China must cut farming population, says OECD

Richard McGregor – The Financial Times

Copyright The Financial Times
China’s rural population will have to fall by tens and possibly
hundreds of millions in coming decades if farmers’ incomes are to rise to match
living standards in the mainland’s increasingly prosperous cities, according
to a report by the Operation for Economic Co-operation and Development.
The first comprehensive study on Chinese agriculture by the Paris-based
body says agriculture employs 40 per cent of China’s workers, but produces only
15 per cent of economic output, a gap that can narrow only if many
farmers are employed more productively in other sectors. “The transfer of huge
numbers of workers from low productivity agriculture to higher
productivity manufacturing is one of the basic ingredients of China’s economic
growth,” the report says.
Fully 200m of China’s 248m rural households farm on plots of land of
around 0.65ha. While output is high per unit of land, it is low relative to
the number of workers employed.
Between 70m and 100m more rural workers will leave agriculture between
and 2010 on current trends, but the capacity of businesses in smaller
to absorb them is doubtful, raising the pressure on China’s larger
cities to
take them in.
The OECD says the Beijing government should liberalise restrictions on
rural population’s mobility to help manage this outflow. It also says
Beijing should clarify farmers’ property rights over their land, to
them to use it more flexibly.
“Land has been extremely fragmented. [Farmers] need to have incentives
release it to other people for agriculture,” said Andrzej Kwiecinski,
principal author of the report.
The report also says China would benefit from relaxing its policy of
self-sufficiency in food, which is now defined internally to mean
about 95 per cent of its grains and feedstock locally.
Mr Kwiecinski said the government was already redefining
self-sufficiency to
cover just rice, rather than grains and oil seeds and the like.
“They are differentiating between what is consumed by humans and what
consumed by livestock,” he said.
Concern over this issue was heightened by the fact that China recorded
deficit in agricultural trade in 2004, the first for well over a
However, the OECD says this should not deter the leadership from
liberalising the sector.
Hu Jintao, China’s president has already removed a swathe of
taxes and committed to spending more on education and health in the

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