Australasian Agribusiness Review - Vol.14 - 2006

Paper 10

ISSN 1442-6951

----------------------------------------------------------------------------

Evolving Trends of Grain Production in China[1]

Zhang-Yue Zhou and Wei-Ming Tian

Zhang-Yue Zhou, School of Business, James Cook University, Townsville QLD 4811, Australia

E-mail: zhangyue.zhou@jcu.edu.au

Wei-Ming Tian, College of Economics and Management, China Agricultural University, Beijing, 100094, P.R.China

E-mail: tianwm@vip.sina.com

Abstract

Grain is China’s most significant agricultural product, its output being the most watched indicator by government officials, traders and researchers inside and outside China. This paper looks into China’s grain production trends in the recent decade, both before and after China’s WTO accession. It examines changes in total grain output, grain crop composition, regional distribution of grain production, and also changes in production technologies and costs. The paper concludes by addressing a number of emerging issues that are likely to affect future grain production in China.

Key words: China, grain production, structural adjustment, farm support, foodgrain vs feedgrain

Introduction

The level of China’s grain output is a most important indicator to government officials, traders and researchers both inside and outside China. This indicator is important for several reasons. First, the level of the grain output has a significant bearing on China’s domestic demand-supply situations and subsequently the price level of grains. Too high a level of the grain price is always a concern to the government due to social and economic stability considerations. Second, achieving national grain security has always been a priority for the government. Low level domestic production often leads the government to adopting abrupt policies that have significant affects on grain production, and domestic and international grain trade. Third, when China imports or exports grains resulting from poor or bumper harvests, it tends to produce a major impact on the world grain prices, as has been frequently proven in the past two decades. Finally, China’s grain output level and future production trends are of significant importance to government officials and traders, for policy prescription and trade strategy formation.

In recent years, China’s grain production has fluctuated, and some major changes have been taking place in the grains industry. One issue that is of particular interest is how China’s grain production has responded to China’s accession to the WTO. Have any substantial adjustments taken place in China’s grains industry after the WTO accession? If so, what are they? How will such changes affect China’s future grain production prospects? In this paper an attempt is made to answer some of these important questions and provide a comprehensive overview of the developments in China’s grains industry in recent years. 

To understand China’s grain production and its evolving trends, it is useful to appreciate the characteristics of China’s grain production; this is the subject of the next section. In Section Two, we examine changes in total grain output and in grain crop composition. In Section Three the dynamics in regional distribution of grain production are highlighted. Changes in production technologies and costs are presented in Section Four. In Section Five, we address a number of emerging issues that are likely to affect China’s future grain production. The last section is a conclusion.

1. Characteristics of China’s Grain Production

China’s grain production has some unique features. Such features affect not only short-run land and labour productivities, but also long-term prospects of the grain sector’s development and grain supply potential. Some major features of China’s grain production are highlighted below.

The most striking feature of China’s grain production is the very small scale of the operators who grow grain. China is the largest grain producer, producing 484 million tonnes in 2005 (the highest being 512 million tonnes in 1998) (SSBa 2006, p. 126). This huge amount of grains is produced by millions of small household farms. Following the rural economic reforms in the early 1980s, rural households again became the basic units of agricultural production. Land was distributed among farmers largely according to the number of people in a household. This resulted in a very small land area per household. Also the area may be composed of several small blocks due to the need to distribute land of varying quality to all farmers in an equitable manner. Farmers use these small blocks to produce a wide range of farm produce. In 2004, there were about 249.7 million household farms (SSBb 2005, p. 443). Land area cultivated by each farm is extremely small (Figure 1). Over 90 per cent of household farms work on an area that is less than 1 hectare while those that have a land area over 3.4 hectares account for less than 1 per cent. Yet most of China’s grain output in the vicinity of 500 million tonnes is produced by these small farms.

Figure 1. Scale distribution of cultivated land of farm households

Source: Office for National Agricultural Census (1998, p. 43).

Most of China’s grain is produced for on-farm consumption. According to the State Statistical Bureau (SSBb 2005, p. 474), each agricultural labourer produced on average about 1520 kg of grains, of which less than half was sold either to the state or on the market with the rest being retained for on-farm consumption. China’s grain production is still largely semi-subsistence.

