China’s ‘new farmer:’ an investor, manager and & decision maker; mass exodus from the countryside has left China asking, “Who will till the farmlands and feed 1.4 billion Chinese people?”

China’s ‘new farmer:’ an investor, manager and & decision maker

  • Xinhua

2013-03-15

China is going to great lengths to foster a “new type” of professional farmer to inhabit the empty farmhouses across its vast rural areas and entice more migrant workers to return home to till fields and feed the world’s largest population.

If it succeeds, China will solve a major problem that cropped up after its urbanization process resulted in a population split 50:50 between rural and urban areas. Decades ago, nine in 10 people lived in rural areas, where their lives were not as good as that of their urban peers.

As large numbers of farmers, especially young farmers, have flocked to cities and towns, they have left the countryside largely inhabited by the elderly, women and children.

This mass exodus from the countryside has left China asking, “Who will till the farmlands and feed 1.4 billion Chinese people?”

This question, as well as a host of possible solutions, has been talked about at length during the ongoing first annual session of the 12th National People’s Congress, the country’s legislature.

On March 5, exiting premier Wen Jiabao offered a possible solution in his government work report: adopt effective measures to stabilize the forces for agricultural production and actively foster a new type of farmer in rural areas.

EMPTY FARMHOUSES

Chinese farmers often choose to leave their hometowns and migrate to cities and towns to fulfill their dreams of becoming “townspeople,” an appellation that promises a better life for their families and more education opportunities for their children.

Li Liancheng, a national legislator from Xixinzhuang Village, Puyang City, central China’s Henan Province, said, “The dreams of us farmers are simple — to dress warm and eat our fill, to have a good school nearby for children, a home near a credible hospital and jobs in nearby towns.”

Though the realities of urban life are not usually the things dreams are made of, many young farmers stick it out, unwillingly to abandon their hopes for a better life.

Over the past three decades, nearly 260 million migrant workers have settled in cities and towns, 23% of the total urban population.

Xu Xilong, governor of Gansu provincial branch of the Agricultural Bank of China and a national legislator, estimates that China sees about 13 million rural residents move to towns and cities annually.

Zhou Tianyong, a professor of the Party School of the Communist Party of China Central Committee, forecast that over the next three decades, 400 million to 500 million rural residents will relocate to towns and cities.

As a consequence of this large-scale migration, rural areas are now short of laborers to work on farmlands, particularly young and experienced farmers, said Cai Fang, professor on population studies with the Chinese Academy of Social Sciences as well as a national legislator.

At the ongoing annual session of the National People’s Congress, the Jiu San Society, a non-Communist Party political organization, published an investigation report showing that although rural areas increase lands reserved for farmers to build homes by 1% each year, a quarter of rural homes are empty year-round. Rural permanent residents are declining at an annual rate of 1.6%.

In a recent survey of four villages, Liu Hongmin, chairman of a rural cooperative in Xixia city, east China’s Shandong province, found that 57% of village residents surveyed were over age 50, and men in their prime, normally under 45, made up only 20% of the farmers there. Less than 15% of rural residents earned a living fully dependent on farming, and male farmers accounted for less than 7.5% of village laborers in the four villages.

These days, agricultural machinery is widely used in farming, but this is problematic for elderly farmers.

“Farmers in their 60s or even 70s start to have feeble feet and poor technical skills. It is dangerous for them to use such machines,” said Liu.

A NEW KIND OF FARMER

China is reviewing its options for addressing the rural labor shortage.

Some large companies based in major cities, such as Beijing, Shanghai and Nanjing, have shown strong interest in starting businesses on farmland leased from farming collectives.

But these profit-oriented companies are not trustworthy in the eyes of rural farmers, said Li Liancheng, the national legislator from Henan.

“These companies seek to maximize profits. Planting crops makes meager profits. People doubt whether they would set their hearts on cultivating farmlands for long,” said Li.

“I prefer to see scattered farmlands transferred to the hands of professional farmers for scaled production,” said Li. “This also helps to ensure food safety at the very source.”

