Priorities for public investment in Chinese agriculture

• Chinese Academy of Agricultural Sciences, China
• State Planning Commission, China
• University of Adelaide, Australia
• Australian National University, Australia

Agricultural growth is a key driver of poverty reduction. In China policies are needed that cater for investment options to help build infrastructure, strengthen outputs and address barriers to growth. More effective policies would ensure that smallholders gain by way of increased productivity or, failing this, by leaving agriculture and moving into non-farm sectors.

This project comprised a series of policy research reports that provided national and regional policy makers in China with information to evaluate the impact of public investment in different sectors, and future priorities for investment. In particular the results guided the Chinese government in determining appropriate levels of investment in agricultural research, identifying the subsectors that deserve the greatest investment (cereal crops, cash crops, animals or fresh water fisheries), and deciding which were the most and least favourable agroecological zones to invest in (from the viewpoint of both production increases and poverty alleviation). The studies also guided policy makers in deciding relative levels of investment in agriculture in relation to other sectors of the economy.

The overall objective of the project were to develop a framework to undertake an in-depth analysis of the nature and impact of public investment on production and productivity growth, and to assess future priorities for public investment in Chinese agriculture compared with investment in areas such as infrastructure development.

The project was designed to strengthen China's analytical capacity. Researchers developed ex-post and ex-ante evaluation methodologies suitable for China and other developing countries to conduct policy analyses related to overall public investment priorities. These methodologies were applied in empirical analyses of the impact of past public investments on production and productivity growth, and their regional differences.

The researchers again used empirical analysis to establish future priorities for public investment in Chinese agriculture. They placed specific emphasis on identifying the economic trade-offs involved, in terms of the economic growth versus the income distribution consequences of choosing public investment priorities, with consideration for the following parameters:

- levels of governments (national, provincial, and county)
- types of investment (R&D, irrigation, education etc)
- subsectors (cereal crops, cash crops, animals, and fresh water fisheries)
- agroecological zones (distinguishing between more- and less-favourable agricultural environments) as well as geopolitical and agroeconomic regions (e.g, poorer versus richer regions).

Results of such research would, in future, guide the Chinese government in determining appropriate level of investment in agricultural research, in comparison with investments in other activities such as public infrastructure between subsectors and agroecological zones.

This project concluded at the end of 2001. It achieved its objectives of developing relevant methodologies to identify and quantify the nature of past and present public investments in China, assessing comparative growth and productivity consequences of these investments, and evaluating priorities for future public investments in Chinese agriculture. The final dissemination conference was held in Beijing on 5-6 November 2001, attended by more than 100 policymakers and researchers from the central and provincial governments in China along with researchers from India, Vietnam, Japan, Australia, and international organizations. By coincidence, this conference was held in the week that China formally joined the World Trade Organization (WTO).

This conference has had an enormous impact on the thinking of future investment strategies in rural areas of China-a major topic of the Beijing conference. Immediately after the conference the Director-General of the International Food Policy Research Institute (IFPRI) briefed President Jiang Zemin about the project findings.

The conference participants were concerned about possible negative effects on the poor (often smallholders) in less-developed western areas of China, while at the same time congratulating project collaborators for their efforts. Based on these concerns and feedback, IFPRI and its Chinese partners are planning to launch a follow-up study to analyse how smallholders in less-developed western areas can adapt under the WTO, and to define what government policies, particularly investment policies, can assist them to prosper in the future.