Producing grains of the desired quality is difficult. The small scale of production coupled with inadequate grain marketing facilities makes it very difficult to produce grains of the desired quality at the desired quantity for specific usages. First, the quality of grains varies from farm to farm. Second, grains of similar quality are often not handled separately, due mainly to the high operational costs to do so when delivery is in small quantity. It is noted, however, as a result of increased demand for higher quality of grains, both the government and the grains industry have in recent years paid much attention to increasing the output of higher quality grains. This has been done through the provision of subsidised improved seeds and the use of contract production.

There tends to be an over-utilisation of land resources. Due to limited land resources and high demand for grains, China has to make full use, and sometimes overuse, of its land resources in order to produce enough grains. Multiple cropping has been widely practised throughout China as a way to raise land productivity. Intensive land use often leads to soil degradation, pollution resulting from fertiliser and chemical use, and depletion of water resources.

Regional patterns are distinct. Being such a vast country, China has diverse agronomic conditions. In line with local conditions, Chinese farmers produce different crops in various ways, resulting in distinct regional patterns of grain production. For example, rice is produced chiefly in southern China and wheat in northern China (see Section 3 later in this paper for details of regional distribution of various grains). Farmers also adopt various cropping systems according to local conditions. For instance, rice-based double or even triple cropping is a common practice in the tropical and subtropical areas and multiple cropping of upland crops is widely used in the temperate zone.

Grain production is still strongly affected by government policies. Although the Chinese government has in the past decade tried to liberalise its grain economy, it still maintains a strong degree of control over grain production. According to Tian and Zhou (2005), the degree of control depends on China’s grain output and the amount of grains that is in the government’s hand. The government intervenes in grain production whenever it is deemed necessary. However, it is noted that, in recent years, more and more indirect measures have been increasingly used by the government to achieve policy targets. Examples of such indirect measures include increased investment in rural infrastructure and in agricultural R&D and extension, and increased subsidy to the adoption of improved seeds.

Given the above features of China’s grain production, it may be appreciated that how China’s grain production will evolve in the future is likely to be complicated and will be affected by various factors. Particularly in relation to government policy, any dramatic changes may overshadow predicted general trends of grain production as happened in the past two decades. Keeping this in mind, in the rest of this paper, we examine major trends in China’s grain production in recent years and identify important factors that will affect its longer term development.

2. Grain Production and Crop Composition

Since 1990, China’s total grain production has fluctuated. This fluctuation is closely related to structural changes that have taken place in China’s broader agricultural sector. Changes in the production of grains have typically exhibited a reversed ‘U’ shape (see Figure 2).

Figure 2. Trends in China’s total grain production

Source: SSBb (2005, p. 462)

The promotional policies and the high prices since 1994 stimulated grain production strongly. As a result, grain output rose notably in subsequent years until 1998 when China registered a record high of 512 million tonnes of grains. The strong growth in domestic supply, coupled with declining world grain prices, resulted in stockpiling of grains in government reserves, usually grains of low quality. In response, the government encouraged farmers to adjust their production according to market demand. Grain prices, including state procurement prices, have declined to varying extents since 1998 (MOA 2003). Consequently, China’s grain output dropped in 1999 by 4 million tonnes and during 2000-02 total grain output remained 50-60 million tonnes lower than the 1998 level. The consecutive lower grain output since 1999, further prompted by a rising price since September 2003, caused Chinese policymakers to deploy various measures in early 2004 in order to promote grain production (see Tian and Zhou 2005 for details).

Grain in China includes cereals (rice, wheat, corn, sorghum, millet and other miscellaneous grains), tuber crops (sweet potatoes and potatoes only, not including taro and cassava), as well as pulses (including mainly soybeans, red bean, and moonbean). The output of tuber crops (sweet potatoes and potatoes) was converted on a 4:1 ratio, i.e., four kilograms of fresh tubers were equivalent to one kilogram of grain, up to 1963. Since 1964, the ratio has been 5:1. The output of beans refers to dry beans without pods. Grain production level as presented in Figure 2 includes all these ‘grains’. Cereals, however, occupy an overwhelming importance in grain production, accounting for about 89 per cent of the total grain output. Since 1991, the government has issued separate statistics for cereals. In the future, cereals will receive ever-increasing attention in the discussion of grains.

