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Korean agricultural cooperative development

Kyoung-soo Hong
Assistant General Manager, International Cooperation Office
National Agricultural Cooperative Federation, Seoul, Republic of Korea

Agricultural Cooperatives in the Republic of Korea

As stated in the Agricultural Cooperative Law, the objective of Korean agricultural cooperatives is to increase agricultural productivity and enhance the socio-economic status of member farmers to achieve balanced national development. However, in the early 1960s, the realities of agrarian rural life were very harsh. Development efforts had to be efficiently organized with very limited resources. In order to optimize these resources, therefore, Republic of Korea chose a multipurpose cooperative system to meet the diversity of needs of farmers, most of who were living on small-scale farms of only about 0.9 hectares (ha) on average. During this time, the National Agricultural Cooperative Federation (NACF), the umbrella organization of farm cooperatives, was launched and merged with the Agricultural Bank, which provided financial support to the various programmes.

There are now two million member farmers in the 1 360 member cooperatives in the Republic of Korea, comprising almost all of the Korean farm households. In serving members and acting as the agricultural and rural development agency for the country, agricultural cooperatives provide diversified business services and activities. These include cooperative marketing, provision of farm inputs and consumer goods, credit and banking, insurance, warehousing, transportation, extension and other social and cultural activities.

The NACF now operates more than 800 bank branches and over 600 business centres for marketing and processing as well as various subsidiary enterprises while managing institutions (e.g. training institutes, an agricultural cooperative college and the Farmers Newspaper). In banking alone, the NACF network holds the largest amount of deposits in the Republic of Korea totaling US$160 billion, including mutual credit for member cooperatives which would be ranked top among domestic banks, including all commercial banks. In marketing, more than 40 percent of total farm production volume is handled by agricultural cooperatives.

Our achievement over the past 43 years has been remarkable and the institution has now become a model for agricultural cooperative movements around the world. However, as is true for the international cooperative movement today, we must meet the challenges that confront our member farmers internally as well as those presented by the overall agricultural economy in order to make future progress. Particularly, ongoing negotiations following the World Trade Organization Doha Development Agenda (WTO-DDA) will present more painful challenges to Korean agriculture, which had already been hit severely by the Uruguay Round ten years ago.

It is important for agricultural cooperatives in the Republic of Korea to become more competitive in this rapidly changing globalized economy. We should meet the challenges of a changing environment - e.g. in agricultural structure, competitors, technological innovation and globalization - and work to devise a strategic plan to respond to these changes.

In this paper, I first discuss the development of Korean agricultural cooperatives. I then focus more on the emerging trends in the cooperative movement worldwide and the challenges that it must face. Some of them can be seen in your cooperative movement; others may still happen in the future. I hope this paper will help you understand better the situation of your own cooperative system and possibly contribute to making them stronger to meet imminent challenges.

The development of Korean agricultural cooperatives

Every country has its own organization and management system for cooperatives. The development stages of cooperatives differ from one another. This diversity can be traced to the environment of these organizations. Korean agricultural cooperatives formed and developed on the basis of small-scale farming. Meanwhile, the Korean agricultural cooperative system has been influenced by government policy and its political, economic and social surroundings.

Agricultural cooperatives are the most prevalent type of organization in the Republic of Korea. Therefore, their business and management systems have had a significant influence on other cooperatives. They also lay claim to large business volumes and organizational structure and thus contribute considerably to the rural and national economy.

The reason why the cooperative movement in the Republic of Korea is still led by agricultural cooperatives in this highly industrialized society can be understood by examining the historical, political and cultural background of the country.

After Korea’s independence from Japan in 1945, government policy allowed agricultural cooperatives to take over previously established facilities and organizations, including national credit cooperatives and agricultural associations. It became easy for Korean agricultural cooperatives to become the prominent organization in the cooperative movement in the country. In the 1960s, agricultural cooperatives implemented agricultural policy and were given substantial support from the Korean government, which made rapid cooperative development possible.

From a top-down to a bottom-top system

In the 1950s and 1960s when Korean agricultural cooperatives were established, Korean farmers generally did not have the will or the means to develop a cooperative system. At that time, rural communities were devastated and suffered from chronic food shortages. Most Korean people felt it was important to build up a government-led cooperative system to facilitate the recovery of the rural economy. Thus, the Korean agricultural cooperative system was established in a top-down fashion. First, the Agricultural Cooperative Law was enacted. The establishment of the national federation followed. Finally, county-level cooperatives were organized. Korean agricultural cooperatives constructed their business system in a short time by taking over previously established agricultural organizations such as the former Agricultural Bank.

Looking back on the development and experience of Korean agricultural cooperatives over the last 43 years, it is believed that this top-down organization had been the best choice for the early stages of the cooperatives. However, the top-down method could not always be justified because a democratic and autonomous agricultural cooperative system was also considered important. The year 1988 marked another milestone with the enactment of the new Agricultural Cooperative Law. This law introduced the direct election of presidents of regional cooperatives as well as the chairman of the federation. It also did away with the right of local governments to supervise regional cooperatives.

Multipurpose cooperatives

The Korean agricultural cooperative system is unique in its diversity of business and activities, which include banking, insurance, agricultural marketing and extension services. Furthermore, its banking business is similar to that of commercial banks in supporting financing for other businesses. Initially, a multipurpose system was adopted because extensive support for Korean farmers was essential. Korean farms were then small (i.e. under 1 ha farming, itself not specialized); therefore, Republic of Korea considered the Japanese case where small-scale farming was also dominant and used multipurpose cooperatives to achieve agricultural development.

This multipurpose character of Korean agricultural cooperatives is counted as another reason for their widespread success. In the 1970s, credit unions and consumers’ cooperatives were rare in rural communities. But Korean agricultural cooperatives eventually became involved in mutual credit and retail business, which made them an important part of the rural community.

