Chinese economy and agriculture

economy and agriculture

1. Chinese economy, history and problems

1.1Chinese history

China, officially the People's Republic of China (PRC), is a sovereign state located in East Asia. It is the world's most populous country, with a population of over 1.35 billion. Covering approximately 9.6 million square kilometers, China is the world's second-largest country by land area, and either the third or fourth-largest by total area, depending on the method of measurement. China's landscape is vast and diverse, ranging from forest steppes and the Gobi and Taklamakan deserts in the arid north to subtropical forests in the wetter south. The Himalaya, Karakoram, Pamir and Tian Shan mountain ranges separate China from South and Central Asia. The Yangtze and Yellow Rivers, the third - and sixth-longest in the world, run from the Tibetan Plateau to the densely populated eastern seaboard. China's coastline along the Pacific Ocean is 14,500 kilometres (9,000 mi) long, and is bounded by the Bohai, Yellow, East and South China Seas.territory of China lies between latitudes 18° and 54° N, and longitudes 73° and 135° E. China's landscapes vary significantly across its vast width. In the east, along the shores of the Yellow Sea and the East China Sea, there are extensive and densely populated alluvial plains, while on the edges of the Inner Mongolian plateau in the north, broad grasslands predominate. Southern China is dominated by hills and low mountain ranges, while the central-east hosts the deltas of China's two major rivers, the Yellow River and the Yangtze River. Other major rivers include the Xi, Mekong, Brahmaputra and Amur. To the west sit major mountain ranges, most notably the Himalayas. High plateaus feature among the more arid landscapes of the north, such as the Taklamakan and the Gobi Desert. The world's highest point, Mount Everest (8,848m), lies on the Sino-Nepalese border. The country's lowest point, and the world's third-lowest, is the dried lake bed of Ayding Lake (?154m) in the Turpan Depression.'s climate is mainly dominated by dry seasons and wet monsoons, which lead to pronounced temperature differences between winter and summer. In the winter, northern winds coming from high-latitude areas are cold and dry; in summer, southern winds from coastal areas at lower latitudes are warm and moist. The climate in China differs from region to region because of the country's highly complex topography.major environmental issue in China is the continued expansion of its deserts, particularly the Gobi Desert. Although barrier tree lines planted since the 1970s have reduced the frequency of sandstorms, prolonged drought and poor agricultural practices have resulted in dust storms plaguing northern China each spring, which then spread to other parts of East Asia, including Korea and Japan. According to China's environmental watchdog, Sepa, China is losing a million acres (4,000 km²) per year to desertification. Water quality, erosion, and pollution control have become important issues in China's relations with other countries. Melting glaciers in the Himalayas could potentially lead to water shortages for hundreds of millions of people.history of China goes back to the ancient civilization - one of the world's earliest - that flourished in the fertile basin of theYellow River in the North China Plain. For millennia, China's political system was based on hereditary monarchies, known asdynasties, beginning with the semi-mythological Xia of the Yellow River basin. Since 221 BCE, when the Qin Dynasty first conquered several states to form a Chinese empire, the country has expanded, fractured and been reformed numerous times. The Republic of China (ROC) overthrew the last dynasty in 1911, and ruled the Chinese mainland until 1949. After the defeat of the Empire of Japan in World War II, the Communist Party defeated the nationalist Kuomintang in mainland China and established the People's Republic of China in Beijing on 1 October 1949, while the Kuomintang relocated the ROC government to its present capital of Taipei.the introduction of economic reforms in 1978, China has become one of the world's fastest-growing major economies. As of 2013, it is the world's second-largest economy by both nominal total GDP and purchasing power parity (PPP), and is also the world's largest exporter and importer of goods. China is a recognized nuclear weapons state and has the world's largest standing army, with the second-largest defense budget. The PRC has been a United Nations member since 1971, when it replaced the ROC as a permanent member of the U.N. Security Council. China is also a member of numerous formal and informal multilateral organizations, including the WTO, APEC, BRICS, the Shanghai Cooperation Organisation, the BCIM and the G-20. China is a regional power within Asia and has been characterized as a potential superpower by a number of commentators. [2]

1.2 Chinese economy

The socialist market economy of China is the world's second largest economy by nominal GDP and by purchasing power parity after the United States. It is the world's fastest-growing major economy, with growth rates averaging 10% over the past 30 years.is also the largest exporter and second largest importer of goods in the world. China is the largest manufacturing economy in the world, outpacing its world rival in this category, the service-driven economy of the United States of America. ASEAN-China Free Trade Area came into effect on 1 January 2010. China-Switzerland FTA is China's first FTA with a major European economy, while China-Pakistan Free Trade Agreement came in effect in 2007 is the first FTA signed with a South Asian state. The economy of China is the fastest growing consumer market in the world.a per capita income basis, China ranked 87th by nominal GDP and 92nd by GDP (PPP) in 2012, according to the International Monetary Fund (IMF). The provinces in the coastal regions of China tend to be more industrialized, while regions in the hinterland are less developed. As China's economic importance has grown, so has attention to the structure and health of the economy. Xi Jinpings Chinese Dream is described as achieving the «Two 100s»: the material goal of China becoming a «moderately well-off society» by 2021, the 100th anniversary of the Chinese Communist Party, and the modernization goal of China becoming a fully developed nation by 2049, the 100th anniversary of the founding of the Peoples Republic.internationalization of the Chinese economy continues to affect the standardized economic forecast officially launched in China by the Purchasing Managers Index in 2005. At the start of the 2010s, China remained the sole Asian nation to have an economy above the $10-trillion mark (along with the United States and the European Union).of China's economic growth is created from Special Economic Zones of the People's Republic of China that spread successful economic experiences to other areas. The development progress of China's infrastructure is documented in a 2009 report by KPMG. [3]