In this section, we focus on the production changes in cereals. Table 1 indicates three major changes in cereal production since 1991: (1) decline in area sown to cereal crops, (2) fluctuation in cereal output, and (3) changes in the composition of cereal crops.

Table 1. Trends in cereal production

Year

Sown area (million hectares)

  

Output (million tonnes)

Total

Rice

Wheat

Corn

  

Total

Rice

Wheat

Corn

1991

94.07

32.59

30.95

21.57

  

395.7

183.8

96.0

98.8

1992

92.52

32.09

30.50

21.04

  

401.7

186.2

101.6

95.4

1993

88.91

30.36

30.24

20.69

  

405.2

177.5

106.4

102.7

1994

87.54

30.17

28.98

21.15

  

393.9

175.9

99.3

99.3

1995

89.31

30.74

28.86

22.78

  

416.1

185.2

102.2

112.0

1996

92.21

31.41

29.61

24.50

  

451.3

195.1

110.6

127.5

1997

91.96

31.77

30.06

23.78

  

443.5

200.7

123.3

104.3

1998

92.12

31.21

29.77

25.24

  

456.2

198.7

109.7

133.0

1999

91.62

31.28

28.86

25.90

  

453.0

198.5

113.9

128.1

2000

85.26

29.96

26.65

23.06

  

405.2

187.9

99.6

106.0

2001

82.60

28.81

24.66

24.28

  

396.5

177.6

93.9

114.1

2002

81.47

28.20

23.91

24.63

  

398.0

174.5

90.3

121.3

2003

76.81

26.51

22.00

24.07

  

374.3

160.7

86.5

115.8

2004

79.35

28.38

21.63

25.45

  

411.6

179.1

92.0

130.3

Source: SSBb (2005, pp. 458, 462).

In the late 1990s, the government was concerned by excessive stocks of cereals, which represented a heavy fiscal burden at both the national and regional levels. To reduce both the stock level and the downward pressure on the price in the grain market which had suppressed farmer income, the government took various measures to encourage farmers to adjust their crop production. One major measure was the ‘Grain for Green’ program. Under this program, farmers in areas where resources are not conducive for grain production are provided with incentives to restore their cultivated land to forests, pastures or lakes, in an effort to rehabilitate the degraded or damaged environment. By 2003, about 8 million hectares of cultivated land had been planted to trees (State Forestry Bureau 2004).

During 1999-2004, total area planted to cereals deceased from 91.6 million hectares to 79.4 million hectares, a reduction by 13.3 per cent. Apart from land set aside for conservation purposes under the ‘Grain for Green’ program, relatively low return from cereal crops, rapid urbanisation and increased use of arable land for non-agricultural purposes (e.g., highway construction) are major causes of the reduced areas sown to cereals.

There is a clear trend of devoting more land area to corn production at the expense mainly of wheat. In 2004, the share of corn area in total area planted to cereals rose to 32 per cent, compared with 23 per cent in 1991. Meanwhile, the share of rice remained at about 35 per cent, but the share of wheat declined from 33 per cent to 27 per cent. Apart from strong domestic demand for corn as feed, the increase in sown area to corn is induced by the relatively high price of corn in the domestic market, which is partially attributed to government policies in the late 1990s to subsidise corn export (Tian et al. 2005). The decline in wheat output is mainly due to reduction of spring wheat, which is of inferior quality. In 1990, the output of spring wheat was 13.3 million tonnes, but it declined to 4.3 million tonnes in 2003 (MOA 2004, p. 24). (The output in 2004 rose to 5.7 million tonnes as a result of the policies stimulating grain production.)

The fluctuation in cereal output largely matches that of total grain output. China’s cereal output increased sharply in 1996, then remained at a level around 450 million tonnes before the decline in 2000 (Table 1). The decline in cereal production in recent years is attributed to the reduction in planting areas as discussed above while yields remained relatively stable.


