Reform was initiated in China's agricultural sector 40 years ago with the introduction of the family production responsibility system. This led to the division of collective-owned farming land, and its allocation to every rural family through a long lease contract-30 years (renewable).
Peasants can decide what to grow in their leased land, or even release it to others for a rental profit. Such freedom is a key contributing factor to China's rapid economic expansion because it frees hundreds of millions of peasants from agriculture to work in export-orientated processing industries.
However, 40 years on Chinese agriculture faces a set of different problems. Primarily, the Chinese rural sector suffers from a widespread decline due to the lack of an energetic working population.
A report by National Economic Data Centre, Tsinghua University released in 2017 stated that 21.6% of migrant families had left the countryside and bought houses in towns and cities. In their lifetimes, and in the foreseeable future, up to 80% of the young children of rural residents would relocate to cities and towns. The report commented that, if this trend continues, the Chinese rural sector would experience a dramatic reduction in population within 15-20 years.
Desertification of houses and farming lands, rundown public sanitation and widespread pollution are a common scenario in Chinese rural communities. A report by Liu Yanwu published in China Youth Daily in 2008 revealed that the suicide rate of elderly people in rural areas has risen sharply since 1990 and remains at an alarming level due to sickness, lack of basic care and poverty.
On the other hand, maintaining employment for migrant workers in their millions in the cities has increasingly become an acute problem due to the sharp rise of labour and environmental costs in China's coastal regions.
China could continue with the existing approach of pooling resources into major cities, in anticipation that the flourishing of service industries in mega-cities would gradually absorb the unemployed labour force. But critics say that with this choice, in addition to widening the gap between the urban and rural sector, China is likely to encounter the same problems troubling mega-cities in other countries such as New Deli, Mexico City, San Paulo and, to a lesser extent, New York. These are modern and affluent communities on the one hand, but slums, congestion and crime on the other.
Chen Xiouwen, one of the top level government officials overseeing agriculture has said, in an official TV program, that even if China's urbanisation rate climbs to 70% by 2030, there will be still 450-500 million people living in the rural sector. It will be impossible to secure national stability if such a large rural population lives in a poor and polluted environment.
This is the reason that revitalization of China's rural sector has been set out as a key national strategy in the 19th Congress of the Chinese Communist party.
To a great extent, such an aspiration is feasible thanks to China's efforts in two areas:
First, the rapid upgrade of infrastructure. The expansion of coal-fired power stations and the establishment of solar, wind, hydraulic and nuclear facilities has made a power supply readily available in most rural communities.
Transportation systems including high-speed rail, railway and highway networks have made China's inland provinces closer to the advanced coastal regions and the new trade routes to Central Asia, Europe, the Southeast and south Asia.
The extensive coverage of 4G telecommunication, the development of cloud computing and big data analysis offer new opportunities for agricultural businesses to access E-commerce and advanced technologies online. On Nov 11, 2017 (a date dedicated to E-Commerce in China) processed agricultural products were valued at 4.5 billion yuan and roughly U$600 million) were sold online. Some of the products were airlifted out of mountainous regions by drone.
The second area of progress has been reform and innovation of the legal framework overseeing the transfer of rural land.
It has been a norm for those migrant workers working in cities to release their leased land to others in order to grow crops for a rental profit. Such transfers have proven to be productive as the concentration of farming land in the hands of families capable of conducting profitable farming improves efficiency in the use of farming land.
In addition to this improvement in agricultural efficiency, the government is increasingly attaching importance to the role transfer of farming land plays in poverty reduction. By investing their leased land into agricultural businesses, poor families have gained income not only through wages but also from the economic return from their land.
It has become a trend for local governments to support agricultural businesses with financial, managerial and technological support. Many of these agricultural businesses are collectively owned, with heavy involvement of local government officials. Nowadays, there are 2.8 million agricultural businesses operating in China, owned by a population of 12.8 million rural residents.
However, in comparison with the farms in Western countries, the size of individual Chinese agricultural businesses is far smaller. Many of them cover an area of less than 10 hectares. Most of the farming production is done on family basis.
Obviously, the agriculture industry alone is insufficient to accommodate the existing rural population. The logical solution for China, if it is to preserve the size of the population in rural areas and offer rural people a decent living standard, is to develop agriculture related service and processing industries and tourist industries.
The achievement of mechanisation in Chinese agriculture is a good example. Nowadays there are many agricultural businesses in China that offer agricultural machinery services. Such businesses have flourished because there's no no need for every rural family to have a whole range of agricultural machines. Using these services, 66% of agricultural production in China is carried out by machine.
The government aims to extend this pattern to a wide range of agricultural activities ranging from seeds, animal feed, fertiliser, technical consulting, transportation, storage, processing and marketing.
The development of these agricultural businesses requires land and investment. Now the government is developing policies to allow rural residents to capitalise on their homesteads.
In the past, because they were defined as collectively owned property, the homesteads of rural families could not be traded. Now the government is testing polices that separate the right to use homesteads from the right of property ownership. Rural families are allowed to lease, or to invest proceeds from their right to the use of homesteads in agricultural businesses.
It is reported that in Yiwu, Zhejiang province, 3,160 rural families have withdrawn from their homesteads, which cover an area of â€‹â€‹276,600 square metres. Based on this amount of land, 24 financial institutions have issued 6,763 mortgage-style loans to these families, at a value of 3.223 billion yuan total, for various proposes.
The "land ticket" system which originated from Sichuan province several years ago has been a vigorous attempt to improve the management of the homestead situation. Basically, when rural families return their homesteads to arable land by demolishing their houses, they are entitled to list the land in the land market of cities. Developers in cities can access a piece of land of equal size after purchase to the listed land in the land market. In such a way, the return of homesteads to arable land in remote countryside is linked to the land market in cities. This not only preserves the balance of the land for agricultural and commercial usage, which is important to China where arable land is very limited, but also benefits rural residents, who reap the capital gain on their land.
The overall situation of the Chinese rural sector is complicated. While decline and deterioration is obvious in some areas and industries, there is hope and achievement in others. According to World Bank data on China, "the share of the population living in poverty fell from 88.3% in 1981 to 66.6% in 1990 and 1.9% in 2013."
The Chinese economy is undergoing a major transition. Revitalization of agriculture is one of the key characteristics of this process. The future formation of the agricultural production and rural societies in China will change fundamentally. Some commentators predict that the total investment in the rural sector will reach 40-50 trillion yuan in the foreseeable future.