Shift Away from Grain Production Worries Some in China

Last June, Li Jiayu, the manager of a small village of about 3,000 people in China’s richest farming area, gazed across a sea of rice paddies and predicted that they would gradually vanish.

“Each year from now on, 10% of the land will be switched to other uses, like growing fruit and flowers and breeding fish,” Li said proudly. The peasants would earn about five times more from these endeavors, he noted, than they would from growing rice or wheat.

Throughout rural China last year, it appears, millions of peasants and rural officials were making similar choices, for the area devoted to growing grain in China dropped by about 4%. As a result, for the first time in the past five years, China’s grain harvest plummeted to about 380 million tons last year from 407 million tons in 1984.

For sheer volume, China is by far the world’s leading grain producer. Yet because China is also required to feed 1 billion people, roughly a quarter of the world’s population, with only 7% of the world’s arable land, grain production has always been a major concern here. In recent years, China has imported considerable amounts of grain, particularly wheat, to help supplement local production.

Half-Decade of Increases

The bumper harvest of 1984 was the largest ever collected by China or any other nation. It capped a half-decade of steady increases in grain output since the regime of Chinese leader Deng Xiaoping dismantled rural communes and began permitting peasants to grow grain on their own family plots.

The big 1984 crop suggested that Chinese leaders need not worry so much about feeding the population and that, in fact, China might soon turn into one of the world’s grain-exporting nations.

A year later, with China’s grain production falling, both of these assumptions are being called into question. Leaders of the Chinese Communist Party are debating how best to revive the “enthusiasm” of the peasants to grow grain. And foreign diplomats are once again viewing China over the next few years as potentially a major purchaser, rather than a seller, of grain on the world market.

Although virtually all analysts agree that the decline in grain output has some important political and economic implications for China, there is considerable disagreement over just how serious the drop is and over the reasons for it.

‘Huge Amounts’ in Storage

Experts say that, because of the big harvests of the past few years, China has more than enough grain reserves to feed the nation. “I don’t think it (the 1985 decline) is too serious. According to Peking, they have huge amounts of grain in storage,” said University of Washington Professor Nicholas R. Lardy, an American specialist on Chinese agriculture.

Indeed, some Chinese officials maintain that the decline may even be beneficial. “Some areas of China had problems in selling their grain last year,” said Lo Wenping, an agronomist for the Chinese Ministry of Agriculture. “So in a sense, this is a good thing, not a bad thing.”

Others say the drop in grain production should not be taken so lightly.

“It’s a pretty big drop-off,” said one Western diplomat who follows agricultural policy here. “I don’t think there will be major ramifications, but there could be a pinch in the amount of grain fed to livestock this year. Remember, even if there are reserves of grain in China, transportation is poor, and there’s still no guarantee those reserves will be in the places where they’re needed at the time they are needed.”

Within the Chinese Communist Party, the lower grain harvest provides a handy political target for those more tradition-minded leaders skeptical about the direction and pace of Deng’s market-oriented economic reforms.

At a special Communist Party conference last September, Chen Yun, a member of the standing committee of the party Politburo, admonished party leaders not to underestimate the unending job of feeding China’s enormous population. “We must continue to pay attention to grain production,” Chen said.

Now that the grain figures for 1985 are coming in, Deng’s supporters are beginning to heed Chen’s warning. Last month, Wan Li, a vice premier and Politburo member, while noting that the year’s grain production was still the third-largest in Chinese history, told rural officials: “We should make a concrete analysis of this year’s lower grain output and adopt effective measures to solve existing conspicuous problems.”

What happened to produce the sudden change of direction in the Chinese countryside?

Bad Weather Blamed

Some Chinese officials insist the grain problems were largely the result of bad weather. A series of unusual typhoons in northeast China flooded wheat fields there this summer, and some of China’s main rice-growing areas in the south were hit by drought.

Early this month, the newspaper China Daily, which is published by the government, said the “minor drop” in grain production was “mainly due to adverse weather.”

Yet most Chinese officials admit that bad weather alone cannot explain the reduction in the size of the grain crop. Li Jinghua, a spokesman for the Ministry of Agriculture, acknowledged at a news briefing this month that a key factor was the reduction in acreage devoted to grain in China last year.

Foreign analysts here estimate that there was a 4% reduction in the land devoted to growing grain throughout China in 1985. For rice, which makes up nearly half of China’s total grain production, the decline was slightly higher, about 5%.