Figure 3. Changes in yields of major cereals


Source: Calculations based on SSBb, various issues.

Figure 3 shows that although the yields of major cereal crops in recent years were higher than that in the early 1990s, they are slightly lower than the respective peak levels. Lower yields are partially due to a downward movement of grain prices during 1997-2002 that did not entice farmers to use more inputs. Apart from this, a shift towards producing cereal varieties of higher quality is another, perhaps more important, reason. The area planted to high quality varieties in 1998 was 2.27 million hectares for early indica rice, 1.60 million hectares for wheat, and 1.93 million hectares for corn. By 2004, the area planted to high quality varieties increased to 14 million hectares for all rice varieties (accounting for 54.6 per cent of total area sown to rice); 8.27 million hectares for wheat (38 per cent of total area sown to wheat), and 6.8 million hectares for corn (28 per cent of total area sown to corn) (MOA 2004, p. 13). In 2004, there was an increase in the yields of the three major cereals. Wheat yield reached an all-time high while the yields of rice and corn were very close to the record high in 1998. It seems that the farm support provided by the government to grain producers in 2004 has encouraged farmers to increase yields. 

Although total cereal output has fluctuated over time, the proportion of each of the major cereals (wheat and corn and unmilled rice) in the total output has remained fairly stable (see Figure 4). However, the change in proportion does exhibit certain trends. That is, the share of rice in total cereal output tends to decline slightly over the years. The share of wheat remained at about 25 per cent till 2000 but seems to have experienced a notable decline since 2001. The share of corn generally shows an increasing trend, increasing at the expense of rice and wheat shares. At the aggregate level, the proportion of these three major cereals continues to dominate the total cereal output, accounting for 97 per cent in recent years compared to 95 per cent in the early 1990s.

Figure 4. Proportion of major cereals out of total cereal output

Source: Calculations based on data in SSBb (2005, p. 462).

The other 3-5 per cent of the cereal output is for minor cereal crops. Factors responsible for the decline in the share of minor cereal crops from 5 per cent to 3 per cent are: (1) only high quality minor cereals can sell at remunerative prices. However, such products are usually site-specific and cannot be planted widely. (2) Change in the alcohol industry also has an impact. The reduction of alcohol content of spirits and a shift from spirits to beer and wine has reduced the demand for minor cereals (such as sorghum and millet). (3) Large imports of higher quality barley for brewery purposes reduce the demand for domestically produced barley. Limited efforts have been devoted to improving domestic barley varieties and production techniques.

The changes in the composition of the three major cereals are chiefly induced by market forces. The key driving force is the reduced direct human consumption of grains and increased use of grains as animal feed. In urban areas, per capita grain consumption has declined sharply from 131 kg in 1990 to 78 kg in 2004 (SSBb 2005, p. 344). Per capita consumption of grains in rural areas has also declined (Zhou et al. 2005). Accompanying this reduced direct consumption of grains, consumer demand shifted to higher quality grains. Farmers have responded by producing more grains of higher quality. However, higher quality grains generally have lower yields, thus contributing to lower rice and wheat output and to lower shares of the total cereal output. On the other hand, increased demand for food of animal origin has boosted China’s demand for feedgrains in the past decade or so. This has encouraged farmers to produce more corn.

3. Regional Distribution of Grain Production

Map 1 shows regional distribution of grain production in China in 2004. In the past two decades, however, there have been changes in regional distribution of grain production. At the more aggregate level, grain production has shifted from the south to the north. In 1980, almost 60 per cent of China’s grains were produced by 14 provinces south of the Yangtze River (including Jiangsu, Anhui and Hubei, part of which are in north of the Yangtze River; in 1980, Chongqing and Hainan had not yet been separated from Sichuan and Guangdong). The 15 provinces north of the Yangtze River produced the other 40 per cent. However, by 2004, the proportion of grains produced by those provinces south of the Yangtze River had dropped by 9.5 percentage points, to being merely over 50 per cent while the proportion of grains produced by northern provinces had increased to 49.6 per cent. This has resulted in a change from ‘transporting grains from the south to the north’ (nan liang bei diao) to ‘transporting grains from the north to the south’ (bei liang nan yun).

