) are now allowed to import sugar and must regularly report import volumes (GAIN CH2020-0132, 2020[36]).

In May, August and December 2020, China successively suspended imports from six Australian beef meat plants, citing issues relating to labelling and health certificates (Reuters, 2020[37]). On 5 January 2021, China imposed a ban on poultry and related products imports from France due to reported avian influenza outbreaks in November 2020.

Starting on 5 April 2020, the General Administration of Customs of China (GACC) eliminated the requirement for quality inspections of imported cotton. GACC continues to conduct phytosanitary inspections as required by Chinese import regulations (GACC, 2020[38]).

On 6 November 2020, Sinograin signed a soybean purchase agreement with selected suppliers in Argentina and Brazil for imports to China (OilCn, 2020[39]).

On 16 September 2020, the United States formally entered into consultations with China at the WTO regarding the imposition of tariffs on certain goods originating from China (AMIS, 2020[16]). In the WTO dispute settlement proceedings regarding China’s TRQ administration for wheat, rice and maize, China and the United States have agreed to extend the compliance deadline to 31 March 2021 (WTO, 2021[40]). In addition, on 28 September 2020, a WTO dispute panel was established to determine whether China complied with an earlier ruling regarding the provision of support to wheat and rice producers (WTO, 2020[41]).

On 19 December 2020, China released rules on foreign investment security review to safeguard national security. The rules, jointly released by the NDRC and MOFCOM, specify provisions on the security review mechanism on foreign investment, including the types of investments subject to review, review scope, and procedures. Agriculture, energy, and natural resources are among the sectors covered (Xinhua, 2020[42]).

On 15 November 2020, the Regional Comprehensive Economic Partnership (RCEP) was concluded9. China’s schedule of tariff commitments10 foresees tariff reductions and phase-outs for selected agro-food goods such as meat products, while other goods such as cereals are largely excluded. The Agreement also provides a framework for strengthening co-operation among parties in the areas of standards, technical regulations, and conformity assessment procedures as well as for streamlining rules of origin and border processes for perishable goods. The latter includes best endeavour provisions covering expedited six-hour clearance times for perishable products, release of such goods outside normal business hours, and at the importer’s storage facilities (ASEAN Secretariat, 2020[43]; AMIS, 2020[44]; China Briefing, 2020[45]).

On 26 January 2021, China and New Zealand signed the upgraded China-New Zealand Free Trade Agreement, for which negotiations had been concluded in November 2019. The upgraded FTA includes a number of provisions with a direct impact on agro-food products. This concerns areas such as certificates of origin (introducing the option for ‘approved exporters’ to self-declare the origin of their goods) as well as simplifying administrative processes and trade documentation for goods in transit. Further operational improvements cover expedited six-hour clearance times for perishable products, release of such goods outside normal business hours, and appropriate storage. Tariffs on New Zealand dairy exports will be phased out by 2024 (SCMP, 2021[46]).

On 14 September 2020, China and the European Union signed the Agreement on Cooperation on, and Protection of, Geographical Indications (GIs). The agreement, which was concluded in November 2019, protects 100 European GIs in China and 100 Chinese GIs in the European Union. The Agreement entered into force on 1 March 2021. Within four years after its entry into force, the scope of the agreement will expand to cover 175 additional GIs from each side.

On 30 December 2020, China and the European Union also concluded a deal in principle on investment (Comprehensive Agreement on Investment). In the non-services sectors, China would make limited investment liberalisation commitments in agriculture and fisheries. In addition, China would remove joint venture requirements in environmental services such as solid waste disposal, nature and landscape protection and sanitation (China Briefing, 2021[47]).

Trade policy responses to the COVID-19 pandemic

In February 2020, China introduced a ban on the trade and consumption of wildlife as food (IFPRI, 2020[48]).