Agency for government policy

It is natural for Korean agricultural cooperatives to have a close relationship with the government because the establishment of the cooperative system depended largely on government policy rather than on farmers’ voluntary will. Agricultural cooperatives have been involved in he implementation of agricultural policy for the government - e.g. supplying agricultural funds and farm supplies, stabilizing agricultural product prices, purchasing harvested rice and providing farming technology programmes. If profit-oriented private corporations had carried out these programmes, the farmers might have become victims of unfair business practices and monopolistic behaviour. The government also benefited since it could cut costs by using the cooperatives, which had direct contact with farmers, to implement various agricultural programmes.

Considering the current environment surrounding the country’s agriculture industry and rural communities, a close relationship between the government and agricultural cooperatives has gained importance once again. Globalization and market liberalization have increased the competition Korean farmers now face. In this scenario, government should expand its financial and institutional support for agricultural cooperatives to protect the domestic agricultural industry and rural communities. Korean agricultural cooperatives should actively support and implement agricultural policy to benefit member farmers.

World agricultural policy

Focus on multifunctionality and the environment

The main ideology of farming and agricultural policy today entails moving away from a production-oriented concept - which focuses on production volumes, profitability and producer income - to a wider concept that appreciates the need to improve the quality of food and farm products, promote the multifunctionality of agriculture and enhance the environmental role of agriculture. The European Union is trying to change its agricultural policy to integrate agriculture, environment and regionalism. It has been promoting the multifunctionality of agriculture through Agenda 2000 and subsequent agricultural reform. Responding to globalization, Japan introduced the "New Policy" in 1992, which aims to change the goals of domestic food and agricultural policy in light of consumer interests rather than just the interests of producers or farmers. In the United States of America, they also recognize that environmental protection, rural development and safe food supply are important policy objectives.

The introduction of direct payments

Direct payments have an important role as market involvement is minimized in state agricultural support policy. There seems to be strengthened tax adjustment crossing borders and increased restrictions on subsidy policies including domestic price support. The practice of providing direct payments represents the main farm support policy today; it aims to balance the national economy by publicly paying farmers for the various benefits the multifunctionality of agriculture provides. Large amounts of direct payments have been given to farmers even in developed countries in order to implement satisfactory environmental protection and control the negative affects agriculture may have on the ecosystem.

Partnerships and regionalism

The regional nature of planning and policy implementation in agriculture has drawn much attention. Partnerships among various groups including community members and policy-makers within a region are growing in number. The European Union’s LEADER, Japan’s direct payment to farmers in semi-mountainous areas and the United States of America’s rural promotion programme all place importance on understanding the unique characteristics of rural communities and collaborating among various groups. We can thus witness the changes in policy planning and implementation of rural development programmes from a top-down method initiated by government to a bottom-up approach led by rural people.

Emphasizing consumers and food safety

Establishment of policies that ensure food safety at all levels (i.e. production, marketing and consumption) now holds the highest priority as concerns about food safety increase - especially so after recent BSE outbreaks, overusage of antibiotics and evidence of chemical residues such as dioxins in food. Measures are being undertaken to ensure safety of food in all European Union member countries. The issue is increasingly gaining more attention in each country’s agricultural ministries as manifested by changes in labeling and in the roles and structures of government agencies responsible for food safety. In addition, the Codex Alimentarius Commission adopted the Hazard Analysis Critical Control Point (HACCP) and recommended member countries to implement the system.

Trends in the cooperative movement in the 21st Century

Challenges and opportunities in agricultural cooperative movement

The modern cooperative movement emerged from the Industrial Revolution. Human history showed us that we could build a sound economic society based on cooperative values. Cooperatives competed with corporations during the growth and development of a capitalist society but were different in their objective, concept and method.

Cooperatives are an effective way of promoting rural development in many developing countries. They contribute to enhancing the social and economic status of members, serve as a countervailing force against monopolies of corporations and increase the bargaining power of relatively weak members.

Cooperative management unfortunately shows some weaknesses relative to corporate management. Although cooperatives have many advantages, they experience difficulty in coping with a rapidly changing environment, which requires flexibility. The worsening situation caused by the economic crisis in Asia in 1997 and the opening of markets after the Uruguay Round in 1993 gave a fatal blow to many of the cooperatives. Many small cooperatives in Southeast Asia went bankrupt and member involvement deteriorated. The debt of farm households doubled during this tumultuous period, and the index of terms of trade for farmers decreased by 13 percent from 1995 to 2002. Members of our own organization, the NACF, experienced similar hardships.

On the other hand, globalization and free markets provided large multinational corporations good opportunities to expand their operations, as the whole world was busy emphasizing the importance of free trade and an open economic system.

Cooperatives need to overcome the new challenges: namely, an influx of multinational corporations and the inflow of their capital into domestic or local markets, where cooperatives work beyond their capacity. Considering the characteristics of cooperatives, which are usually organized and operated in a familiar rural community, expansion of local markets can make a big impact.

Since the end of the 20th century, the rapid development in technology, globalization and trade liberalization have been the driving forces behind the creation of a global village. This movement presents many threats to traditional cooperatives, a lesson we had learned in the Industrial Revolution 150 years ago. The question then is whether the global cooperative movement will kneel to this new revolution or take advantage of challenges to upgrade the cooperative movement in the 21^st century.

The answer to the question is quite obvious. I dare say that one of the most significant findings in modern civilization is the "cooperative identity", which states that: The cooperative is an organization operating a business through cooperation to benefit members and improve the value of life. A cooperative member is hence owner, controller, beneficiary as well as customer of the business. The value and principle of a cooperative varies depending on the present paradigm. The concept of cooperative identity however can be adopted into the cooperative movement of the 21^st century.