Map 1: Regional distribution of grain production, China, 2004

Source: Based on SSBb (2005, p.462).

At the less aggregate level, the decline in grain production in southern China took place mainly in the wealthier south-east coastal region. From 1980 to 2004, this region registered a decline in the proportion of grain production out of the national total by 7.7 percentage points, while the four north-east provinces gained 6.3 percentage points (see Table 2, Panel A). The other major gaining region is the four provinces in north Central China, by 3.1 percentage points. Changes in the share in all other regions seem to be marginal. Hence, it can be concluded that grain production has been declining in China’s south-east coastal region but increasing in the north-east region. Table 2 also shows that Central China remains the major grain-producing region in China.

Table 2. Changes in regional distribution of grain production, 1980-2004 *

A. All Grain

Region

  

1980

1990

2000

2004

Beijing-Tianjin

  

1.0

1.0

0.6

0.4

North-east

  

12.3

15.3

14.2

18.6

South-east

  

20.7

17.9

15.8

13.0

Central China

  

40.9

42.9

44.2

43.6

            Central China – North

 

21.0

22.2

24.5

24.1

            Central China – South

 

19.8

20.7

19.6

19.5

South-west

  

19.3

16.7

18.9

18.0

North-west

  

5.8

6.1

6.3

6.4

            North of Yangtze River

  

40.1

44.6

45.7

49.6

            South of Yangtze River

  

59.9

55.4

54.3

50.4

Output (mt)

  

320.6

446.2

462.2

469.5

B. Rice

Region

  

1980

1990

2000

2004

Beijing-Tianjin

  

0.4

0.3

0.1

0.1

North-east

  

3.0

5.3

9.9

11.3

South-east

  

34.4

30.4

27.3

23.8

Central China

  

37.8

40.4

37.8

40.0

            Central China – North

 

2.4

2.4

2.7

2.8

            Central China – South

 

35.3

38.0

35.1

37.2

South-west

  

23.4

22.6

23.6

23.8

North-west

  

1.0

1.1

1.2

1.0

            North of Yangtze River

  

6.9

9.0

13.9

15.2

            South of Yangtze River

  

93.1

91.0

86.1

84.8

Output (mt)

  

139.9

189.3

187.9

179.1


C. Wheat

Region

  

1980

1990

2000

2004

Beijing-Tianjin

  

1.2

1.7

1.3

0.6

North-east

  

9.0

8.1

3.3

2.2

South-east

  

12.9

11.1

8.9

7.8

Central China

  

50.7

56.2

65.1

68.9

            Central China – North

 

39.1

45.8

55.4

58.2

            Central China – South

 

11.6

10.4

9.8

10.7

South-west

  

11.9

8.9

9.3

7.8

North-west

  

14.3

14.0

12.1

12.5

            North of Yangtze River

  

63.7

69.5

72.0

73.7

            South of Yangtze River

  

36.3

30.5

28.0

26.3

Output (mt)

  

55.2

98.2

99.6

92.0

D. Corn

Region

  

1980

1990

2000

2004

Beijing-Tianjin

  

2.3

2.1

0.9

0.9

North-east

  

29.1

38.5

28.0

36.7

South-east

  

2.6

2.7

3.3

2.4

Central China

  

38.8

36.2

42.1

38.1

            Central China – North

 

36.5

33.1

36.7

33.3

            Central China – South

 

2.3

3.1

5.4

4.8

South-west

  

19.1

13.3

16.5

13.2

North-west

  

8.0

7.1

9.2

8.7

            North of Yangtze River

  

75.9

80.9

74.8

79.5

            South of Yangtze River

  

24.1

19.1

25.2

20.5

Output (mt)

  

62.6

96.8

106.0

130.3

* The grouping of provinces into regions for this table is somewhat arbitrary. We carried out the grouping largely on the basis of local geographical conditions and the level of economic development. Beijing and Tianjin, two minor grain-producing areas, are placed into one group. The provinces included in each of the other groups are given below:

Sources: SSBb, various issues.

