Originally published in China Water Risk, Hong Kong here

Written by Sourajit Aiyer

Emerging markets could learn from China’s initiatives to revive their farm sectors despite the challenges posed by environmental degradation

Is climate change hurting Chinese agriculture? Apparently it is. China’s Ministry of Science and Technology’s report on climate change estimated that the country’s average temperature rose by approximately 0.9-1.5 °C from 1909 to 2011, higher than the global average. A 2016 paper, titled Climate change, food, water and population health in China, by researchers at Queensland University had estimated that the average temperature across China rose by 0.5-0.8 °C during the 20th century and the frequency/intensity of extreme heat in east China went up in the new millennium. It is clear that climate change is fast leading to droughts in north and north-east China and floods in south-east China. All this impacts agriculture, as shifts in temperatures and precipitation change the climate patterns, water availability and soil quality, which in turn, affect crop yield, availability of arable land, price of clean water, incidences of plant diseases apart from testing the vulnerability of the farm communities. This is an observation consistent across most emerging markets, where manufacturing and services preceded as modern economic growth-drivers. Climate shocks are only adding to their woes.

Focus on food security, rural development and tax incentives:

China has responded to these challenges. Its No.1 Central Document (on policy) has highlighted agriculture for some years. The country has focussed on agro-technology innovations and research and development (R&D), market-oriented reforms for farm goods, increasing agricultural incomes, balancing the urban-rural development, and so on, with the ultimate aim being food security and rural development. This includes intensifying the support mechanisms for agriculture, creating an incentive structure to earn a positive PSE (producer support estimate) instead of pushing a MSP (minimum support price) structure, pushing rural land reforms, accelerating the rural financial industry, improving rural governance and enabling the direct payment of subsidies to farmers in a single scheme as per land-holding, not as per crops, to promote efficiencies and rural economics. It is also experimenting with the reduction in fertiliser use, climate change adaptation, biotechnology and so on. Tax incentives in China’s agri-business were launched to level the playing field for domestic and foreign enterprises. This exempts companies from paying tax on profits earned via the planting of grains, vegetables, fruits, medical herbs, and so on, afforestation, new varieties of farm products, livestock and agriculture services like irrigation, preliminary processing of agro-products, agro-technologies and servicing agro-machineries. It is also offering VAT exemptions for investments in crop production, forestry, animal husbandry and aquaculture.

Bringing sustainability into agriculture:

Since China, like most nations, is facing constraints in terms of land and water owing to the impact of climate change, its policies include collective forest rights, constructing water conservation infrastructure, promoting sustainability in agriculture and setting up a rural social security system. It is now importing cotton (from Africa), soya (from Latin America) and timber (from Russia) which are typically water-hungry and soil depleting crops. Reducing the domestic production in these would reduce the environmental impact on China’s natural resources. Further, crop switching is emerging as a focus of agriculture research in China.

Scientific research suggests climate change-induced soil quality issues and water scarcity in southern China could impact the productivity of grains like rice and wheat vis-à-vis the northern parts. One way to mitigate this would be through crop-switching, complementing it with irrigation to reduce the dependence on rain-fed land. Of course, these policies must be customised as per local-area conditions. China’s 13th Five-Year Plan included targets like a 23 per cent, 15 per cent and 18 per cent reduction in water consumption, energy consumption and CO2 emissions by 2020, thus providing visible milestones to aspire for. The World Bank-funded study, China’s National Technology Needs Assessment for Climate Change Adaptation, includes breeding of stress-tolerant varieties, precision agriculture technology and water-saving technologies as priority areas, which would also be useful from the perspective of sustainability and climate. The Chinese policy on this front should benefit through its increasing cooperation with Israel.

A case for soft diplomacy:

In the end, China has maintained a self-sufficiency policy when it comes to grains, intending to produce at least 95 per cent of its demand domestically. The immediate impact of climate change on China’s fertile south and east regions may inevitably impact domestic farm production to some extent. However, the long-term outcomes of the policies and initiatives that China is working on should be positive. Most importantly, its experiences with these initiatives could offer guidance for other developing countries, thus providing China a ready agenda to pursue soft diplomacy. Other emerging markets, who otherwise concentrated on manufacturing or services as their modern economic growth-drivers, could also learn from China’s initiatives to revive their farm sectors.

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