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China's Agriculture Industry Grows - 2004-07-29


A new study by Washington's Institute for International Economics finds that China is becoming increasingly competitive in agricultural goods and that it stands to benefit from an easing of the restrictions that constrain world agricultural trade.

Institute director Fred Bergsten says the transformation of Chinese agriculture, which has lifted 300 million people out of poverty, is the most significant achievement in development economics in two decades. China has become a net food exporter. And its consumers have benefited from the steady reduction in import tariffs that was a condition of joining The World Trade Organization three years ago.

The study, entitled Roots of Competitiveness: China's Evolving Agricultural Interests, finds that China's farming has become more efficient and market oriented. This despite the absence of private property and the retention of communist era collective farms. Co-author Scott Rozelle, an agricultural economist at the University of California Davis, says rural families are allocated extremely small plots of land.

"Think about about a football field and the distance from zero to the 12 yard line, it's like a garden," he says. "And there are six of them for the number of people per household. So people are basically farming on a soccer field. So they are very small farms. But what we've seen in the past ten years is this real movement towards a rental market."

The rental markets, says Mr. Rozelle, are most common in coastal areas where farm output is greatest.

Mr. Rozelle adds China has become increasingly competitive in specialized, labor-intensive crops like fruits and vegetables. China, he says, has emerged as a major rival for U.S. exporters in East Asian markets.

"Right now in East Asia it is a battle between the quality that comes from California and Chile versus the cheapness of the crops and commodities that come from China," he explains. "But that is changing very, very fast."

Mr. Rozelle says Chinese fruit in many cases has a 90 percent cost advantage over California growers.

The study concludes that China would be a beneficiary of the kind of farm trade liberalization favored by the United States in the ongoing Doha Round of trade negotiations.

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