Among other reasons, changes in the level of economic development between regions are primarily responsible for changes in regional distribution of grain production. Rapid economic development in the south-east coastal region made grain production a less attractive industry. Governments in such regions are keen to promote agricultural structural adjustments. After WTO accession, changes in regional distribution of grain production seem to have accelerated. China joined the WTO in 2001. Comparing 2004 with 2000, the share of grains produced by provinces south of the Yangtze River out of the national total reduced by almost 4 percentage points while it reduced by only 1.1 percentage points during 1990 and 2000. Clearly there was a major decline in grain production in the wealthier south-east region and the north-east region gained a major increase in grain production.

Changes have also occurred in regional distribution of grain production at the crop level. An overwhelming proportion of China’s rice (85 per cent) is still produced by those provinces south of the Yangtze River. Nonetheless, there has been an increasing trend in rice production in those provinces north of the Yangtze River, an increase by over 8 percentage points in 2004 compared to 1980 (see Table 2, Panel B). However, this increase has taken place mainly in the four north-east provinces (mainly in Heilongjiang) (by 8.3 percentage points). On the other hand, the proportion of rice production in those south-east coastal provinces has fallen by 10.6 percentage points. The proportional change in all other regions is relatively small. As mentioned earlier, the declining comparative advantage in grain production in the south-east region is largely responsible for the drop in the region’s rice production share. The north-east provinces are most suitable for the production of premium quality japonica rice, which has been in high demand by domestic consumers and also in demand for exports.

Wheat production has become increasingly concentrated in Central China, especially in the four provinces north of the Yangtze River (namely, Shandong, Shanxi, Henan and Hebei) (Table 2, Panel C). In 1980, about 51 per cent of China’s wheat was produced in the eight provinces in Central China. By 2004, this proportion has increased to 69 per cent, with 58 per cent being produced by the four northern provinces. Measurable changes have also occurred in the distribution of wheat production in most other regions. Compared to other regions, those north-east provinces experienced a larger reduction in wheat production (by 6.8 percentage points). Winter wheat cannot be produced in most parts of these provinces. While spring wheat production is possible, the quality is not good. In these provinces, wheat production has been to some extent substituted by rice and corn production.

Changes in the distribution of corn production in southern and northern China have been less drastic (see Table 2, Panel D). The proportion of corn produced in 2004 in provinces south of the Yangtze River was 3.6 percentage points lower than that of 1980. It is noted, however, there were some fluctuations in years in between. In south-east provinces, the proportion of corn production in the national total has been at around 3 per cent but reduced to 2.4 per cent in 2004. There was a small increase in this proportion, compared to 1980, by 2.5 percentage points in the four Central China provinces that are south of the Yangtze River. This is largely due to substitution of corn production for rice production, driven by the growing demand for feedgrain. Feedgrain has been in short supply in many southern provinces. Transporting corn from north-east China to south China is not only expensive but also places strain on the transportation capacity. The proportion of corn production in north-east China fluctuated quite significantly. Changing market prices and unfavourable weather conditions are largely responsible for the unstable corn production in these provinces. North-east China has become increasingly important in corn production. South-west China is a major corn-consuming area, due to pork production. Its corn production has, however, fluctuated and tended to decline. In the meantime, this region’s pork production out of the national total has also tended to decline.

An examination of changes in grain production at the provincial level further confirms that grain production patterns have been evolving largely in accordance with changed market demand and supply situations and local comparative advantages. Table 3 presents the share of grain output of each province out of the national total in three time periods of 1989-91, 1999-01 and 2002-04 (three-year average). They are so designed that we can indicate changes before the WTO accession (1989-91 – 1999-01) and after the WTO accession (1999-01 – 2002-04).

