The hordes of diplomats, economists and journalists parsing the words of policymakers at last week’s annual meeting of the National People’s Congress (NPC) in Beijing will have found little new in terms of policy direction from the country’s agriculture minister.
It was noticeable how many reporters and diplomats turned up to hear the country’s affable agriculture minister Han Changfu – he also oversees China’s aquaculture and fisheries sectors – give his annual briefing on where the country’s farms and fisheries are headed.
Han has overseen an unprecedented surge of government spending on growing the nation’s food bank. But unfortunately much of the money is misspent. China spends a fortune on subsidising its domestic grain output because of the long-standing Communist Party policy to ensure production grows every year so that the country becomes self-sufficient in food.
Contrast this with the dearth of credit for aquaculture producers – a situation thrown into sharp relief this month with the collapse of a rural banking network in Jiangsu province, a key production base for freshwater crab. The rural credit cooperatives, having taken in locals’ deposits, have been felled by a bad debt crisis after officials overseeing the loans lent heavily to real estate projects which turned bad.
That’s symptomatic of a bigger problem. China’s government invests USD 40 billion (EUR 35.7 billion) per year into agriculture and fisheries, while USD 25 billion (EUR 22.3 billion) comes from the private sector. In the U.S., the private sector is responsible for USD 40 billion (EUR 35.7 billion) in annual investment.
Aside from subsidies to grain growers, the Chinese government also sets a floor price on grain that is currently well above global levels, in order to prop up production and rural incomes. This has resulted in a glut of poor quality grain. Similarly the government spent USD 22 billion (EUR 19.6 million) between 2004 and 2015 on subsidies to aid farmers purchase farm machinery.
China has lots of cash for the sector but puts it in the wrong places, while its inability to deal with significant policy issues has inhibited private investment. At this week’s NPC meeting, much was made of the presence of private industrialists (capitalists in effect who have been invited into Communist Party annual meetings as figureheads) but while in its policy papers, government regularly cajoles private business to invest in aquaculture and fisheries, it has been unable to remove barriers to investment.
The main barrier is land ownership. China’s farmers and aquaculture operators don’t invest because ultimately they don’t own the land, only the right to lease it for long periods from local officials. Government has promised –and has tested with pilot programs – the right to trade long-term land usage rights as a precursor to full land ownership. But more conservative members of the party have blocked progress on this front out of a belief in primacy of the socialist value of common land ownership.
In this limbo, only short-term investments are made, resulting in problems commonly found in Chinese aquaculture and horticulture, like over-intensive use of land, over-stocking of ponds and overuse of chemicals. One imagines that landowners would be much more wary of using these chemicals knowing the long-term damage to their soils and land value. Local government officials in the wealthier province of Guangdong have already been seeking to shift to less intensive forms of aquaculture given the long-term damage done to local land by some shrimp and tilapia farms.
It’s a damning statistic that only 4 percent of China’s total annual investment goes into agriculture and aquaculture, while over 30 percent goes into real estate. This is unfortunate because vast sums are needed to modernize both sectors and relieve current problems around quality. China produces far too much inferior seafood because its production is based on quantity rather than quality.
This matters to everyone in the seafood industry around the world because overcapacity in China is being shifted to markets like Africa and southern Asia, where it’s impacting local fishery companies, who are unable to compete with rock-bottom Chinese prices.
But the fundamental problem of land ownership and skewed public spending priorities mean the industry’s overcapacity problems will persist. If China deals with the first problem, there’s a good chance private partners will step up and help shift China’s seafood production to a higher level of quality.
In the absence of reform, a a redirection of cash into segments like seafood, where China has a real competitive advantage (rather than grain, where it is not competitive) could also result in real change, especially if financial incentives and low-interest loans to the sector are linked to quality of output.
The other problem is, of course, representation. Minister Han offered an upbeat assessment on the outlook for Chinese farmers and fishermen this week but there wasn’t any rebuttal or comment from an industry body representing the seafood sector. China has several advising bodies representing producers and while they’re well-meaning and have made some efforts to disseminate data and advice to producers, all of them are government-funded and -monitored rather than independent industry voices. That’s another problem that must be solved in order for China’s seafood industry to thrive.
