1 The Historical Transformation of China’s Agriculture: Productivity Changes and Other Key Features Liu Shouying, Wang Ruimin, Shi Guang, Shao Ting 1 Abstract With the transition from rural China to the urban-rural China, the agriculture in China has experienced the millennium transformation. According to the analysis of sampled data from the National Bureau of Statistics conducted on 70,000 peasant households, agricultural labour productivity, which has been experiencing a long-term stagnation or even a decline, has been eventually increasing at a faster rate than land productivity after 2003. It also reveals the heterogenization of small farmers, the transformation of agricultural inputs from an excessive manual labour to a gradual growth in farm machinery, the expansion of scale of land management, the development of the rural land leasing market and the diversification of the agricultural management entities. Review of the historical transformation of agriculture helps to recognize the declining importance of agricultural land, the direction of the agricultural technological change, the path and the disposition of the agricultural system change and the adjustment of China’ rural policies. Key words: agricultural development model, changes in agricultural productivity, historical transformation of agriculture, JEL codes: N55,O13,Q15 I. The Issue For the long traditional rural society in China, the increasingly tense relationship between man and land is the main factor affecting peasants’ livelihood and economic transformation. With the rapid growth of the population, the slow development of the industrial and commercial sectors can hardly function as a pipeline to absorb the redundant rural workforce. A large amount of labour has been stranded for a long time in the agricultural sector. With the potential depletion of land reclamation and the constant decline of the ratio between man and land, the improvement in the land use frequency (Boserup, 2015) and land yield has become the basis of the traditional model of agricultural development (Chayanov, 1996 2 ). According to the empirical evidence provided by Perkins (1984), at least half of the grain output growth over six centuries (1368-1968) in China is attributed to the expansion of cultivated land, while the other half is due to the increase of yield per unit area. The continuously increased demographic pressure on the land has led to the emergence of Chinese agriculture with “growth but without development” (Huang, Philip C., 1992). In circumstances 1 Liu Shouying, Professor, School of Economics, Renmin Universitiy of China, Email:[email protected];Wang Ruimin, Research Associate, Institute of Economic Research, Chinese Academy of Macroeconomic Research,Email:[email protected];Shiguang, Associate Research Fellow, Development Research Center of the State Council,Email:[email protected];Shaoting, Associate Research Fellow, Development Research Center of the State Council,Email:[email protected]. The authors acknowledge the financial support of the Foundation of Ministry of Education of the People’s Republic of China (Grant No.16JZD024).
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1
The Historical Transformation of China’s Agriculture:
Productivity Changes and Other Key Features
Liu Shouying, Wang Ruimin, Shi Guang, Shao Ting1
Abstract
With the transition from rural China to the urban-rural China, the agriculture in China
has experienced the millennium transformation. According to the analysis of sampled
data from the National Bureau of Statistics conducted on 70,000 peasant households,
agricultural labour productivity, which has been experiencing a long-term stagnation
or even a decline, has been eventually increasing at a faster rate than land productivity
after 2003. It also reveals the heterogenization of small farmers, the transformation of
agricultural inputs from an excessive manual labour to a gradual growth in farm
machinery, the expansion of scale of land management, the development of the rural
land leasing market and the diversification of the agricultural management entities.
Review of the historical transformation of agriculture helps to recognize the declining
importance of agricultural land, the direction of the agricultural technological change,
the path and the disposition of the agricultural system change and the adjustment of
China’ rural policies.