In spite of their theoretical strengths, globalization and trade liberalization have weak points as well. These movements have generated concentration of capital and resources through principles of unrestrained competition and survival of the fittest. With regard to business administration, cooperatives need to be adventurous enough to adopt management-improvement techniques of the business enterprise. Needless to say, broad strategic alliances among domestic or international cooperatives are essential in order to compete with multinational corporations and overcome regional limits.

Recent trends in cooperatives

1. Promoting utilization of the business

Members’ utilization of the cooperative business is both a right and an obligation included in cooperative law and articles. Membership can be revoked or limited if these regulations are not followed and if cooperatives place greater emphasis on member relations. With strict conditions on food safety, for example, only qualified farm products can be delivered Under the Aglian Produce Ltd, the potato cooperative of United Kingdom. The Sunkist cooperative is likewise intensifying requirements on quality. The New Generation Cooperative is associating stock with the right of shipment and making contracts with member farmers under certain conditions (e.g. the obligation of shipment, quality requirements and financial settlement and sanction measures). Therefore, the emphasis is on moving from "equity" to "equality".

The "free rider" problem is also being overcome. New businesses have been introduced that allow differential application of prices and costs according to utilization in contrast to traditional practices (i.e. wherein every member is entitled to equal prices and equal costs). Accordingly, the relationship between the cooperative and its members is developing into one that is increasingly "business-oriented". Cooperatives are looking to give member benefits by focusing more on contract-based relationships (i.e. between cooperative and member) and fulfilling the rights and obligations designated in the contract.

2. Changes in membership systems

The cooperatives in many countries are changing their membership system to improve stability and competitiveness of their businesses. Changes include widening the door for potential members and introducing an "associate member" system. This is mostly practiced by cooperatives specializing in mutual credit. For example, the Credit Agricole Group in France opened its membership to almost every customer who patronizes local banking branches.

The associate member system is already quite popular. Most cooperatives in the European Union as well as in Japan have adopted this system. The "Overseas Associate Member System", which entitles members of overseas agricultural cooperatives to membership in domestic cooperatives, was adopted as a strategy by cooperatives in the United States of America and Europe (particularly those involved in the processing and sale of farm products) to reduce costs by sourcing raw produce from overseas. Moody’s, the world’s third top-rated credit rating company, emphasizes "stability in the number of members" in rating agricultural cooperatives.

3. Mergers and subsidiaries

Some cooperatives have been merging in order to attain economies of scale. Denmark has a strong cooperative movement in the swine industry. There were around 50 slaughterhouse cooperatives in 1970 but the number fell to only two in 2002. In Japan this year, there are 944 agricultural cooperatives in operation, down by 1 691 cooperatives from eight years ago. Local cooperatives in the United States are becoming bigger, forming what are called "super local cooperatives".

Cooperative federations have likewise been expanding their business operations. Credit Agricole of France and Rabobank of the Netherlands are examples of cooperatives that have grown into global financial cooperative enterprises.

Cooperatives are also using subsidiary companies in conducting business. Cebeco of the Netherlands operates more than 100 subsidiaries; Bayern agricultural cooperative has 27 subsidiaries including Byawa; Credit Agricole has 298 subsidiaries; and the Japanese agricultural cooperatives operate around 1 000 subsidiaries.

4. Increasing capital

Cooperatives have been seeking methods to increase operational funds in order to solve the common problem of capital restrictions. The Cmapina Melkunie milk cooperatives of the Netherlands solved this problem by increasing the portion of internal reserves from patronage dividends to members. Other livestock and dairy cooperatives in Europe introduced the per unit capital retained; in certain areas, some part of transaction fee from members is set aside as capital reserve. Some Danish dairy cooperatives (e.g. MD Foods) use the base capital plan as means of increasing internal capital. Members invest an additional 2.7 euros per tonne of milk delivered to the cooperative. Selling shares without voting rights is a very well known method used by agricultural cooperatives in Saskatchewan, Canada. Disposing of unnecessary assets is also one way of expanding cooperative capital.

5. Cooperative governance

Cooperatives engaged in farm product processing and sale are now trying to attract new management and professional CEOs even from their rivals in businesses ranging from food processing companies to large-scale consumer goods marketing complexes. Land O’Lakes, the dairy cooperative in the United States of America, recruited its new CEOs from large-scale food marketing companies such as Kellog, Kraft, Pillsburry and General Mills. Welch’s, the subsidiary of the National Grain Cooperative in the United States, selected four of its ten board members from outside the company.

Education and training of management and staff members have become increasingly more important. It is generally true that directors from the farming profession have abundant knowledge about farm production but they lack experience and skills needed to manage a business organization and cope with changes in the market. Agricultural cooperatives in France in alliance with ESSEC business graduate school opened the "Seneque’ (educational course for management strategy) nationwide to boost the effectiveness of their board of directors. Agricultural cooperatives in the United States of America encourage members and young staff to participate in cooperative leader training courses or workshops hosted by the Missouri University or Columbia University and run by the Young Farmers/ Cooperative Movement Conductor Programme.

Conclusion

Cooperatives are business enterprises that need to cope with problems on their own in the future. They should become market-oriented enterprises as members will not support them if they do not receive any economic benefit. Cooperatives should accept the need to shift from the traditional model to one that is more effective while maintaining the fundamental identity of cooperatives. We need a new financial plan to increase funds of cooperatives in order to increase owners’ equity, but this plan should be in harmony with cooperative principles. Cooperatives should increase their business competitiveness by hiring professional managers and board members and strengthening the training of staff members. They should obtain government support by adopting market-oriented business methods while holding on to their core identity.

Japanese agricultural cooperative development

Akio Yamamoto
General Manager, JA-ZENCHU Central Union of Agricultural Cooperatives
Tokyo, Japan

This country report shares how our organization, JA-ZENCHU, sees the policy issues relating to food security and Japanese agricultural cooperative development.