1.3Problems of Chinese Economic Growth

are a lot of problems of Chinese economic growth, they are:

1.Pollution.

Pollution is a major problem in many industrialised cities. Increased car ownership has led to problems of smog and worsening air quality. Pollution also occurs from Chinas vast industrial sector. Often regulation of pollution is very limited with untreated sewage often been poured directly into rivers.

. Shortage of Power.growing demand of the Chinese economy has placed great demands on Chinas creaking power infrastructure. This has led to the creation of projects like the Three Gorges Dam. This has been criticised for creating environmental and social problems. Environmentalists fear that the dam will severely impact on the natural habitats of many species.

. Growing Income Inequalitys economic growth has benefited the south and eastern regions more than anywhere else. This has created a growing disparity between north and south. The agricultural north has, by contrast, been left behind. Many farmers struggle to make a living. Therefore, this has encouraged a migration of workers from north to south. China has struggled to deal with this regional inequality.

. Property Boomare fears that China has been caught up in its own speculative property bubble. Especially in Beijing and the south East, houseprices have increased significantly. There are concerns that this property bubble could burst, creating negative equity.

. Inefficient Banking Sector.particular the Chinese banking sector has a bad reputation for making bad loans. Many loans are not repaid back. This is a legacy of the Communist intervention in industry. Banks often made loans to large government business with little regard for free market principles. As a consequence it is difficult for genuine new starts to get sufficient capital funding. But, much investment is squandered.

. Unemploymentsounds a paradox that the Chinese economy can grow at 8% and yet unemployment is still a problem. The reason is that there are still many state owned enterprises which are grossly inefficient. Therefore, in the process of privatisation and modernisation many surplus workers are being made redundant. There is also a lot of unemployment (and disguised unemployment) in the agricultural sector.

. Undervaluation of Yuan.Chinese Yuan has been tied to the dollar. As the dollar had devalued the Yuan has also devalued. However, it is argued by many (especially in the US) that the Yuan is undervalued against the US dollar by up to 40%. The impact of an undervaluation of the Yuan is that:

·Increase inflationary pressure in the Chinese economy.

·Make it expensive for Chinese to buy foreign goods.

·Give an artificial advantage to Chinese manufacturers.

8. Overheating Economy.the Chinese economy is growing so quickly there are concerns that this could easily lead to inflationary pressures. This is particularly a problem because of:

·relatively loose monetary policy

·undervalued exchange rate

·Property Boom.

·Inflation is currently 3.8%, but, there are upward pressures.

9. Huge Balance of Payments Surplus.it is not such a serious problem for China. But, the US sees it as creating a great disequilibrium. The US, if not anyone else, would like to see the China use its balance of payments surplus elsewhere.

1.4The Chinese Economic Model

In 1978, Deng Xiaoping, then leader of the Chinese Communist Party (CCP) instigated a series of political and economic reforms that are typically credited as the beginning of China's transition toward a market economy (Jacques, 2009). This reform, coupled with the disintegration of the Soviet Union after 1989 and the Asian financial crisis in 1997, particularly shaped the belief that the legitimacy of the CCP lay in its ability to develop China into a powerful modern economy and to raise individual living standards (Downs and Saunders, 1998) for which Chinese leadership see stability as key to achieving (Wang and Chee, 2011).a large extent, the CCP has succeeded with Chinas real GDP and international trade growing at 9.58% and 18% per annum respectively since 2003 (People's Daily, 2003, Trading Economics, 2012). For the purpose of this report, it is accepted that the Chinese economic model is similar to the East Asian economic model, whereby governments actively regulate financial markets and seek macroeconomic stability whilst creating markets where they did not previously exist (Branstetter and Lardy, 2006). Within this context it is further understood that the Chinese economic model differs in its relatively early dismantling of tariff barriers, acceptance of large quantities of foreign direct investment (FDI), and earlier engagement in international trade (see Figure 1 & 2; Boltho and Weber, 2009). Implications as a result of this model resulted in Chinese companies taking advantage of large flows of foreign capital for investments. This had the added result of causing such companies to learn from the outside world via transfer of foreign technologies and management practices (European Commission: Enterprise and Industry, 2004).