Key words: agricultural development model, changes in agricultural productivity,
historical transformation of agriculture,
JEL codes: N55,O13,Q15
I. The Issue
For the long traditional rural society in China, the increasingly tense relationship
between man and land is the main factor affecting peasants’ livelihood and economic
transformation. With the rapid growth of the population, the slow development of the
industrial and commercial sectors can hardly function as a pipeline to absorb the
redundant rural workforce. A large amount of labour has been stranded for a long time
in the agricultural sector. With the potential depletion of land reclamation and the
constant decline of the ratio between man and land, the improvement in the land use
frequency (Boserup, 2015) and land yield has become the basis of the traditional
model of agricultural development (Chayanov, 19962). According to the empirical
evidence provided by Perkins (1984), at least half of the grain output growth over six
centuries (1368-1968) in China is attributed to the expansion of cultivated land, while
the other half is due to the increase of yield per unit area. The continuously increased
demographic pressure on the land has led to the emergence of Chinese agriculture
with “growth but without development” (Huang, Philip C., 1992). In circumstances
1 Liu Shouying, Professor, School of Economics, Renmin Universitiy of China, Email:[email protected];Wang
Ruimin, Research Associate, Institute of Economic Research, Chinese Academy of Macroeconomic
Research,Email:[email protected];Shiguang, Associate Research Fellow, Development Research Center of
the State Council,Email:[email protected];Shaoting, Associate Research Fellow, Development Research
Center of the State Council,Email:[email protected]. The authors acknowledge the financial support of the
Foundation of Ministry of Education of the People’s Republic of China (Grant No.16JZD024).
2
where agricultural labour productivity suffers stagnation or even decrease, we have no
choice but to rely on a relatively effective division of labour in agriculture, to increase
more intensive labour input so that the growth of total agricultural output can be
achieved.
Since the founding of P.R. China, the Communist Party has marched on this
ancient rural society towards the process of industrialization. Based on the strategy of
prior development of the heavy industry, to comply with the capital accumulation
demand, it is necessary to artificially lower the prices of certain factors such as
agricultural products to secure its supply (Lin et al., 1999). The monopolized purchase
system for agricultural products, the people’s commune system for the production of
collective organizations and the household registration system of farmers trapped in
the collective land all worked as a systematic institutional structure towards the
national development strategy. In the context of the institutional inefficiencies and the
continuing deterioration of the land-man ratio, grain production growth was mainly
supported by increasing land productivity. Firstly, intensively make use of chemical
fertilizers and pesticides to increase the agricultural yield. Secondly, increase the
multiple cropping index to improve land use efficiency. Between 1952 and 1978, the
total grain output grew for about 86 percent, with an average annual growth rate of
approximately 2.5 percent. The increase in grain yield mainly benefited from the
growth in grain yield per unit area, which was around 90 percent, with an average
annual growth of 2.8percent. The increase in grain yield per unit area made China’s
grain production grow faster than population growth rate (1.9 percent).
Unfortunately, the state-led transition has excluded farmers from the process of
industrialization and urbanization. From 1952 to 1978, the land-man ratio in rural
areas has dropped from 3.23 mu per capita to 1.89 mu3. The relationship between man
and land in agriculture has further deteriorated and the agricultural labour productivity
has fallen into stagnation. The real output per capita of the entire economy increased
by 82 percent, the labour productivity improved by 58 percent, while an average
decline of 0.2 percent showed in agricultural sector. The fall in the total factor
productivity was even more serious. The incorrect development strategy, the
inefficient agricultural system, and the tight attachment of farmers to the land have led
to the transformation of agricultural China lagging behind the overall economic
transformation.
In the last century from late 1970s to mid 1990s, rural China has experienced a
huge institutional and structural change. Firstly, the implementation of the household
contract responsibility system greatly stimulated farmers’ enthusiasm and promoted
the growth of agriculture. Between 1979 and 1984, the agricultural growth rate in
China reached 7 percent. The rural reform generated a large amount of recessive
surplus labour force. At the same time, the township and village enterprises set up in
the collective land attracted a great deal of the surplus rural workforce. From 1985 to
1995, the township and village enterprises absorbed nearly 100 million of the rural
labour force4. Based on the rural industrialization, the division of labour within the
countryside has been brought into being. But farmers didn’t leave the village while
they left the land, the rural transformation in China has not been thoroughly started.