On 20 March 2020, the State Taxation Administration (STA) and the Ministry of Finance increased the rebate rate for the value-added tax (VAT) and consumption tax on exported products11 in support to exporters affected by COVID-19. The rebate was increased from 6% to between 9% and 13% for 1 464 products, including 380 agro-food goods such as selected meat, fish, and fruit products12 (GAIN CH2020-0051, 2020[49]).

Starting on 24 June 2020, China has requested that imports of soybeans originating from Brazil, Canada and the United States be accompanied by a signed declaration guaranteeing that the shipment is not contaminated with COVID-19 (AMIS, 2020[50]).

Following a COVID-19 outbreak in June 2020 linked to Beijing’s Xinfadi Wholesale Market, China implemented a series of measures to test for infectious SARS-CoV-2 material in domestic and imported food and food packaging. It also delisted several approved facilities in partner countries for products such as pig meat, beef, poultry, fish or seafood, preventing these from exporting to China. Imports of frozen food from 124 suppliers in 21 countries have been suspended since then (GAIN CH2019-0205, 2020[10]; Bloomberg, 2021[51]).

In December 2020, China introduced additional COVID-19 protocols at the border affecting agro-food trade transactions, which include testing and disinfection at customs and regular nucleic acid testing for workers in shipping. The new protocols involve multiple departments, including customs, transportation, health, sanitary agency, market supervision, and local governments (Xinhua, 2020[52]).

In October 2020, as an effort to improve import traceability during the COVID‑19 pandemic, all businesses importing cold-storage meat and seafood sold in Beijing markets were required to upload data on their products onto a platform supervised by the Beijing Administration for Market Regulation. Trace codes were made available on the packages of the products or market shelves where they are placed in order for consumers to scan and obtain information on the products, including their origin (China Daily, 2020[53]). This led to the set-up in December 2020 of an online national traceability platform managed by the State Administration for Market Regulation (SAMR), currently operating in 13 provinces. Food companies have to report the source of imported shipments, the amount, their current location and destination. Inspection and disinfection certifications must be transmitted with the shipment (State Council, 2020[54]).

Starting on 2 December 2020, imported frozen food products cannot be commercialised without an inspection or quarantine certificate, COVID-19 testing report, disinfection certificate, or traceability information (State Council, 2020[54]).

Contextual information

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 76% of the average of countries covered by this report (Table 8.3). 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 accounts for 25.4% of employment, but its 7.4% share in 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 67% 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 co-operative and corporate farms. North and northeast provinces have seen more rapid farm consolidation than other regions, as increased labour mobility and 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]).

Table 8.3. China: Contextual indicators

	China		International comparison
	2000*	2019*	2000*	2019*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	3 688	23 605	9.2%	20.7%
Population (million)	1,291	1,434	30.0%	27.6%
Land area (thousand km2)	9 425	9 425	11.3%	11.1%
Agricultural area (AA) (thousand ha)	523 731	528 529	17.1%	17.3%
			All countries1
Population density (inhabitants/km2)	138	153	53	63
GDP per capita (USD in PPPs)	2 921	16 785	9 265	21 975
Trade as % of GDP	19	16	12.3	14.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	14.9	7.4	2.9	3.5
Agriculture share in employment (%)	50.0	25.4	-	-
Agro-food exports (% of total exports)	4.8	2.3	6.2	7.3
Agro-food imports (% of total imports)	4.7	6.5	5.5	6.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	65	67	-	-
Livestock in total agricultural production (%)	35	33	-	-
Share of arable land in AA (%)	23	23	32	34

Notes: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

While real GDP growth averaged 6.5% in 2017-19, China continued to experience a gradual slowdown in economic growth. The COVID-19 pandemic and related restrictions then led to a steep drop in GDP growth to 2% in 2020 (Figure 8.5). China is nonetheless the only major economy experiencing economic growth in 2020, supported by the upturn in industrial activity and a boost of 3.6% in exports. Unemployment remained stable at 4.4% in 2020, supported by the COVID-19 fiscal support policies. The inflation rate increased to 3% in 2020, with food inflation largely driven by higher pig meat prices following the African swine fever outbreak and related supply reductions.