Li’s opinions have been echoed by other legislators and political advisors attending the ongoing annual NPC session and that of the Chinese People’s Political Consultative Conference, the top political advisory body, in Beijing.

“The government should create a more favorable environment to guide farmers to evolve from old-fashioned field-tillers to a ‘new type’ of professional farmer. It will markedly resolve China’s labor shortage problem in rural areas,” said Zhang Xiaoshan, a national legislator as well as a professor with the Chinese Academy of Social Sciences.

The “new type” of professional farmers, as Zhang put it, is able to meet the demands of modern production and operation in rural areas. They cultivate grains or cash crops on household farms, he explained.

“Unlike traditional farmers, the ‘new type’ of professional farmers go well beyond tilling farmlands. They are investors, managers and decision-makers,” said Zhang.

Experimental programs have been put in place in some regions to foster the development of the “new type” of professional farmer.

Since Mar. 2012, farmers in Tianchang city, Anhui province, who grow crops across more than 300 mu (20 hectares) of farmland for over five years are encouraged to register as single-investor, individually-owned companies. The local government helps them overcome operational problems, such as outdated technologies and poor management, so they can compete in the market as professional businesses.

So far, the city has registered 80 such farming companies across 60,000 mu of farmland, nearly 70% of the scaled agricultural development in Tianchang.

Over the past two months, Mao Shirong, a 50-year-old farmer-turned farm business owner, has been busy preparing rice seeds and farming facilities for the upcoming spring planting season.

“The central government has encouraged us to be decisive and bold in running household farms. I will work on it heart and soul,” said Mao.

He referred to the central government’s first policy document for 2013, dubbed the no. 1 central policy, which explicitly encourages governments at all levels to support big specialized farms, farming households and farming cooperatives, which are seen as the “new type” of rural production bodies.

“We have adopted the corporate operations mode and become equal market players,” said Mao. “Having visions of making profit from farming will help us in the long term.”

Mao and the farmers behind 50 other companies like his have united into the Dadi Cooperative, which helps members purchase agricultural facilities and services at lower prices, via a group buying mechanism.

“We have settled with the municipal seed company to buy paddy rice seeds at 10 yuan (US$1.60) per kilogram cheaper than the market price,” said Jiang Jinfu, deputy chief of the Dadi Cooperative.

The cooperative is planning a training course for its members, and it expects to help them obtain more bank loans.

“In the early stages, we invested heavily in renting farmland from separate farmers. We often run short on circulating capital when it comes time to buy production materials and farming tools. We help each other by lending tens of thousands of yuan among us for a short period. But it is far from enough,” said Mao.

Jiang, who has worked in the agricultural sector for over 30 years, has great expectations for future prosperity under the mechanism.

“Registering the farmers as owners of household farming companies is only a change in the form of farming operations. We hope the government extends training and policy support to help the new kind of professional farmers change substantially,” said Jiang.

Other regions have also experimented with similar schemes. Northwest China’s Shaanxi province has vowed to give priority to fostering more big household-based farms, agricultural machinery service providers and farmers “in their prime.” It aims to cultivate 220,000 professional farmers by 2015.

During a panel discussion of the NPC session, Yu Xinrong, deputy minister of agriculture, said, “These experiments are in line with the orientation of future rural development. Our ministry is establishing policies to support the experiments.”

Of China’s estimated 279 million rural laborers currently working on farmland, only about 10 million receive systematic farming training each year.

In August, the Ministry of Agriculture decided to experiment with fostering the “new type” of professional farmer in 100 counties across the country.

Zhang Xiaoshan, a legislator and professor, stressed that creating a favorable environment is key for encouraging migrant laborers to return home to work as professional farmers.

“We must extend subsidies to them for growing grains, and offer them technical support and professional training. We must improve social management and the rural financial system to ensure they earn more from farming than working in towns as migrant workers. In this way, they will be at ease about settling down in rural areas,” he said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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