3
Since the end of last century, with the impact of high-speed industrialization and
urbanization tide, Chinese peasants were dragged into the torrent of trans-regional
flow. The door between the urban and the rural was open. A large amount of rural
population left their homelands and flooded into the cities. The annual migrant
population from rural to urban areas was more than 15 million people (Tao and Wang,
2015). China suffered a major transformation from “rural China” to “urban-rural
China” (Zhou, 2014). Under the pattern of a urban-rural China where “half are in
cities and the other half are in rural areas,” the traditional model of agricultural
development experienced a historical change. The relative price of agricultural factors
changed dramatically. Chinese farmers, who had relied on high labour inputs to raise
land yields per unit, begun to change their inputs structure, by significantly reducing
the labour input and increasing machinery and capital investment in agricultural
production. The agricultural development mode underwent historical changes from a
traditional model of intensive labour inputs to improve land productivity to a modern
agricultural development model mainly based on labour productivity.
Based on sampled data collected from 70,000 peasant households by National
Bureau of Statistics (NBS), this paper will analyse the key features of the agricultural
transformation in China under the pattern of “urban-rural China”. The paper primarily
focused on the changes of agricultural productivity from land productivity to labour
productivity. Among the key features of historical transformation of agriculture, we
will concentrate on the peasant household differentiation, agricultural inputs
replacement and changes in the farm size and farmland lease market. In conclusion,
we will give the policy implications of the agricultural transformation.
II. Changes of Agricultural Productivity
The transformation of agricultural China can be measured by many indicators such as
the agricultural GDP, the amount of agricultural labour absorption, etc. But changes in
labour productivity still symbolizes the transition from traditional agriculture to
modern agriculture. It is the change in agricultural labour productivity which reflects
the influence of relative price changes of agricultural productive factors and indicates
the dividing line between different agricultural development models.
1. Productivity Based on Macro Agricultural Data
From the macro agricultural data released by NBS of China, we can intuitively
see that after 2000 the growth rate of agricultural labour productivity in China has
been significantly higher than that of land productivity (see Figure 1 and 2). The most
obvious change is that the growth of labour and land productivity began to diverge in
2003. Since then, the increase of agricultural labour productivity has approximately
stayed in a range between 5 percent and 10 percent, and the growth rate of land output
per unit has maintained below 5 percent.
From a single-factor productivity perspective, the agricultural labour productivity
in China increased from 1,124kg/capita to 2,093kg/capita between 2000 and 2012,
with an average annual growth rate of 5.46 percent. The agricultural output per capita
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increased from 3,849RMB/capita to 18,213RMB/capita with an average annual
growth rate as high as 14.11 percent. Since the agricultural output per capita did not
exclude the price factor, its growth rate is higher than that of the labour productivity.
During the same period, grain yield per unit area increased from 317kg/mu to
388kg/mu, with an average annual growth rate of only 1.73 percent.
Figure 1. Changes in Agricultural Labour Productivity and Grain Yield per Unit Area
Data Source: National Bureau of Statistics of China.
Figure 2. Changes in the Growth Rate of Agricultural Labour Productivity and Grain
Yield per Unit Area
Data Source: National Bureau of Statistics of China.
2. Changes of Agricultural Productivity Based on Sampled Data Collected from
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70,000 Peasant Households
Although macro statistical data can clearly demonstrate the changes of driving
force in agricultural development, there are still some deficiencies. First, the
agricultural labour input statistics have errors. A substantial proportion of peasant
households are not only engaged in agricultural activities, but also work in urban
areas or take agricultural production as part-time job. Therefore, the actual
agricultural labour input cannot be accurately demonstrated by macro statistical data.
Second, macro data is the aggregate data based on the whole country and cannot be
used to analyse the peasant households’ features of different operation scales, Besides,
the macro data can hardly demonstrate the impact of changes in agricultural scale
operation and the diversification of management entities. Third, macro data cannot
distinguish the agricultural production efficiency of different types of peasant
households, such as pure peasant households, part-time peasant households and
non-peasant households.