Figure 1: FDI as a percentage of GDP in China, Korea, Taiwan and Japan over their fastest growth period (Jacques, 2009) [modified].

earlier exposure to international markets also compares starkly with the dual economy of other Asian tigers, which is characterised as a successful export-orientated sectors, but poor performing domestically orientated service sectors (McKinsey & Co., 2000, Fund, 2005). This raises the possibility that the Chinese service sector is at a significantly higher level of productivity than that of Korea and Japan at a similar stage of development. The net effect of this increasing openness to trade and FDI is the limiting and disciplining of state owned enterprises via the fostering of competition in product and service markets that would otherwise had not existed (Branstetter and Lardy, 2006). This also represented the reason as to why China was willing to participate in the WTO despite more stringent terms of ascension as described by Premier Zhu Rongji in his visit to the US in 1999 (The White House, 1999). [4]

Figure 2: Foreign Trade GDP ratios (ratio of exports and imports of goods and service to GDP at current prices). Chinas trade/GDP ratio increase faster compared to Korea and Japan (Boltho and Weber, 2009)

context of modern China, Chinese economic growth has been largely sustained by a rapidly developing manufacturing sector. In this regard, a Heckscher-Ohlin viewpoint realises that Chinas comparative advantages lie mostly in its favourable demographic factors and accelerated growth productivity, contributing greatly to its export-orientated growth. With regard to Chinese demographics, the total population of China in 2011 was estimated to be 1.35 billion people, of which 74.4% were of working age. With its relatively low dependency ratio, rapid urbanization has resulted in 51.27% of the population living in urban areas, allowing for a rapid transition of labour to formal employment.

2. Chinese agriculture

2.1 The history of Chinese agriculture

Due to China's status as a developing country and its severe shortage of arable land, farming in China has always been very labor-intensive. However, throughout its history various methods have been developed or imported that enabled greater farming production and efficiency. They also utilized the seed drill to help improve on row farming.the Spring and Autumn Period (722-481 BCE), two revolutionary improvements in farming technology took place. One was the use of cast iron tools and beasts of burden to pull plows, and the other was the large-scale harnessing of rivers and development of water conservation projects. The engineer Sunshu Ao of the 6th century BCE and Ximen Bao of the 5th century BCE are two of the oldest hydraulic engineers from China, and their works were focused upon improving irrigation systems. These developments were widely spread during the ensuing Warring States period (403-221 BCE), culminating in the enormous Du Jiang Yan Irrigation System engineered by Li Bing by 256 BCE for the State of Qin in ancient Sichuan.agricultural purposes the Chinese had invented the hydraulic-powered trip hammer by the 1st century BCE, during the ancient Han Dynasty (202 BCE-220 CE). Although it found other purposes, its main function to pound, decorticate, and polish grain that otherwise would have been done manually. The Chinese also innovated the square-pallet chain pump by the 1st century CE, powered by a waterwheel or an oxen pulling on a system of mechanical wheels. Although the chain pump found use in public works of providing water for urban and palatial pipe systems, it was used largely to lift water from a lower to higher elevation in filling irrigation canalsand channels for farmland.the Eastern Jin (317-420) and the Northern and Southern Dynasties (420-589), the Silk Road and other international trade further spread farming technology throughout China. Political stability and a growing labor force led to economic growth, and people opened up large areas of wasteland and built irrigation works for expanded agricultural use. As land-use became more intensive and efficient, rice was grown twice a year and cattle began to be used for plowing and fertilization.the Tang Dynasty (618-907), China had become a unified feudal agricultural society. Improvements in farming machinery during this era included the moldboard plough andwatermill. Later during the Yuan Dynasty (1271-1368), cotton planting and weaving technology were extensively adopted and improved.around 750, 75% of China's population lived north of the river Yangtse, by 1250, 75% of the population lived south of the river. Such large-scale internal migration was possible due to introduction of quick-ripening strains of rice from Vietnam suitable for multi-cropping.1909 US Professor of Agriculture Franklin Hiram King made an extensive tour of China (as well as Japan and briefly Korea) and he described contemporary agricultural practices. He favourably described the farming of China as 'permanent agriculture' and his book 'Farmers of Forty Centuries', published posthumously in 1911, has become an agricultural classic and has been a favoured reference source for organic farming advocates.the Communist Party of China's victory in the Chinese Civil War, control of the farmlands was taken away from landlords and redistributed to the 300 million peasant farmers. In 1952, gradually consolidating its power following the civil war, the government began organizing the peasants into teams. Three years later, these teams were combined into producer cooperatives, enacting the Socialist goal of collective land ownership. In the following year, 1956, the government formally took control of the land, further structuring the farmland into large government-operated collective farms.the 1958, «Great Leap Forward» campaign initiated by Mao Zedong, land use was placed under closer government control in an effort to improve agricultural output. In particular, the Great sparrow campaign had a direct negative impact on agriculture. Collectives were organized into communes, private food production was banned, and collective eating was required. Greater emphasis was also put onindustrialization instead of agriculture. The farming inefficiencies created by this campaign led to The Great Chinese Famine, resulting in the deaths of somewhere between the government estimate of 14 million to scholarly estimates of 20 to 43 million. Although private plots of land were re-instated in 1962 due to this failure, communes remained the dominant rural unit of economic organization during the Cultural Revolution, with Mao championing the «Learn from Tachai» campaign. Tachai's semiliterate party secretary Chen Yonggui was among those outmaneuvered by Deng Xiaoping after the death of Mao: from 1982-1985, the Dazhai-style communes were gradually replaced by townships.in 1978, as part of the Four Modernizations campaign, the Family Production Responsibility System was created, dismantling communes and giving agricultural production responsibility back to individual households. Households are now given crop quotas that they were required to provide to their collective unit in return for tools, draft animals, seeds, and other essentials. Households, which now lease land from their collectives, are free to use their farmland however they see fit as long as they meet these quotas. This freedom has given more power to individual families to meet their individual needs. In addition to these structural changes, the Chinese government also engages inirrigation projects (such as the Three Gorges Dam), runs large state farms, and encourages mechanization and fertilizer use.1984, when about 99% of farm production teams had adopted the Family Production Responsibility System, the government began further economic reforms, aimed primarily at liberalizing agricultural pricing and marketing. In 1984, the government replaced mandatory procurement with voluntary contracts between farmers and the government. Later, in 1993, the government abolished the 40-year-old grain rationing system, leading to more than 90 percent of all annual agricultural produce to be sold at market-determined prices.1994, the government has instituted a number of policy changes aimed at limiting grain importation and increasing economic stability. Among these policy changes was the artificial increase of grain prices above market levels. This has led to increased grain production, while placing the heavy burden of maintaining these prices on the government. In 1995, the «Governors Grain Bag Responsibility System» was instituted, holding provincial governors responsible for balancing grain supply and demand and stabilizing grain prices in their provinces. Later, in 1997, the «Four Separations and One Perfection» program was implemented to relieve some of the monetary burdens placed on the government by its grain policy.China continues to industrialize, vast swaths of agricultural land is being converted into industrial land. Farmers displaced by such urban expansion often become migrant labor for factories, but other farmers feel disenfranchised and cheated by the encroachment of industry and the growing disparity between urban and rural wealth and income.most recent innovation in Chinese agriculture is a push into organic agriculture. This rapid embrace of organic farming simultaneously serves multiple purposes, including food safety, health benefits, export opportunities, and by providing price premiums for the produce of rural communities, the adoption of organics can help stem the migration of rural workers to the cities. In the mid-1990s China became a net importer of grain, since its unsustainable practises of groundwater mining has effectively removed considerable land from productive agricultural use. [5]