Shift to Other Uses

“Our reading is that the grain reduction came more from this shift in acreage than from natural disasters,” said a Peking-based diplomat from a grain-exporting nation.

The conversion of rice paddies and wheat fields to other uses stemmed from government policies that have given increasing economic freedom to Chinese peasants--and that, at the same time, have created strong financial incentives for peasants to cultivate cash crops or work in rural industries instead of growing grain.

Last summer, Li Jiayo, 50, who directs economic affairs for Zhuqiao township just outside the city of Chengdu, explained the economics in simple terms.

“For each mu (a Chinese measure that is one-sixth of an acre) of land on which we grow rice, we earn 300 yuan (about $94),” Li said. “If we switch the land to fruit or flowers, we can earn 1,500 yuan (about $470); at the same time, we liberate more workers for our industry and other sideline occupations.”

In the era of Chairman Mao Tse-tung, Zhuqiao township, like all other rural localities in China, was organized into a people’s commune. For more than 20 years, Li recalled, its peasants were forbidden to work private plots or engage in any sideline businesses. Local Communist Party officials determined exactly what and how much grain should be planted on collectivized fields.

Fixed Quotas

In the first stage of the rural reforms initiated under Deng’s leadership six years ago, the state maintained ownership of the land but permitted families to operate private plots. Peasants were required to grow fixed quotas of grain each year but, once these quotas were met, they could then sell whatever additional grain they grew to the state at fixed, relatively high prices. It was these changes that brought about a half-decade of steady increases in China’s grain production.

In 1985, the rural reform program entered its second phase. The Chinese regime initiated a series of new measures aimed at reducing the state’s role in grain production and shifting to a more market-oriented agricultural system.

In effect, the government abolished the decades-old state monopoly on grain distribution. Instead of setting quotas and fixed prices for grain sales to the state, officials announced that peasants should negotiate contracts with state purchasing agents specifying how much grain would be delivered and at what price. Furthermore, the state cut back sharply on the total amount of grain it would buy and told peasants that they should sell their surplus grain on the free market.

Freed from the obligation to grow rice or wheat for the state, and uncertain of how the new pricing system would work out, Chinese peasants responded by devoting less acreage to grain and more to other crops.

Chinese agricultural officials freely acknowledged last year that they expected some difficulties in switching to the new system. “Some problems may occur,” Jing Shuanling, deputy director of Chengdu’s agricultural commission, said in an interview last spring. “We practiced the mandatory system for so many years. It may be that peasants will switch land now to more profitable crops or uses.”

Economists note that the reason it is so much more profitable for peasants to grow fruit or vegetables than grain these days is that the retail prices of rice and bread for China’s 200 million city dwellers are still kept by the state at artificially low levels.

Lifted Price Controls

Last year, the government lifted price controls on meat, vegetables and other non-staple food items in Chinese cities. The result was a sharp increase in consumer prices for these items--and a political backlash against the regime, which was blamed for allowing this inflation.

At the same time, authorities kept the lid on retail prices for grain in the cities. “They are either unwilling or unable to do anything about the consumer prices of grain,” a foreign analyst said.

Some experts also believe that, beyond the problems created by the new pricing system, China faces long-term difficulties in increasing grain production because it is not investing enough money in agriculture these days.

“They’re putting half of what they used to into irrigation facilities,” the University of Washington’s Lardy said. “And even private investment is very modest. Farmers are putting three times as much money into new housing as into investment for farming.”

Lowering the Cost

For the moment, the regime is trying to figure out how best to persuade peasants that they should keep on growing grain instead of shifting land to other uses.

One of the measures being considered is to lower the peasants’ costs for producing grain. This year, for example, the Ministry of Agriculture is planning to provide farmers with fertilizer at low, state-fixed prices when they sign contracts agreeing to grow rice or wheat.

Another possible method is to use some of the profits from rural industries to subsidize grain production. Early this month, Chinese Premier Zhao Ziyang urged all rural businesses to provide greater support for farming.

Some localities were already beginning to experiment with this approach last year. In Sichuan’s Zhuqiao township, peasants who had once worked in rice paddies could be seen putting the finishing touches on Swan brand parkas in a small factory.

“Some of the income (from the factory) helps support the peasants who are still growing rice,” Li said.