What this paper adopts is the micro survey panel data on rural households
released by NBS, covering 70,000 agricultural households across the country with a
time span between 2003 and 2012, among which the following six years are
specifically focused: 2003, 2004, 2005, 2007, 2009 and 2012. The time span
coincides with our intuitive agricultural transition period in China, which provides a
rare opportunity to analyse the historical transformation of Chinese agriculture. At the
same time, sampling of agricultural household survey data effectively solves the
problems mentioned above in macro statistics, and helps us to better understand the
changes and features of the agricultural productivity in China.
(1) Labour Productivity. Labour productivity is defined as the agricultural product
income provided by the agricultural labour input per month. The unit is expressed in
RMB/month. The agricultural labour productivity can be calculated using the total
agricultural output divided agricultural labour input of the households. The results of
Table 1 show that the agricultural labour productivity for the households in China
increased from 381RMB/month in 2003 to 1,671RMB/month in 2012, an increase of
more than 3 times, with an average annual growth rate of about 18 percent.
Table 1. The Changes of Agricultural Labor Productivity
Year Mean(Unit: RMB/Month) Std. Dev. Freq.
2003 381.40 483.36 63035
2004 512.57 630.27 62400
2005 583.56 721.48 62199
2007 753.17 981.16 61647
2009 925.84 1438.22 60740
2012 1671.60 3006.80 61190
Total 800.82 1536.86 371211
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Data Source: National Bureau of Statistics of China
Figure 3 and Figure 4 depict the distribution of the agricultural labour
productivity. Overall, the distribution of the agricultural labour productivity shows a
long-tail shape, mainly centred at the low level of 1,000RMB/month. The agricultural
labour productivity of a few peasant households reached over 2,000RMB/month. As
time goes on, the distribution of the agricultural labour productivity becomes more
and more gentle. We can see that the peak of distribution keeps moving right, and
most households’ productivity concentrates on less than 500RMB/month in 2003, but
have turned to mildly distribute within 0RMB/month to 2,000RMB/month in 2012.
This indicates that: 1) The overall agricultural labour productivity has improved
remarkably. 2) The gap of labour productivity among peasant households is
broadening largely.
Figure 3. Distribution of Agricultural Labor Productivity
Data Source: National Bureau of Statistics of China
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Figure 4. The Changes of the Distribution of Labor Productivity, 2003-2012
Data Source: National Bureau of Statistics of China
(2) Land Productivity. Land productivity is defined as the agricultural product income
provided by the unit sown acreage. Since 2003, the land productivity in China has
been improving, though not as faster as the labor productivity. It has increased from
841RMB/mu in 2003 to 2,942RMB/mu in 2012 with an average annual growth rate of
nearly 15 percent.
Table 2. Land Productivity (RMB/mu)
Year Mean Std. Dev. Freq.
2003 841.01 10853.19 63361
2004 1377.00 36780.57 63004
2005 1189.04 12846.61 62227
2007 1352.35 12828.60 61576
2009 1884.16 34707.80 61071
2012 2942.61 39694.72 61106
Total 1590.42 27574.58 372345
Data Source: National Bureau of Statistics of China
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Unlike labour productivity, the distribution of land productivity is relatively
smooth, similar to that of a normal distribution. The average value is 1,590 RMB/mu
while the median is 640 RMB/mu. As time goes on, the peak of land productivity
distribution moves smoothly towards the right side and the peak density is
continuously falling down. This indicates that: 1) The overall land productivity has
been improved; 2) The gap of land productivity among peasant households is
widening.