Table 3. Changes in distribution of cereal production

 

Rice

Wheat

Corn

Cereal
 

1989-91

1999-01

2002-04

1989-91

1999-01

2002-04

1989-91

1999-01

2002-04

1989-91

1999-01

2002-04

Beijing

0.1

0.0

0.0

1.0

0.6

0.2

1.4

0.6

0.3

0.7

0.3

0.2

Tianjin

0.2

0.1

0.1

0.6

0.6

0.4

0.8

0.5

0.6

0.4

0.3

0.3

Hebei

0.5

0.4

0.3

9.5

11.7

11.8

8.8

9.0

8.9

4.8

5.7

5.7

Shanxi

0.0

0.0

0.0

3.3

2.3

2.7

3.0

3.0

4.2

1.6

1.4

2.0

Inner Mongolia

0.2

0.4

0.3

2.6

1.9

1.2

4.0

6.2

7.2

1.7

2.4

2.7

Liaoning

1.9

2.0

2.3

0.4

0.4

0.1

7.6

6.8

7.7

2.9

2.9

3.5

Jilin

1.4

2.0

2.2

0.1

0.1

0.1

14.4

11.5

13.5

4.3

4.3

5.3

Heilongjiang

1.6

5.3

5.6

4.4

1.5

0.8

9.9

8.2

7.7

4.4

5.2

5.2

Shanghai

1.0

0.7

0.5

0.3

0.2

0.1

0.1

0.0

0.0

0.6

0.4

0.3

Jiangsu

9.2

9.6

9.3

9.0

8.4

7.2

2.6

2.2

1.8

7.5

7.2

6.4

Zhejiang

7.3

5.3

4.1

0.8

0.5

0.2

0.1

0.2

0.2

3.8

2.6

2.0

Anhui

6.5

6.6

7.0

5.1

7.5

7.9

1.6

2.0

2.6

4.9

5.5

5.8

Fujian

4.1

3.5

3.2

0.3

0.1

0.0

0.0

0.1

0.1

2.1

1.7

1.5

Jiangxi

8.4

8.2

8.5

0.1

0.1

0.0

0.0

0.1

0.0

4.2

3.8

3.8

Shandong

0.4

0.6

0.5

17.7

18.3

17.5

13.4

13.1

11.5

8.1

8.6

8.0

Henan

1.3

1.5

1.8

16.9

22.2

26.1

9.5

9.7

8.2

7.3

9.1

9.5

Hubei

9.1

8.2

8.4

4.1

2.4

1.8

1.3

1.8

1.5

5.9

4.9

4.6

Hunan

13.4

12.6

12.6

0.3

0.2

0.2

0.2

1.1

1.0

6.8

6.2

6.0

Guangdong

8.8

7.7

6.8

0.2

0.0

0.0

0.1

0.6

0.4

4.5

3.7

3.2

Guangxi

6.5

6.6

6.9

0.0

0.0

0.0

1.3

1.5

1.4

3.5

3.5

3.5

Hainan

0.8

0.8

0.8

0.0

0.0

0.0

0.0

0.0

0.0

0.4

0.4

0.4

Sichuan *

11.7

11.1

11.7

7.2

5.9

5.8

7.0

6.3

6.1

9.4

8.5

8.5

Guizhou

2.0

2.5

2.5

0.7

1.0

0.9

2.1

2.9

2.7

1.7

2.2

2.2

Yunnan

2.7

3.0

3.5

1.0

1.5

1.4

3.1

4.1

3.5

2.4

2.9

3.0

Tibet

0.0

0.0

0.0

0.2

0.3

0.3

0.0

0.0

0.0

0.0

0.1

0.1

Shaanxi

0.5

0.5

0.5

4.8

4.0

4.5

3.6

3.5

3.1

2.4

2.2

2.3

Gansu

0.0

0.0

0.0

3.8

2.9

3.2

1.5

1.9

1.9

1.3

1.3

1.4

Qinghai

0.0

0.0

0.0

0.8

0.5

0.4

0.0

0.0

0.0

0.2

0.1

0.1

Ningxia

0.3

0.3

0.3

0.8

0.8

0.9

0.4

0.8

0.9

0.4

0.6

0.7

Xinjiang

0.2

0.3

0.3

3.9

3.9

4.0

2.2

2.4

2.8

1.7

1.8

1.9

* Sichuan includes Chongqing.

Source: Calculations based on data from SSBb, various issues.