2.2 Chinese agriculture

is by far the leading occupation, involving almost 50% of the population, although extensive rough, high terrain and large arid areas-especially in the west and north-limit cultivation to only about 15% of the land surface. Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production. Even with these improvements, agriculture accounts for only 12% of the nation's GDP. Despite initial gains in farmers' incomes in the early 1980s, taxes and fees have increasingly made farming an unprofitable occupation, and because the state owns all land, farmers have at times been easily evicted when croplands are sought by developers. Additional land reforms adopted in 2008 allow farmers to transfer land use rights.for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east. China is the world's largest producer of rice and wheat and a major producer of potatoes, corn, peanuts, millet, barley, apples, sweet potatoes, sorghum, and soybeans. In terms of cash crops, China ranks first in cotton and tobacco and is an important producer of tea, oilseeds, silk, ramie, jute, hemp, sugarcane, and sugar beets.raising on a large scale is confined to the border regions and provinces in the north and west; it is mainly of the nomadic pastoral type. China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork). Sheep, cattle, and goats are the most common types of livestock. Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south. Hogs and poultry are widely raised in China, furnishing important export staples, such as leather and egg products. Fish, chicken, and pork supply most of the animal protein in the Chinese diet. Due to improved technology, the fishing industry has grown considerably since the late 1970s.

Although China's agricultural output is the largest in the world, only about 15% of its total land area can be cultivated. China's arable land, which represents 10% of the total arable land in the world, supports over 20% of the world's population. Of this approximately 1.4 million square kilometers of arable land, only about 1.2% (116,580 square kilometers) permanently supports crops and 525,800 square kilometers are irrigated. The land is divided into approximately 200 million households, with an average land allocation of just 0.65hectares (1.6 acres).'s limited space for farming has been a problem throughout its history, leading to chronic food shortage. While the production efficiency of farmland has grown over time, efforts to expand to the west and the north have held limited success, as such land is generally colder and drier than traditional farmlands to the east. Since the 1950s, farm space has also been pressured by the increasing land needs of industry and cities.

Such increases in the sizes of cities, such as the administrative district of Beijing's increase from 4,822 km² in 1956 to 16,808 km² in 1958, has led to the increased adoption of peri-urban agriculture. Such «suburban agriculture» led to more than 70% of non-staple food in Beijing, mainly consisting of vegetables and milk, to be produced by the city itself in the 1960s and 1970s. Recently, with relative food security in China, periurban agriculture has led to improvements in the quality of the food available, as opposed to quantity. One of the more recent experiments in urban agriculture is the Modern Agricultural Science Demonstration Park in Xiaotangshan.