Figure 5. Overall Distribution of Land Productivity
Data Source: National Bureau of Statistics of China
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Figure 6. Distribution of Land Productivity, 2003-2012
Data Source: National Bureau of Statistics of China
In general, agricultural productivity has been remarkably improved and its growth
rate is higher than land productivity from 2003 to 2012. It means that the agriculture
in China is no longer only depending on the increase of factor input to improve land
output, and that it is stepping into the development path of improving labour
productivity. The main reason leading to this huge change is that rapid
industrialization and urbanization has absorbed a large amount of rural workforce, and
the intense relationship between man and land has been relieved since abundant rural
labour force is able to seek employment opportunities across areas. The endowment
structure of the agricultural production factors has changed, giving rise to the
historical transformation of the agriculture. The new development mode driven by
agricultural labour productivity in China has just arrived.
III. Key Features of the Agricultural Historical Transformation
1. Differentiation of Peasant Households
What we should pay most attention to about agricultural transformation are the
changes that peasant households have experienced. In the traditional rural society,
farmers have been considered basically homogeneous. The rural policy since the
reform and opening-up also confirmed this fact. Peasants in China have experienced
the change from community members of the collectivization to small farmers under
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the land contract system, and subsequently the baptism of rural industrialization and
the trans-regional large-scale rural labours flow into cities (Li and Gao, 2013).5 The
traditional peasants in China who “make agriculture as their main means of
livelihood” as identified by Fei (1992) no longer exist. They have been largely
differentiated by their differences in degree and method of being involved in
non-agricultural activities.
(1) Stylized Facts of Peasant Household Differentiation. Since 2003, the process of
industrialization and urbanization in China has been accelerating, and the size of rural
migrant population continues to expand. Non-agricultural income has become the
main source of income for most peasants and their time is mainly dedicated to
non-agricultural economic activities. Differentiation among peasants is becoming
more and more profound. According to the degree of participation in non-agricultural
activities, peasant households can be divided into pure peasant households,
non-peasant households and part-time peasant households, which are further divided
into type I part-time household and type II part-time households. These types of
peasant households showed obvious diversity among different areas.
First, the differentiation among peasant households is becoming deeper from
2003 to 2012. During this period, the proportion of non-peasant household is
increasing. Part-time peasant households have become the major part of peasant
households, while the proportion of pure peasant household remains unchanged. The
proportion of type I part-time household2 and type II part-time households in 2012
was 30.07 percent and 35.72 percent respectively, which account for 65.79 percent of
the total. Pure peasant household and non-peasant household occupied 18.28 percent
and 15.93 percent respectively. From 2003 to 2012, the percentage of pure peasant
household and type I part-time household has decreased by 2.5 percent and 12.39
percent separately, while that of type II part-time households and non-peasant
household has increased by 4.52 percent and 10.36 percent.
2 Type I part-time households are those who mainly depend on agricultural
income,and type II part-time households are those who mainly depend on
non-agricultural income.
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Figure 7. Differentiation of National Peasant Households, 2003-2012
Data Source: National Bureau of Statistics of China
Second, the differentiation degree of peasant households among different regions
is different. In 2012, the proportion of non-agricultural peasant households in the
eastern, central and western regions accounted for 30.4 percent, 7.12 percent and 6.08
percent respectively. Between 2003 and 2012, the proportions of the non-agricultural
peasant households in the eastern, central and western regions have increased by 17.4
percent, 5.39 percent and 4.86 percent separately.
12
Figure 8. Differentiation of Peasant Households in the Eastern Region, 2003-2012
Data Source: National Bureau of Statistics of China
The proportion of type I part-time household in the western region is the highest,
followed by that in the central region and then in the eastern region. In 2012, the
proportions of type I part-time household in the eastern, central and western regions
were 19.17 percent, 34.2 percent and 40.29 percent separately. However, there is only
small difference among the proportions of type II part-time households in each region.
In terms of trend evolution, from 2003 to 2012, the proportion of Type II part-time
households in the eastern region decreased by 4.95 percent and in the central and
western regions increased by 8.56 percent and 11.09 percent respectively.