China has consistently been a net agro-food importer since 2003, but agro-food exports have been growing steadily over the last two decades. Primary products used as inputs in the domestic food industry dominate China’s agro-food imports, representing 41% of the total in 2019. In turn, primary and processed products for final consumption are key export categories, accounting for 70% of total agro-food exports (Figure 8.6).

Figure 8.5. China: Main economic indicators, 2000 to 2020

Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.

Figure 8.6. China: Agro-food trade

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

Agricultural output growth in China averaged 2.8% in 2007-16, almost one-third above the world average (Figure 8.7). This has been driven by strong growth in total factor productivity (TFP) at 3.2% per year, twice the global average. TFP growth can be largely attributed to farm consolidation and increased mechanisation of production.

However, the rapid and sustained growth in agricultural output has been exerting mounting pressures on natural resources, most notably on land and water. This is reflected in the high nutrient surplus intensities for nitrogen and phosphorus (Table 8.4). Agriculture remains the key user of water, accounting for 61.2% of total water consumption, well above the OECD average. Water stress is more than twice as high as the OECD average.

Figure 8.7. China: Composition of agricultural output growth, 2007-16

Note: Primary factors comprise labour, land, livestock and machinery.

Source: USDA Economic Research Service Agricultural Productivity database.

Table 8.4. China: Productivity and environmental indicators

	China		International comparison
	1991-2000	2007-2016	1991-2000	2007-2016
			World
TFP annual growth rate (%)	4.2%	3.2%	1.6%	1.6%
			OECD average
Environmental indicators	2000*	2019*	2000*	2019*
Nitrogen balance, kg/ha	49.1	40.5	33.2	28.9
Phosphorus balance, kg/ha	9.7	10.6	3.4	2.6
Agriculture share of total energy use (%)	2.4	2.2	1.7	2.0
Agriculture share of GHG emissions (%)	9.8	6.7	8.4	9.5
Share of irrigated land in AA (%)	10.3	13.0	-	-
Share of agriculture in water abstractions (%)	68.8	61.2	46.0	43.4
Water stress indicator	19.3	20.8	9.3	8.5

Note: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

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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.  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]).

← 3.  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 area have consistently been selected as the topic of this document since 2004.

← 4.  The quality grade standard is divided into five grades plus a sub-standard category.

← 5.  The strategy of “dual circulation” was introduced in May 2020, placing an increased emphasis on the domestic market (or “internal circulation”) while gradually decreasing reliance on an export-oriented development model (or “external circulation”) (SCMP, 2020[55]).

← 6.  Guangxi accounts for 70% of China’s total cane sugar production.

← 7.  In February 2020, the National Food and Strategic Reserves Administration (NFSRA) also introduced a ceiling on the volume of rice procured at the minimum purchase price at 50 million tonnes (20 million tonnes for indica rice and 30 million tonnes for japonica rice).

← 8.  On 27 November 2020, preliminary AD/CV duties between 107.1% and 212.1% were introduced on Australian wines, following the anti-dumping investigation launched by MOFCOM in August 2020.

← 9.  The list of signatories includes: Australia, Brunei Darussalam, Cambodia, China, Indonesia, Japan, Lao People’s Democratic Republic, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Viet Nam. RCEP will enter into force 60 days after the date on which at least three non-ASEAN signatories and six ASEAN signatories have completed their necessary domestic procedures and deposited their instrument of ratification

← 10.  China’s Schedule of Tariff Commitments includes five sections applicable to ASEAN, Australia, Japan, Korea, and New Zealand.

← 11.  Companies can apply for a rebate, or refund of the VAT and consumption tax on eligible products destined for overseas markets.

← 12.  Includes breeding animals, fresh or frozen meat and offal, certain fresh or chilled fish products (such as scabbard fish, yellow croaker, and butterfish), selected fruits (such as grapes, melon, fragrant pear) and a variety of nuts (such as hazelnut, Brazilian nut, chestnut).