Food crops

About 75% of China's cultivated area is used for food crops. Rice is China's most important crop, raised on about 25% of the cultivated area. The majority of rice is grown south of the Huai River, in the Yangtze valley, the Zhu Jiang delta, and in Yunnan, Guizhou, and Sichuan provinces.is the second most-prevalent grain crop, grown in most parts of the country but especially on the North China Plain, the Wei and Fen River valleys on the Loess plateau, and in Jiangsu, Hubei, and Sichuan provinces. Corn andmillet are grown in north and northeast China, and oat is important in Inner Mongolia and Tibet.crops include sweet potatoes in the south, white potatoes in the north, and various other fruits and vegetables. Tropical fruits are grown on Hainan Island, apples and pears are grown in northern Liaoning and Shandong.seeds are important in Chinese agriculture, supplying edible and industrial oils and forming a large share of agricultural exports. In North and Northeast China, Chinese soybeans are grown to be used in tofu and cooking oil. China is also a leading producer of peanuts, which are grown in Shandong and Hebei provinces. Other oilseed crops are sesame seeds, sunflower seeds, rapeseed, and the seeds of the tung tree.is a major cash crop in southern China, with production scattered along and south of the Yangtze River valley. Mandarins are the most popular citrus in China, with roughly double the output of oranges.important food crops for China include green and jasmine teas (popular among the Chinese population), black tea (as an export), sugarcane, and sugar beets. Tea plantations are located on the hillsides of the middle Yangtze Valley and in the southeast provinces of Fujian and Zhejiang. Sugarcane is grown in Guangdong and Sichuan, while sugar beets are raised in Heilongjiang province and on irrigated land in Inner Mongolia. Lotus is widely cultivated throughout southern China.is the leading producer of cotton, which is grown throughout, but especially in the areas of the North China Plain, the Yangtze river delta, the middle Yangtze valley, and the Xinjiang Uygur Autonomous Region. Other fiber crops include ramie, flax, jute, and hemp. Sericulture, the practice of silkworm raising, is also practiced in central and southern China.

Livestock

China has a large livestock population, with pigs and fowl being the most common. Chinas pig population and pork production mainly lies along Yangtze River. In 2011, Sichuan province had 51 million pigs (11% of Chinas total supply). In rural western China, sheep, goats, and camels are raised by nomadic herders. In Tibet, yaks are raised as a source of food, fuel, and shelter. Cattle, water buffalo, horses, mules, and donkeys are also raised in China, and dairy has recently been encouraged by the government, even though approximately 92.3% of the adult population is affected by some level of lactose intolerance.demand for gourmet foods grows, production of more exotic meats increases as well. Based on a survey data from 684 Chinese turtle farms (less than half of the all 1,499 officially registered turtle farms in the year of the survey, 2002), they sold over 92,000 tons of turtles (around 128 million animals) per year; this is thought to correspond to the industrial total of over 300 million turtles per year.incomes and increased demand for meat, especially pork, has resulted in demand for improved breeds of livestock, breeding stock imported particularly from the United States. Some of these breeds are adapted to factory farming.

Fishing

China accounts for about one-third of the total fish production of the world. Aquaculture, the breeding of fish in ponds and lakes, accounts for more than half of its output. The principal aquaculture-producing regions are close to urban markets in middle and lower Yangtze valley and the Zhu Jiang delta.

Productionits first fifty years, the People's Republic of China greatly increased agricultural production through organizational and technological improvements.

Crop1949 Output (tons)1978 Output (tons)2009 Output (tons)Grain113,180,000304,770,000508,390,000Cotton444,0002,167,0003,831,000Oil-bearing crops2,564,0005,218,00026,012,000Sugarcane2,642,00021,116,00074,700,000Sugarbeet191,0002,702,0008,640,000Flue-cured tobacco43,0001,052,0002,185,000Tea41,000268,000676,000Fruit1,200,0006,570,00062,376,000Meat2,200,0008,563,00059,609,000Aquatic products450,0004,660,00041,220,000, since 2000 the depletion of China's main aquifers has led to an overall decrease in grain production, turning China into a net importer. The trend of Chinese dependence on imported food is expected to accelerate as the water shortage worsens. However desalination plants find few customers because it is still cheaper to over-utilize rivers, lakes and aquifers, even as these are depleted., China is both the world's largest producer and consumer of agricultural products. However, the researcher Lin Erda has stated a projected fall of possibly 14% to 23% by 2050 due to water shortages and other impacts by climate change; China has increased the budget for agriculture by 20% in 2009, and continues to support energy efficiency measures, renewable technology, and other efforts with investments, such as the over 30% green component of the $586bn fiscal stimulus package announced in November 2008.