13
Figure 9. Differentiation of Peasant Households in the Central Region, 2003 -2012
Data Source: National Bureau of Statistics of China
In 2012, the proportions of pure peasant households in the central and western
regions were around 20 percent, 5 percent higher than that of the eastern region. In
terms of trend change, the proportion of pure peasant households in the eastern region
has been stable from 2003 to 2012(Increased only from 14.76 percent to 14.95 percent)
while that in the central and western regions have decreased by 3.91 percent and 3.35
percent respectively.
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Figure 10. Differentiation of Peasant Households in the Western Area, 2003 -2012
Data Source: National Bureau of Statistics of China
(2) Peasant Household Differentiation and Agricultural Productivity. The correlation
between different types of farmers and agriculture performance is diverse. As shown
in Table 3, the degree of specialization in the pure peasant households is the highest,
so their agricultural labour productivity is the highest with 949RMB/month, followed
by Type I part-time peasant households whose labour productivity is 810RMB/month.
Labour productivity for non-part-time peasant households is 752RMB/month, while
that of non-peasant households is the lowest. Their main economic activity is not for
agriculture. Their agricultural labour productivity is only 269RMB/month.
Table 3. Labour Productivity for Different Types of Peasant Households
Employment Type Mean Std. Dev. Freq.
Pure Peasant Households 949.13 1478.52 79131
Type I Part-time Households 810.57 1743.34 154435
Type II Part-time Households 752.56 1344.11 123986
Non-Peasant Households 269.52 576.36 13659
Total 800.82 1536.86 371211
Data Source: National Bureau of Statistics of China
15
The land productivity of pure peasant households is 2,063RMB/mu, which is also
the highest (see Table 4). From there, the land productivity progressively decreases,
from 1,716RMB/mu for part-time peasant households to around 1,180RMB/mu for
both non-part-time peasant households and non-peasant households. Hence, it is also
demonstrated that the degree of specialization of agricultural production affects the
stimulus of land productivity.
Table 4. Land Productivity for Different Types of Peasant Households
Employment Type Mean Std. Dev. Freq.
Pure Peasant Households 2063.01 34666.05 78491
Type I Part-time Households 1716.18 32496.23 154063
Type II Part-time Households 1186.97 14341.39 126344
Non-Peasant Households 1181.65 2309.28 13447
Total 1590.42 27574.58 372345
Data Source: National Bureau of Statistics of China
2. Changes in the Structure of Agricultural Inputs:
The Replacement of Labour by Machinery
Traditional agriculture in China mainly relies on high labour input to improve
land use ratio. Since 2003, the increase in the agricultural productivity is mainly
reflected by the great increase in the agricultural labour productivity. It manifests the
changes in agricultural input structure brought by the reallocation of the rural labours
in different sectors. Therefore, we should observe the agricultural transformation
based on changes of agricultural inputs. Furthermore, as the agricultural development
model changes, the high-labour input on which the traditional agriculture in China
primarily based is transferred to machinery and capital input.
(1) Labour Input. The cost of crop farming has increased and agricultural labour input
has decreased. According to Figure 13, The household self-employment cost and hire
labour wage have increased significantly. And the hire labour wage has been
increased from 14.05 RMB/day in 1999 to 112.39 RMB/day in 2015, which has been
increased by almost 8 times. The household hire labour wage has been increased from
9.5 RMB/day in 1999 to 78 RMB/day in 2015, which has been increased by almost 7
times. From 1999 to 2015, the total cost for household hire labour in major crops have
experienced constant growth (See Figure 11). As the labour cost been increasing,
peasant households generally adopt the strategy of reducing labour input when they
allocate labour force. At last, the labour inputted in crop farming has decreased
remarkably (As in Figure 12).
16
Figure 11. Price of Labour Input in Crop Farming (Wheat, Rice and Corn)
Data Source: Compilation of cost and benefit data of national agricultural products
(Quanguo nongchanpin chengben shouyi huibian, Over the Years)
Figure 12. Changes of Household Labour Input in Crop Farming, 2010-2015
Unit: Day
Data Source: Compilation of cost and benefit data of national agricultural