Currently, provinces having a large share in rice production are Hunan (12.6 per cent), followed by Sichuan (11.7 per cent), Jiangsu (9.3 per cent), Jiangxi (8.5 per cent) and Hubei (8.4 per cent). For wheat, the province having the largest share is Henan (26.1 per cent), followed by Shandong (17.5 per cent), Hebei (11.8 per cent), Anhui (7.9 per cent) and Jiangsu (7.2 per cent). Jilin had the largest share in corn production in 2002-04 (13.5 per cent), followed by Shandong (11.5 per cent), Hebei (8.9 per cent) Henan (8.2 per cent). Both Heilongjiang and Liaoning produced 7.7 per cent of China’s corn in 2002-02, while Inner Mongolia’s share was 7.2 per cent. In terms of total cereal production, Henan is the largest producer (9.5 per cent), followed by Sichuan (8.5 per cent), Shandong (8.0 per cent), Jiangsu (6.4 per cent) and Hunan (6.0 per cent).

According to Table 3, a general trend is emerging that production has become increasingly shifted to regions with greater comparative advantages. In terms of regional shares in the national output for rice, between 1989-91 and 2002-04, the largest increase occurred in Heilongjiang followed by Jilin and Yunnan, while the largest decline occurred in Zhejiang followed by Guangdong. As for wheat, the output share increased fastest in Henan, followed by Anhui and Hebei, while the share declined fastest in Heilongjiang, followed by Hubei, Jiangsu, and Sichuan. Changes in distribution of corn are somewhat complicated. Out of the three north-east provinces, while Inner Mongolia registered an increase in the output share, the share increased very marginally in Liaoning but declined in Jilin and Heilongjiang. On the other hand, the share of corn production in some southern provinces increased, led by Anhui, Hunan and Guizhou.

The above analysis clearly shows that changes in the regional pattern of grain production at both the crop level and all-cereal level have been taking place in the past 15 years or so. It is noted, however, structural changes in China’s grain production have taken place well before China’s WTO accession and indeed, data in Table 3 suggest that much of the change took place before the WTO accession, although such changes continued afterwards. This is not surprising. China applied to join the GATT (now the WTO) in July 1986 and met with many difficulties. Nonetheless, in the 1990s, the government intentionally pushed forward the market-oriented reforms of its economic systems in a gradual way to prepare China for entering the WTO (Tian and Zhou 2001). Various policy and market reforms were initiated by the government and more market forces were allowed to play a role in influencing production decisions. Such a policy and economic environment encouraged regional adjustments in grain production.

In the early 2000s, structural changes in grain production become easier. The government encouraged farmers to adjust their grain production in response to the WTO accession and to produce higher quality grains in order to solve the relative surplus problem. The extent to which farmers have made use of such opportunity varies from province to province (see Table 4), depending on their ability to use such an opportunity together with the comparative advantage their region possesses. Farmers in wealthier regions, such as in Beijing, Tianjin, Shanghai and Zhejiang, tend to have made greater adjustments to the level of their grain production and also to the composition of their grain crops, compared to their counterparts in less wealthy regions, such as Guangxi, Yunnan, Guizhou and Xinjiang. In economically developed regions, farmers have better access to non-agricultural activities and also to markets that allow them to alter their farm production. Farmers in poorer regions have limited such access. In some major agricultural provinces, land was deviated from cereal production to cash crops, such as vegetables and oilseeds. Table 4 also demonstrates to some extent that Chinese farmers are quite responsive to external changes. This suggests that if the government policies allow them to adjust their grain production and there is demand in the market for certain kinds of products, Chinese farmers will respond accordingly. How China’s future grain production patterns will evolve will be largely determined by market forces unless the Chinese government reverts to stricter administrative controls, which is less likely.[2]

Table 4. Proportional changes in cereal outputs and areas between 2004 and 2000

Region

Output %

  

Area %
 

Cereals

Rice

Wheat

Corn

  

Cereals

Rice

Wheat

Corn

Beijing

-52.4

-94.7

-69.7

-25.9

  

-51.1

-94.2

-67.8

-31.1

Tianjin

-1.3

-23.4

-36.4

66.6