Japan has hitherto held the maintenance and strengthening of the free trade system under the World Trade Organization (WTO) at the centre of its international trade policy. However, it has recently adopted a policy stance to promote bilateral Free Trade Agreements (FTAs), with a view of supplementing the WTO trading system. As an example (see Figure 1), the first ever FTA for Japan was concluded with Singapore in November 2002. This agreement is currently being implemented. Negotiations with Mexico are also being pursued. Discussions are now at the final stage. Furthermore, negotiations have started with four countries - Republic of Korea, Thailand, Philippines and Malaysia -with an eye to concluding FTAs with each of them. A study is being conducted to see if it is appropriate to launch FTA negotiations with Indonesia as well.

Figure 1

Overall trade balance with Asian countries is currently in Japan’s favour, with exports predominantly made up of industrial products. With regards to agricultural trade, Japan is a large net importer.

There are similarities and differences in agricultural and rural situations of Asian countries, which all belong to monsoon Asia. First, labour-intensive, small-scale family businesses centreing on paddy culture predominate agriculture in the region. The average size of farms in Asian countries including Japan is about one hectare per farm household. Asian agriculture cannot survive price competition with its low productivity and it may not be incorrect to say that countries tend to increase dependence on imports.

Figure 2

Second, we can take the climatic conditions as a common feature of agriculture in Asia. Cities such as Seoul of Republic of Korea, Bangkok of Thailand and Calcutta of India receive more than 150 mm of monthly rain during the period from May to October - a situation typical of monsoon Asia. Rainfall (Figure 3) is indispensable for paddy farming in the region. Asian nations have taken advantage of rainfall over their long history and have developed agricultural production centred on paddy culture. They have thus been able to supply Asia’s large population with rice as staple food.

Figure 3

The third commonality of Asian countries is that all are experiencing, albeit in various ways, the adverse impacts of the Uruguay Round Agreement on Agriculture. From the foregoing, it is to be feared that still a larger number of Asian countries will be swallowed by the wave of internationalization in the future given that their agriculture is small in scale.

In negotiating FTAs among countries of monsoon Asia, two issues arise in the context of the aforementioned characteristics of the region. One is the question of how we can assure ourselves of the security of food supply in densely populated Asian countries where rice is important in terms of both agricultural production and food consumption and where poverty prevails in rural communities. The second is the question of how we can help agriculture survive under circumstances that are unique in Asia - i.e. small-scale family operations under similar conditions of land, nature and climate.

In the light of this, the views of JA-ZENCHU on FTAs among countries of monsoon Asia are the following:

(1) Negotiations between two countries must be conducted with the aim of bringing about mutual development and prosperity. One is apt to think that problems faced by an Asian nation are unlike those confronting Japan because of the difference in level of economic development. However, all countries share the long history, culture and values of Asia. Instead, it would be more helpful to think of how such common features can be mutually enhanced so as to move the economic partnership forward.

(2) Negotiations should also be conducted with the aim of enhancing the quality of life and incomes of farmers. While we are engaged in agricultural production under common climatic conditions, it is feared that the new continent type of agriculture (e.g. farming in the United States of America and Australia) may drive out Asian agriculture under the WTO system in the long run. Therefore, FTAs ought to be considered from the angle of how Asian agriculture can survive.

(3) A new approach should be taken so as to secure a nice balance between farm trade liberalization and cooperation in agriculture in the form of assistance for rural development and on matters of food safety.

How does JA-ZENCHU view possible "cooperation" in agriculture within a framework of economic partnership or FTA with countries of monsoon Asia? We can think of three areas for cooperation: (1) international movement of damaging pests and insects; (2) food safety; and (3) rural development.

First, there is room for cooperation in addressing the problem of cross-border movement of pests and insects that are foreign to and do not exist in the country. Several outbreaks of pest- and insect-related diseases have occurred in Japan in recent years. Asian countries witnessed, for instance, the case of the foot-and-mouth disease in 2000, the BSE outbreak in 2001 and the avian flu this year.

The two countries party to negotiation will need to set up a framework of cooperation in the FTA negotiations from the viewpoint of: (1) how to prevent entry of harmful pests and insects into partner countries and (2) how to contain the damage of an outbreak (i.e. measures to prevent them from spreading).

In connection with cooperation on food safety, consumers’ concern over this issue has been noticeably rising in Japan. According to public opinion surveys (Figure 4) of the government conducted in July 2000, 81.9 percent of the respondent opted for domestic produce when asked to choose between domestic and imported produce; 1.6 percent said they would choose the latter. About 82 percent said they would choose domestic produce for safety reasons, followed by freshness (57 percent), quality (42 percent) and taste or flavour (28 percent). This indicates that Japanese consumers have a stronger attachment to safety and quality than to prices when it comes to their food choices.

The outbreak of BSE in 2001 numbers among the reasons behind the heightened concern of consumers. Japan has also often experienced incidents of excessive farm chemical residues in imported foods. It is clear that rather than simply eliminating each others’ import tariffs, an important challenge under the FTA framework is to arrive at a situation wherein agricultural products can be mutually supplied and consumed with a sense of safety. Thus, cooperation needs to be advanced with respect to food safety as well.

Figure 4

With regard to cooperation in the field of rural development, the JA group is already engaged in this field of activity. The group has been promoting an environment-friendly type of agriculture based on cooperation between crop farmers and livestock farmers. More concretely, the primary level JA cooperative formulates the agriculture development plan and promotes fodder crops production in areas within the paddy field that have been set aside based on the plan; when harvested, crops from these areas are then supplied to livestock farms. On their part, livestock farmers are encouraged to properly process waste of animals so that manures can be supplied to crop farms. Setting up such a system of interrelationships is being encouraged. (See Figure 5.)