Inefficiencies in the agricultural market

Despite rapid growth in output, the Chinese agricultural sector still faces several challenges. Farmers in several provinces, such as Shandong, Zhejiang, Anhui, Liaoning, and Xinjiang often have a hard time selling their agricultural products to customers due to a lack of information about current market conditions.the producing farmer in the countryside and the end-consumer in the cities there is a chain of intermediaries. Because of a lack of information flows through them, farmers find it difficult to foresee the demand for different types of fruits and vegetables. In order to maximize their profits they therefore opt to produce those fruits and vegetables that created the highest revenues for farmers in the region in the previous year. If, however, most farmers do so, this causes the supply of fresh products to fluctuate substantially year on year. Relatively scarce products in one year are produced in excess the following year because of expected higher profit margins. The resulting excess supply, however, forces farmers to reduce their prices and sell at a loss. The scarce, revenue creating products of one year become the over-abundant, loss-making products in the following, and vice-versa.is further impaired in the transportation of agricultural products from the farms to the actual markets. According to figures from the Commerce Department up to 25% of fruits and vegetables rot before being sold, compared to around 5% in a typical developed country. As intermediaries cannot sell these rotten fruits they pay farmers less than they would if able to sell all or most of the fruits and vegetables. This reduces farmers revenues although the problem is caused by post-production inefficiencies, which they are not themselves aware of during price negotiations with intermediaries.information and transportation problems highlight inefficiencies in the market mechanisms between farmers and end consumers, impeding farmers from taking advantage of the fast development of the rest of the Chinese economy. The resulting small profit margin does not allow them to invest in the necessary agricultural inputs (machinery, seeds, fertilizers, etc.) to raise productivity and improve their standards of living, from which the whole of the Chinese economy would benefit. This in turn increases the exodus of people from the countryside to the cities, which already face urbanization issues. [6]

2.3 Inefficiencies in the agricultural market

Despite rapid growth in output, the Chinese agricultural sector still faces several challenges. Farmers in several provinces, such as Shandong, Zhejiang, Anhui, Liaoning, and Xinjiang often have a hard time selling their agricultural products to customers due to a lack of information about current market conditions.the producing farmer in the countryside and the end-consumer in the cities there is a chain of intermediaries. Because of a lack of information flows through them, farmers find it difficult to foresee the demand for different types of fruits and vegetables. In order to maximize their profits they therefore opt to produce those fruits and vegetables that created the highest revenues for farmers in the region in the previous year. If, however, most farmers do so, this causes the supply of fresh products to fluctuate substantially year on year. Relatively scarce products in one year are produced in excess the following year because of expected higher profit margins. The resulting excess supply, however, forces farmers to reduce their prices and sell at a loss. The scarce, revenue creating products of one year become the over-abundant, loss-making products in the following, and vice-versa.is further impaired in the transportation of agricultural products from the farms to the actual markets. According to figures from the Commerce Department up to 25% of fruits and vegetables rot before being sold, compared to around 5% in a typical developed country. As intermediaries cannot sell these rotten fruits they pay farmers less than they would if able to sell all or most of the fruits and vegetables. This reduces farmers revenues although the problem is caused by post-production inefficiencies, which they are not themselves aware of during price negotiations with intermediaries.information and transportation problems highlight inefficiencies in the market mechanisms between farmers and end consumers, impeding farmers from taking advantage of the fast development of the rest of the Chinese economy. The resulting small profit margin does not allow them to invest in the necessary agricultural inputs (machinery, seeds, fertilizers, etc.) to raise productivity and improve their standards of living, from which the whole of the Chinese economy would benefit. This in turn increases the exodus of people from the countryside to the cities, which already face urbanization issues. [6]

3. Food safety in China and Chinese government regulation of economic

3.1 Food safety in China

is a growing concern relating to agriculture. China's principal crops are rice, corn, wheat, soybeans, and cotton in addition to apples and other fruits and vegetables. China's principal livestock products include pork, beef, dairy, and eggs. The Chinese government oversees agricultural production as well as the manufacture of food packaging, containers, chemical additives, drug production, and business regulation. In recent years, the Chinese government attempted to consolidate food safety regulation with the creation of the State Food and Drug Administration of China in 2003; officials have also been under increasing public and international pressure to solve food safety problems. Chinese Vice Premier Li Keqiang said, «Food is essential, and safety should be a top priority. Food safety is closely related to people's lives and health and economic development and social harmony,» at a State Council meeting in Beijing.

