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SUstainable Natural REsource Use in Rural China

Due to the extremely limited precipitation and the depletion of underground water, efficient irrigation systems are critical to the survival of villages in those areas. An efficient operation of irrigation canals, however, requires close and large-scale cooperation among Chinese farmers. Cooperation at such a level is a rare phenomenon after the Household Responsibility System was introduced and the collapse of the collective agriculture in early s in China.

Indeed, since , although it is difficult to gauge the exact magnitude of the loss of cultivated land due to poor data, most observers agree that conversions increased.

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This should not be surprising. Employment, income and productivity growth are all associated with the conversion of land from low-productivity agriculture to high productivity industry and services. It should also be noted that compared to other nations e. However, while industrialization and modern development demands that conversions continue, efforts are needed to ensure that land use policies promote rational land use. The policies to follow, however, should not be across-the-board bans on conversions.

Land policy should emphasize rational, long-run land use planning. The government's role should be to decide on what land should be used for what uses. Modern urban planning methods should be used to determine these needs. The incentives for local governments to convert land to non-agricultural uses for fiscal reasons can be reduced by reducing the role of the government in the conversion process.

After land plans are in place, development should be done by the private sector and negotiations for land purchase should be made directly with rural residents. To make this process work, rights need to be given to farmers to ensure that those who lose their land are directly and fairly compensated. New measures also are needed for improvement and enforcement of land laws and regulations to ensure that land acquisition is implemented fairly. These include a clear definition of land ownership and use rights; a clear differentiation of land acquisition for public uses and private business activities; market-based compensation for land acquisition; awareness, transparency and accountability.

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A system of land conversion permits might be considered for use across China that allow only a limited amount of land to be converted each year. It is important to make such permits tradable so development can occur in the places that are most optimal.

Grain for Green, the nation's Cultivated Land Set-aside Program, has set aside more than seven million hectares of cultivated land over the past five years. While there have been serious implementation problems which bear looking into to make the program work better and to avoid abuse by implementation weaknesses , it should be recognized that on the whole Grain for Green has been successful in reducing soil erosion, increasing forested area and doing so by providing farmers with compensation that have led to higher incomes and rising asset values.

Despite its vast scope, there is no evidence that Grain for Green has had a large effect on grain prices in the past year and there is no basis for stating that Grain for Green would have any significant effect on national food security. Research shows that Grain for Green, not land conversion to built-up area, has caused most of the decline in cultivated land in recent years. However, the productivity of the land that was converted to forested area was extremely low, according to the survey commissioned by the State Forest Administration, the average yields were less than 50 jin per mu kilograms per hectare.

With more time available and with access to the capital from program payments, yields on the plots that were not converted also rose. According to research conducted by the Center for Chinese Agricultural Policy using their policy analysis model, the price impact of Grain for Green was minimal. Of the 40 percent grain price increase that occurred between and , less than 5 percentage points are due to the Grain for Green program. While the scope of the original program may need to be reevaluated because of implementation problems, the program should not be halted due to food security concerns.

At the very least, the current program commitments should be fulfilled and increased effort should be given to effective implementation. Although some aspects of the grain reserve management system have improved in the past several years, it is still one of the weakest and least understood part of China's food security program. In many ways, despite the reforms, it is dysfunctional.

The rules for management and release are unclear. There is confusion among the different holders of grain. The lack of transparency creates chaos in grain markets and contributes to greater variability in grain prices. Because no one knows the level of stocks or the quantities of planned or actual release, domestic producers and traders and international trading agencies can not make decisions based on full information.

Rules for purchases and sales need to be open; public information on markets can internalize all of the factors that will affect short- and long-run price expectations, which will affect production and storage and sales decisions.

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Environmental Impacts of Policy Changes. In all of the issues studied by this Task Force, the positive economic effects of recommended policy changes are likely to also result in better environmental management in rural China. Some regional impacts may be negative. Specific observations on all of the issues studied by this Task Force follow. Rural Fiscal Policy. Implementation of Task Force recommendations would increase resource allocation to rural China in public good services such as education, health and rural infrastructure, re-define roles of the various levels of government and the private sector and develop more equitable, regionally sensitive tax policies.

Given the established positive relationships between income and environment and education and environment, rural fiscal policy reform should result in better environmental performance in rural China. Better Marketing Environments for Development. Competitive domestic commodity and labor markets, trade liberalization and market infrastructure development are expected to increase rural incomes and positively impact rural resource management.

Building Partnerships with Farmer Associations. Legislative changes to facilitate voluntary, independent farmer associations that can operate in the interests of their own members in adoption of new technology, access to inputs and marketing are expected to improve the incomes of farmers as they have in developed economies. International experience demonstrates that farmer associations have been leaders in improved land and water resource management. It is in farmers own economic interests to improve the long-term productivity of their resource base.

Preparing for Migration Out of Rural Areas.

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The resource base of farmers who stay in rural areas will be augmented by the departure of their neighbours. This will improve their income potential and provide incentives for better stewardship of their land base.

E-commerce promotes rural development in China

Raising Productivity on the Farm. Encouraging Land Rental Markets. Well-functioning land rental markets and more secure land user rights will expand the resource base of farmers who remain in rural China. Improved stewardship of resources is a consequence of more secure tenure. Experimenting with Rural Finance.

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Financial services to rural residents in China are weak. Reforms that would facilitate rural services such as credit unions and sustainable micro-finance programs would have positive environmental spin-off effects. Better access to credit is needed to facilitate adoption of new technology for better land and water management. Grain Marketing. Greater transparency in management of grain reserves, enhanced private sector participation in grain markets and narrowing of grain self-sufficiency targets to a national food grain security target would reduce pressure on fragile landscapes and the consequent environmental costs.

Cultivated Land Protection. Loss of cultivated land to urban and industrial uses is an inevitable and necessary cost of development. More secure land user rights and more transparent and equitable processes for land acquisition would reduce excessive land taking and mitigate environmental effects. The Grain for Green program is targeted to remove fragile land from cultivated uses and thus should have positive environmental effects.

Continuation of the program with more effective implementation is needed. Trade and Poverty. Trade liberalization has and will have mixed environmental effects. Changes in comparative advantage resulting from changes in relative input and product prices are expected to reduce output of some land-intensive products in north China with consequent reductions in environmental pressure on land and water resources.

Intensity of production is likely to increase in horticultural crops and rice in SE provinces with increased application rates of fertilizers and pesticides. Application of food safety standards inherent in WTO accession may induce or force rationalization of input application rates if Chinese farmers expect to compete in domestic and international markets. I ssues. E ffect on Income. E ffect on Environment. Investment in Public Goods.

Farmer Associations. Off —Farm Employment. Grain Marketing Reform. Land Rental Markets. Rural Financial Reform.

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Overall Impact. Challenges, Opportunities and Policy Recommendations. Agriculture and Rural Development Task Force,.