Figure 5

The JA group is also promoting "the campaign for controlling and book-keeping of the production process." (Figure 6) The upper part of the picture shows the flow of agricultural products. A primary JA first establishes the standard of production by taking the views and intents of member farmers. Farmers then grow the produce following this standard, place the harvest on segregated shipment and deliver these to buyers and consumers.

The lower section of the picture shows the flow of information. A JA cooperative first makes formats for the books and distributes them among member farmers. Farmers then keep records of production activities (e.g. the state of farm chemical use) and submit it to JA. JA then double-checks what is written on the book and transmits the production information to the buyers and consumers. This campaign has been making substantial headway among the JA cooperatives all over Japan, its success driven by strong concern for and interest in food safety on the part of consumers.

Figure 6

Initiatives for rural development have been taken not only by the JA group in Japan but also in Thailand, where they are promoting the "one crop in one village" campaign, and Republic of Korea, where they are engaged in direct sales of domestic produce at "Hanaro Mart."

JA-ZENCHU is concerned about the direction that Japanese agriculture should pursue in economic partnership agreements with countries of monsoon Asia.

An economic partnership agreement in Asia should incorporate in its agricultural provisions various forms of agricultural cooperation between the governments as well as between agricultural organizations. This is based on the criterion that any agreement must be truly beneficial to farmers and conducive to solving the problem of poverty.

By way of illustration, a good example of agricultural cooperation is on the issue of food safety. In tackling this issue, a healthy partnership would involve cooperation for the acquisition of necessary knowledge and the sharing of experiences with the partner country to be able to build a good system and appropriate legal provisions for securing food safety.

In order to mutually ensure sustainable development of agriculture, an agreement should not simply pursue trade liberalization but must also incorporate agricultural cooperation in the area of food safety and rural development to make it truly beneficial to farmers.

JA-ZENCHU strongly believes it is only through partnership and true cooperation - and not in an antagonistic fashion - that we can fulfill our aspirations for mutual benefit of countries and coexistence of agriculture in Asia and meet our goal of sustainable food security in the region.

Social security, gender and food security in China^[31]

Linxiu Zhang^[32]
Deputy Director, Center for Chinese Agricultural Policy Chinese Academy of Sciences
Betting, China

Introduction

In many developing countries, agriculture contributes to social viability by relieving the urban sector of premature rural to urban migration and therefore reduces the social costs arising from congestion of urban areas. The institutional setting of the social safety net in China makes its agriculture crucial to ensuring social viability.

In the past, movement of rural labour to urban areas had been effectively restricted by the registration system and food rations. As a consequence, the share of farm labour in total employment did not decline in parallel with agriculture’s GDP share. In recent years, the Chinese government began to relax restrictions. Rural to urban migration increased rapidly. The trend has accelerated along with China’s economic reforms.

Nevertheless, due to the rural-urban separation in social welfare provision, agriculture in rural areas still retains a primary role in providing social viability to rural residents. This is because of rural China’s unique nature where land is distributed much more equally than in many other developing countries. The land tenure system, though largely community-oriented, essentially functions as a substitute to the rural welfare system.

In general, the land tenure system contributed significantly to food security and the country’s agricultural development. With WTO accession, new challenges and opportunities have emerged vis-à-vis food security and agricultural development, in turn posing new questions about the role of agriculture in providing a social cushion in possible downturns.

There is also clear evidence in rural areas recently of an increasing feminization of Chinese agriculture. Questions thus arise as to whether the feminization process has adverse impacts on agriculture and food security and how the role of women in contributing to food security in rural China can be appropriately recognized and taken into account in formulating agricultural policies.

The objective of this paper is to gain better understanding of the role of agriculture under the social and institutional settings of China given the new macroenvironment. Particular attention is paid to how women contribute to agricultural production and sustained food security. Some policy guidelines on how to enhance the role of agriculture in providing social viability and to recognize women’s contribution to food security in China are also provided.

The paper is organized as follows. In the next section, a brief description of the social safety nets in China is provided with specific attention paid to implications of the system on rural residents. Analysis is then provided to identify the role agriculture plays in ensuring social viability and to describe how women contribute to agriculture and rural development via their participation in off-farm employment and agricultural production. The last section concludes with specific findings and corresponding policy implications, which illuminate how best to promote agricultural development and food security in China under the new global economic environment.

Overview of the social security system in China

Institutionalized mechanisms of social welfare and security have been established in China in the past half century. One thing worthy of noting is that China has adapted the term "safety nets" for such mechanisms. Safety nets are used to refer to the provision of basic forms of social protection by the government, particularly relief provision for those who are not covered by the major systems of social security and insurance (Zhu 1999; Cook 2003). To put it another way, safety nets are taken as an extension of the formal system of welfare provision in China (Cook 2003).

Budgetary spending on pension and social welfare has been increasing since the late 1970s. As shown in Figure 1, the government allocated 1.9 billion yuan for pension, relief and other social welfare purposes at the beginning of the reform period. By 2001, this budget had increased to 26.7 billion yuan (current prices). However, this was surpassed by the increase in total budgetary expenditure during the period. As a result, the proportion of spending on pension and social welfare to the total budget decreased from 1.7 percent in 1978 to 1.4 percent in 2001.

The portion of budgetary resources for pension and social welfare that goes to rural relief has been disproportionately low in light of the massive number of people residing in rural areas. This was especially true in late 1990s. By 2000, the amount spent on rural relief funds accounted for only 19 percent of the total budgetary expenditure on pension and social welfare. Considering the various risks, insecurities and vulnerabilities faced by rural residents, this leaves much to be desired as to the state of social security provision in rural areas.

Figure 1. Budgetary expenditure on social safety nets

Source: calculated by authors based on China Statistical Yearbook, 2002.

