China's rural population will have to fall by tens - and possibly hundreds - of millions in coming decades if farmers' incomes are to rise to match living standards in the mainland's increasingly prosperous cities, according to a report by the Operation for Economic Co-operation and Development (OECD).
The first comprehensive study on Chinese agriculture by the Paris-based body says agriculture employs 40 per cent of China's workers, but produces only 15 per cent of economic output, a gap that can narrow only if many farmers are employed more productively in other sectors.
"The transfer of huge numbers of workers from low productivity agriculture to higher productivity manufacturing is one of the basic ingredients of China's economic growth," the report says.
Of China's 248 million rural households, 200 million farm on plots of land of around 0.65 of a hectare. While output is high per unit of land, it is low relative to the number of workers employed.
Between 70 million and 100 million more rural workers will leave agriculture between 2000 and 2010 on current trends, but the capacity of businesses in smaller towns to absorb them is doubtful, raising the pressure on China's larger cities to take them in.
The OECD says the Beijing government should liberalise restrictions on the rural population's mobility to help manage this outflow. It also says Beijing should clarify farmers' property rights over their land, to allow them to use it more flexibly. "Land has been extremely fragmented. [ Farmers] need to have incentives to release it to other people for agriculture," said Andrzej Kwiecinski, the principal author of the report. China would benefit from relaxing its policy of self-sufficiency in food, which is now defined internally to mean providing about 95 per cent of its grains and feedstock locally, the report adds.
Mr Kwiecinski said the government was already redefining self-sufficiency to cover just rice, rather than grains, oilseeds and the like. "They are differentiating between what is consumed by humans and what is consumed by livestock," he said.
Concern over this issue was heightened by the fact that China recorded a deficit in agricultural trade in 2004, the first for well over a decade. However, the OECD says this should not deter the leadership from further liberalising the sector.
Hu Jintao, China's president, has already removed a swathe of agricultural taxes and committed to spending more on education and health in the countryside.
China's policy support to agriculture was 8 per cent of gross farm receipts in 2003, below the OECD average of 31 per cent, the OECD said. Eliminating grains subsidies could give more access to multinational agribusinesses, but could reduce the burden on China's already strained water resources, said Ken Ash, deputy director of the OECD's food, agriculture and fisheries division.