The growing unrest over food safety in China reached a climax in early 2007, shortly after circulation to the State Council of an Asian Development Bank policy note based on a technical assistance project in collaboration with the State Food and Drug Administration and the World Health Organization. The note and a subsequent report applauded increased efforts by the Chinese government but noted remaining gaps, calling in particular for urgent reforms to strengthen and streamline inter-agency coordination and enact an overarching «basic food law». The State Food and Drug Administration of China also published a survey in early 2007 where 65% of the respondents expressed concern about food safety. Shortly afterwards, Lu Jianzhong, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), and China's Vice Premier, Wu Yi, issued statements of apology and promised to create a food safety monitoring system. [7]'s food regulations are complex, its monitoring system can be unresponsive, and the government departments that oversee and enforce policies have overlapping and often ambiguous duties. There are around ten national government departments that share the responsibility to ensure food safety. There are also numerous provincial and local agencies that monitor local food production and sales. The food and drug laws themselves have been created «in an ad hoc way without the benefit of a basic food law,» as Henk Bekedam of the World Health Organization told the Wall Street Journal (9 April 2007, B1).The last major revision of the food and drug laws was made in 1995 when the Food Hygiene Law of the People's Republic of China established general food safety principles. Both the State Council and the departments under the State Council can issue regulations and directives concerning food.in China's food production system are generating an awareness of food safety problems. China's agricultural system is composed mostly of small land-holding farmers and subsistence agriculture. China, however, has less arable land than other nations and farmers intensively use fertilizer and pesticides to maintain high food production. Food is sold in both open air markets and urban supermarkets, and by the late 1990s, China's farms were adapting to more specialized crop production as the local markets become more connected to the national and international markets. However, local authorities largely control food regulation enforcement unless the central government steps in. As urban consumers' incomes increase, the demand for quality food goods, safer production, and processed foods also increases, and urban residents and supermarkets attract more national and media attention to food problems.July 10, 2007, Zheng Xiaoyu, the former head of State Food And Drug Administration, was executed by lethal injection for taking bribes from various firms in exchange for state licenses related to product safety. [8]

3.2 Government departments

Approximately ten government departments and ministries under the State Council monitor food safety in China. These include the Ministry of Health, the State Food and Drug Administration, the State Drug Administration, and the Ministry of Agriculture, the State Administration for Industry and Commerce, the General Administration of Quality Supervision, Inspection, and Quarantine, the Ministry of Commerce, the Ministry of Science and Technology, and the National Institute of Nutrition and Food Safety.single agency is responsible for all food safety regulations and enforcement in China, and the departments' duties often overlap. There are also local and regional food safety agencies, but there is no clear hierarchy of agencies at the local or national levels. In response to complexity of numerous agencies monitoring and regulating food safety, the National People's Congress established the State Food and Drug Administration in 2003. The State Food and Drug Administration was supposed to oversee the all aspects of food safety regulations and unify food safety controls. However, the State Food and Drug Administration has not become the main governing department as the government had intended, and the other national agencies have continued to regulate and monitor food safety. This unclear division of duties has created conflict and confusion when citizens have sought to complain or a when major crisis needed to be resolved.National People's Congress (NPC) is primarily responsible for implementing food safety laws. The Standing Committee of the National People's Congress and the State Council also regulate food safety issues.[16] The Food Hygiene Law of 1995, passed by the NPC, amended the 1982 Food Hygiene Law and regulates most aspects of food safety.

Ministry of Health

Established in 1949, the Ministry of Health encompasses general health policies, health law enforcement, children's and seniors' health policies, and diseases and emergencies. It provides experts to investigate poisoning cases, enforces food safety and hygiene inspections, and can order local health departments to conduct investigations into food quality violations. The Ministry of Health also oversees the Institute of Food Safety Control and Inspection, an agency that has studied and identified unsafe foods and has helped local health authorities form policies and training programs to combat unsafe food production and handling practices. The Chartered Institute of Environmental Health has called the Ministry of Health «the most important governing body of food safety».general duties of the Ministry of Health are:

1.To draft health laws, regulations and policies; to propose health development programs and strategic goals; to formulate technical protocols, health standards and to supervise their enforcement.

2.To propose regional health programs, to conduct overall planning and to coordinate the nationwide allocation of health resources.

.To formulate working programs and policies on rural health, as well as maternal and child health care; to guide the implementation of primary health programs and technical protocols on maternal and child health care.

.To implement the policy of «Prevention First» and to conduct health education to the general public. To develop programs on the prevention and treatment of diseases that endanger the health of the population; to organize the comprehensive prevention and treatment of major diseases; to publicize the quarantine list of communicable diseases and the surveillance list of infectious diseases.

.To guide the reform of medical institutions; to formulate criteria for medical practitioners, medical quality and service delivery, and to supervise their enforcement.

.To regulate by law blood collection at blood or plasma centers and the quality of blood for clinical transfusion.

.To draft key national development programs on medical science, technology and education; to organize key national medical and health researches; to guide the dissemination and application of medical achievements. To administer the affiliated institutions.

8.To supervise communicable disease prevention and treatment, food health, occupational, environmental, radiological, and school health. To formulate food and cosmetics quality control protocols and be responsible for their accreditation.

.To formulate national development programs on health professionals and professional ethics protocols for health personnel; to draft and implement staffing standards for health institutions and accreditation criteria for health personnel.

.To organize and guide multi-lateral and bilateral governmental and non-governmental health and medical cooperation and exchanges and medical aid to other countries, to participate in major health events initiated by international organizations. To coordinate medical and health exchanges and collaborations between China and the World Health Organization and other international organizations.

.To implement the policy of developing both western medicine and traditional Chinese medicine.

.To do the routine work of the National Patriotic Health Campaign Committee.