Rural-urban separation

As Figure 2 shows, there exist institutionalized forms of exclusion and clear lines of demarcation between rural and urban residents in China. One prominent feature of the welfare provision system established in pre-reform China was the division between the systematic "three irons" security provided to urban workers and the much less generous (and ad hoc) programmes providing social relief and assistance to rural residents. In terms of coverage of social welfare provision by formal government and collective institutions, there is an obvious rural-urban inequality, with coverage of 90 percent in urban areas and 24 percent in the rural population.

Sectoral separation

Another distinct feature of the system is the separation between government line agencies, private institutions and other sectors with responsibilities for and involvement in welfare provision. The transition process has weakened the distinction and separation to some extent, but access to welfare entitlements remains quite limited for rural folk (Cook 2003).

Formal social security system in urban areas

The government has a strong commitment to mitigating the social impacts of potential major economic crises or disasters through a well-defined social security system. Figure 2 gives an overview of the social security system/programmes in China. Five out of the 29 departments/agencies directly under the State Council have special responsibilities for social security provision in the urban sector, including social or occupational insurance, social welfare, social relief/assistance, and social preference programmes administered by the respective ministries. These programmes include the following:

• Social or occupational insurance - including pension and health benefits for special categories offered by the Ministry of Civil Affairs (MOCA), the Ministry of Labour and Social Securities (MOLSS), the Ministry of Personnel (MOP) and the Ministry of Health (MOH); and unemployment insurance by MOLSS. In addition, the Organizational Department (OP) in the Chinese Communist Party system is responsible for pension insurance and health care for senior cadres.

• Social relief - including disaster and poverty relief, minimum living standards relief, and hardship relief programmes for special groups of people funded and implemented by the MOCA, MOLSS, MOP, OP and the All China Federation Trade Union (ACFTU), respectively.

• Social welfare services - including welfare homes/factories for special categories administered by MOCA, reemployment training programmes and labour market services provided by MOLSS and welfare for public servants by MOCA, MOP and OP.

• Preferential services - for special categories of people who have contributed to the country, such as veterans, disabled servicemen and families of martyrs during the revolution.

• Other programs - these include mutual help in communities, volunteer activities and donations.

Source: Adapted from Cook (2003).

Figure 2. Social security system and programmes in China

One point worthy of noting is that among the departments and ministries involved in welfare provision, the MOLSS is the only one with stipulated responsibilities over unemployment insurance, hardship relief for enterprise employees and laid-off workers, re-employment and training programmes and labour market services. These security provisions mainly target the people within the work force. Urban migrant workers and those who fall outside of the formal social security system have to rely on irregular social relief/assistance (in kind or cash) or other informal resources such as commercial insurance companies, enterprises and non-governmental organizations (NGOs)/non-profit organizations (NPOs) for support.

Social security programmes in rural areas

In the transition from a centrally-planned economy to a market-oriented one, traditional rural collective safety nets have been eroded by decollectivization, market liberalization and (effective) privatization of health and education services (Cook 2003). Social security in rural sector is not as institutionalized as that in urban sector. Rather, it is mainly funded and implemented as programmes. These include:

• Social relief and assistance programmes - payments in cash or kind to poverty-stricken households and relief to victims of natural disaster; programmes of this category are mainly funded by collective welfare funds, donations and the MOCA budget.

• Social welfare - institutional care for special groups people such as the aged, the handicapped, and orphans and welfare factories providing employment for the disabled; financial resources include collective welfare funds, self-funding activities and local government subsidies.

• Social insurance - including pension schemes, community health insurance schemes, insurance against disasters, TVE employee insurance and public employee insurance; social insurance in rural areas is financed by individual contributions, collective welfare funds, employer provisions and government budget.

• Social preference for special categories of people based in rural areas - these programmes principally fall in the responsibilities of the civil affair lines and collectives.

• Medical security - includes curative, preventive and immunization services and schemes; funding comes from the MOH, user fees and collective welfare funds.

• Other programmes - including minimum living standards guarantee, childcare, etc. which are funded by individual contributions, the country budget and collective funds.

As indicated in preceding discussions, social security interventions in rural China are relatively ad hoc and limited in scope and coverage and are usually funded by local townships and village enterprises or by fees collected from rural households (Cook 1999). The availability, accessibility and efficiency of social security programmes are very much dependent upon the financial strength of the rural locality.

Social safety nets in China - implications for rural residents

Rural farmers are exposed to two types of risks: output and price risk (Sadoulet and de Janvry 1995). Output risk refers mainly to unfavourable rainfall and climate and the unpredictable incidence of pest and disease outbreaks and other natural disasters. Price risk includes the undesirable movements and volatility in the prices of agricultural inputs and outputs. Besides exposure to market and price volatility, new forms of risk, insecurity and vulnerability are arising in the process of economic transition and restructuring in China. Other shocks to incomes or livelihoods faced by rural farmers include illness, illiteracy, poverty and loss of social connections after being resettled because of infrastructure and development projects.

Increased off-farm employment, especially migration, has become the most important source of household income increases. However, during the transition period characterized by a stop-and-go economy, the impact of employment expansion and retrenchment has translated into fluctuations of household income, which poses new risks and uncertainties to rural households.

Social viability role of agriculture

Importance of farming business

As discussed in the previous section, the trend of out-migration has been quite obvious in rural China over the recent two decades, especially after the mid-1980s. As a result, off-farm income now plays an important role in increasing the incomes of rural households.

However, farming remains an important subsector of rural economy both economically and culturally. This is especially true in the marginal and remote mountainous areas. In those areas, people subsist on farming and agriculture thus sustaining local agro-ecosystems as well as the social systems that support the livelihoods of millions of rural households. Moreover, because of incomplete markets and welfare and service systems in the rural area - e.g. credit markets, health support systems and unemployment benefits - the farming business has been extremely important and crucial in providing overall insurance and protection to households.

Land rights

Many policy-makers in government tend to believe that an egalitarian hukou-based land distribution system provides a basic safety net for the rural population; however, even state and collective institutions withdraw from most welfare functions in rural areas. For most rural Chinese, land remains a basic entitlement and is a major resource they can depend on (in conjunction with labour resources) for their livelihood security. Even urban migrants maintain a close link with land in their home villages in that their remittances help overcome financial constraints faced by family members who stay at home and farm. On the one hand, land serves as the single most important means of livelihood for households that are mainly based on farming. On the other, it is also the basic source of security for those who have migrated to urban areas but are still excluded from government social support systems. These are the major reasons why the Chinese Government is exerting effort to ensure rural farmers’ land rights. Thus, there exist close ties between migrants and their rural households.

Potential buffer role of agriculture

It has been commonly observed that in developing economies, where unexpected macroeconomic shocks occur, the agricultural sector plays a buffer role, allowing people to cope with adverse effects of the shocks. Evidence of members of rural households in developing countries providing temporary shelter to relatives who lose their jobs in urban areas during economic slumps is accumulating. What can be vividly recalled among those interested in Asian economies are the recent examples of Southeast Asian countries such as Thailand and India, where large numbers of unemployed urban workers returned to rural areas and subsisted by rejoining the agricultural labour force during the unexpected 1997/98 Asian financial crisis (Richberg 1998).

In general, developing countries are more vulnerable to macroeconomic shocks compare with developed ones. These shocks can exert serious, sometimes even devastating impacts on people, especially the vulnerable groups in weak economies as shown by welfare indicators like nutrition, school enrolment and poverty. A well-functioning social safety net - which is the ideal - is expected to help those hit by shocks to recover and maintain a healthy and productive life. Unfortunately, governments in developing countries typically lack the resources needed to support an extensive social protection programme. In many cases, people have to rely on their links with the rural or agricultural sector. Thus, the potential of agriculture to act as a safety net during shocks has attracted a great deal of attention from researchers, international development agencies and policy-makers.

Buffer role of agriculture in the Chinese context

China numbers among the few countries in the world where a household registration (or hukou) system is still being maintained. The hukou system, which was an important part of the centrally planned system in the Mao era, classified individuals into two categories: rural and urban household members. Accordingly, two separate economic and social subsystems were instituted to maintain rural-urban differentiation in access to capital and other resources. The hukou system, in conjunction with other policy measures, has resulted in a pronounced rural-urban dichotomy in China since the 1950s (Liu and Reilly 1999). But with the reforms to open up the country launched in the late 1970s, it has been relaxed to some extent as evidenced by strong population mobility and rural-urban migration flows in recent years.

The peculiar rural-urban separation has made China a unique case in terms of rural-urban relations. Many Chinese, especially those now in their sixties, vividly recall the economic crisis of the 1950s when urban families turned to their rural relatives for temporary support (e.g. grain, meat or vegetables) to smooth their food consumption. This is one aspect of the buffer role of agriculture, which is similar to the original definition of the term and which has been observed in many developing countries.

However, the separation of the rural-urban system coupled with urban-biased policies and social welfare systems had made agriculture and the rural sector much more vulnerable than the urban sector. Thus, it was not easy to identify agriculture’s buffer role under the Chinese context. Furthermore, given that the country has not experienced major economic crises in recent decades, the term "buffer role" of agriculture has to be adapted to the context of China in economic transition.

National economic policies targeted at promoting growth and development, along with the increased degree of integration between China and the world economy, have resulted in remarkable economic achievements. China is undergoing a process of change, shifting from a planned to a more market-orientated economy. One significant characteristic of the economic development is the changing role of the agricultural sector and growing activity in the labour market. The linkages between rural and urban areas have broadened from pure commodity exchange to the inclusion of population movements.

Rural to urban migration has become a major part of labour mobility. However, under the existing institutional setting, the buffer role of agriculture can hardly go beyond the boundaries of the separate systems. Although migrants can work and live in urban areas, they are tied closely to their families in rural areas due mainly to security reasons. When economic fluctuations occur, migrants return to agricultural jobs in times of economic contraction and leave again when the economy booms. Thus, their rural families and agriculture serve a buffer role for them.

The buffer role of agriculture has its unique characteristics in that it is mainly a rural phenomenon. During early months of migration, rural households serve as an insurance against the possible risks facing migrants. When the migrants settle down and gain a foothold in the urban sector, they send remittances to family members who stay in agriculture in their home villages. Moreover, agriculture provides shelter for returning migrants during an economic recession and supplies labour during an economic boom.

Migration and remittances

With the rapid growth of China’s economy, especially in the industrial and service sectors, a growing number of rural residents (young and old, male and female) have joined the army of migrant workers who work off-farm locally or outside the home village for better income opportunities. Empirical evidence indicates that migration has become the fastest growing portion of China’s off-farm labour force in the 1990s (deBrauw and Rozelle 2002; deBrauw et al. 2002). But the links between migrants and their source families in remote villages do not become weaker (Liu and Reilly 1999). Instead, the bond between them tightens through the regular remittance payments migrants send home. This money has constituted a steady source of family income in the rural areas.

It is not rare for rural households to depend on regular remittances (in cash or kind) sent by members working outside the farm to make ends meet. Empirical analysis shows that about 20 percent of rural household income is generated by remittances (deBrauw and Rozelle 2002). This is especially the case when migrant workers have aged parents or much younger siblings. Increased rural-urban remittances allow rural households to improve per capita consumption and expenditures in health, schooling and food.

Remittances generated by migrants have been increasingly recognized as one of the major channels through which the agricultural sector can provide a buffer against macroeconomic shocks affecting other sectors. During the process of labour reallocation across the economy, the adjustment of intrahousehold remittances to external shocks is comparatively quicker. Thus, it is reasonable to say remittances can be one of the first to adjust against shocks that affect labour markets.