.To coordinate and dispatch technical health capacity nationwide, to assist local governments and relevant agencies in emergency response to major epidemics and diseases and in epidemic and disease prevention and control.

.To undertake other work as designated by the State Council.

State Food and Drug Administration

The State Food and Drug Administration of China (SFDA) was founded in 2003 as part of China's efforts to improve food safety. The SFDA is responsible for overseeing and coordinating the other health, food, and drug agencies. It is «directly under the State Council, which is in charge of comprehensive supervision on the safety management of food, health food and cosmetics and is the competent authority of drug regulation.» The SFDA encompasses ten departments that regulate and oversee different aspects of food and drug law. These include the General Office Department of Planning and Finance, the Department of Policy and Regulations, the Department of Food Safety Coordination, the Department of Food Safety Supervision, the Department of Drug Registration, the Department of Medical Devices, the Department of Drug Safety and Inspection, the Department of Drug Market Compliance, the Department of Personnel and Education, and the Department of International Cooperation.

The general duties of the SFDA are:

1.To draft health laws, regulations and policies; to propose health development programs and strategic goals; to formulate technical protocols, health standards and to supervise their enforcement.

2.To propose regional health programs, to conduct overall planning and to coordinate the nationwide allocation of health resources.

.To formulate working programs and policies on rural health, as well as maternal and child health care; to guide the implementation of primary health programs and technical protocols on maternal and child health care.

.To implement the policy of «Prevention First» and to conduct health education to the general public. To develop programs on the prevention and treatment of diseases that endanger the health of the population; to organize the comprehensive prevention and treatment of major diseases; to publicize the quarantine list of communicable diseases and the surveillance list of infectious diseases.

.To guide the reform of medical institutions; to formulate criteria for medical practitioners, medical quality and service delivery, and to supervise their enforcement.

.To regulate by law blood collection at blood or plasma centers and the quality of blood for clinical transfusion.

.To draft key national development programs on medical science, technology and education; to organize key national medical and health researches; to guide the dissemination and application of medical achievements. To administer the affiliated institutions.

8.To supervise communicable disease prevention and treatment, food health, occupational, environmental, radiological, and school health. To formulate food and cosmetics quality control protocols and be responsible for their accreditation.

.To formulate national development programs on health professionals and professional ethics protocols for health personnel; to draft and implement staffing standards for health institutions and accreditation criteria for health personnel.

.To organize and guide multi-lateral and bilateral governmental and non-governmental health and medical cooperation and exchanges and medical aid to other countries, to participate in major health events initiated by international organizations. To coordinate medical and health exchanges and collaborations between China and the World Health Organization and other international organizations.

.To implement the policy of developing both western medicine and traditional Chinese medicine.

.To do the routine work of the National Patriotic Health Campaign Committee.

.To coordinate and dispatch technical health capacity nationwide, to assist local governments and relevant agencies in emergency response to major epidemics and diseases and in epidemic and disease prevention and control.

.To undertake other work as designated by the State Council.

State Drug Administration

The State Drug Administration (SDA) was established in 1998. The SDA was intended to consolidate the agencies that had previously managed drug policy, the State Pharmaceutical Administration of China (SPAC) and the Bureau of Drug Policy Administration (BDPA). The SDA operates alongside the State Administration of Traditional Chinese Medicine (SATCM), an agency that oversees traditional medicines. In 2003, the SDA was merged with the State Food and Drug Administration.

Ministry of Agriculture

The Ministry of Agriculture handles farm-level food safety regulations and policies. One of its most important duties is to regulate and enforce the use of chemicals, pollutants, and pesticides on farms. The Institute for the Control of Agrochemicals (CAMA) is responsible for pesticide testing, research, and use regulations, and operates under the Ministry of Agriculture. The Ministry of Agriculture is also responsible for animal health, and has handled the bird flu (avian influenza) outbreaks and the mad cow disease prevention measures. The Ministry of Agriculture works with local governments, operates disease research laboratories, and administers vaccinations and emergency response measures.

Ministry of Commerce

The Ministry of Commerce handles the regulations governing food trade, foreign investments, food distribution, and domestic and international market activities.

The General Administration of Quality Supervision, Inspection, and Quarantine.

The General Administration of Quality Supervision, Inspection, and Quarantine (GAQSIQ) oversees food imports and exports and quarantines at the national and local levels. It functions as a law enforcement agency. There are 19 departments under the GAQSIQ, and the ones that handle food safety issue are the Department of Supervision on Animal and Plant Quarantine, the Bureau of Import and Export Food Safety, and the Department of Supervision of Food Production. The GAQSIQ was made a Ministry in 2001.

The State Administration for Industry and Commerce

The State Administration of Industry and Commerce (SAIC) regulates market activity and is directly under the State Council. Under the SAIC, the Consumer Protection Bureau enforces standards for market products and investigates fake products, the Enterprise Registration Bureau issues business licenses, the Department of Personnel and Education oversees local SAIC departments, and the Department of Advertising Regulation works against fake or misleading advertising. [9]

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The list of literature

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