Empirical analysis of agriculture’s buffer role in China

Because of the comparative advantage in the urban economic sector, it has become common for rural households in China to receive remittances from urban relatives. The reverse flow, however, is quite rare. Thus, when we talk about agriculture’s buffer role in this paper, we will mainly focus on agriculture’s ability to directly and indirectly provide protection and shelter to rural-based households affected by the shocks, especially considering the lowered rural-urban migration and the consequence of limiting unemployed migrant workers in urban areas.

Macro level

There has been an overall increase in rural off-farm employment in the past two decades. Between 1980 and 2000, the percentage of rural labour employed in the non-agricultural sector increased from 5 to 32 percent. Further analysis shows that agricultural employment has typically risen and fallen along with economic cyclical growth. It increased as GDP growth slowed down in the late 1980s and 1990, decreased after a retrenchment of the national economy in 1991 and expanded after 1993 before it started to dwindle again in the late 1990s.

Figure 3 compares the growth trend of GDP with that of rural labour employment. A central point that can be drawn from this figure is that in China as a whole, labour leaves agriculture for off-farm jobs during booms and returns during recessions. This is illustrated by the counter-cyclical rural employment growth rates of GDP and agriculture between 1986 and 2000. This description based on macrolevel data supports the argument that agriculture can act as a buffer during economic slumps, which is consistent with Zhang et al. (1998).

Source: Calculated by author based on NBS and MOLSS, China Labour Statistics Yearbook (2001).

Figure 3. Growth rate of GDP and rural labour force employed in agriculture
(preceding year =100)

Micro level

Evidence drawn from rural household surveys in China (deBrauw et al. 2002) shows that migration has become one of the most significant activities of rural households in terms of labour employment. Furthermore, it has also contributed significantly to the increase in rural household income.

The massive flow of rural workers to urban areas has received both positive and negative commentary. Those who are in favour of the move see rural migrants as having contributed significantly to urban and national development. The critics meanwhile view them as added burden to the already overloaded urban service system (e.g. in schooling and healthcare). Lack of an integrated service system for both migrants and urban residents has made the opportunity cost of migrants living in cities much higher than that of urban residents. Thus, migrants are much more vulnerable to economic shocks and risks. Often, they become the victims of government interventions initiated in the name of social stability or urban worker protection. Although there are no official statistics to reveal this fact, one typical observation during the first stage of reform in the country involved some cities having to send rural migrants home and subsequently fill their job positions with urban workers who were laid off. Job security of migrants is apparently weaker than that of urban workers.

Therefore, constant cases of return migration now characterize the country’s employment scene. By analyzing the information from the same dataset collected in China’s National Rural Survey as deBrauw et al. (2002), one can find that among all the people who had migration experiences in the past 20 years (1981-2000), around 30 percent of them had returned to their rural home (and to agriculture) every year. Thus, the agriculture and rural sector acted as a buffer zone for those return migrants.

Figure 4 shows the number of return migrants on a yearly basis. We can see that about 6 percent of migrants return to their home villages on average per year. However, in recalling the overall economic development trend the past two decades, it is not difficult to see that high return migration appeared during the years when economic development was slow (e.g. 1988-1989 and 1991-1992). Again, from another aspect, this reveals the buffer role of agriculture.

Source: Authors’ survey.

Figure 4. Returning migrants

Empirical evidence of linkages between migrants and rural (source) families through remittances

Data source

In this section, we use the same rural household survey data that have been used by deBrauw et al. (2002) and Zhang et al. (2002b) to track how migrants maintain their ties with their source family in rural areas through remittances.

In general, there are two-way linkages between migrants and their source families. On the one hand, migrants need their family’s financial support to finance their search for jobs outside of their villages. On the other hand, migrants send remittances back to their family once they become successful in finding off-farm employment and gain a stable source of wage earnings.

Our migrant sample shows that about 70 percent of migrants maintain financial links with their source families in that they send home remittances or get support from their families in kind or cash. Moreover, more than half of the migrants (55 percent, 267 out of 485) send remittances to family members who stay behind. On average, remittances account for roughly 38 percent (2253 out of 5906) of migrants’ off-farm labour earnings. If we deduct the support migrants obtain from their family, the net remittances sent by migrants would account for about 36 percent of their off-farm employment earnings (2099 out of 5906) (Table 1).

Table 1. Migrants and remittances

Source: Authors’ survey.

Role of women in agriculture and their contribution to food security

Women and off-farm employment

The development of the rural labour market in the past 20 years or so has been characterized by rapid expansion of the rural labour force’s participation in off-farm employment both in the urban and rural areas.

In the same way that emerging rural labour markets may have numerous effects on the fabric of rural and urban economies, the benefits of women’s participation in labour markets vary (World Bank 2001). By some metrics - e.g. enrollment in primary and secondary schools - indicators of welfare for women rise with the country’s development (which by implication means better labour markets). However, by other indicators - e.g. the relative number of hours of housework performed by women versus men - there has been little improvement. In short, the effect of economic development on women’s welfare is complicated and depends on many different factors.

In the rest of this study, we assume, as do Thomas et al. (1997) and Quisumbing and Maluccio (1999), that increased participation in the off-farm labour market and higher wages for those with off-farm jobs are metrics that are positively correlated with the welfare of women. The logic of this is that when a woman earns a wage that increases her assets, the income that is generated is directly attributable to her labour; because of this, she has more power to make her own decisions and increase her welfare.

In fact, according to our data, when examining the rate at which women have gained employment away from the farm, the newly emerging labour markets have already begun to positively affect women. Although women have participated at rates far below those of men throughout the entire 20-year sample period, participation rates have risen rapidly since the early 1990s. In the 1980s, consistent with the findings from the national community survey-based study reported in Rozelle et al. (1999), the participation rates of men (more than 25 percent in 1981) far exceeded those of women (less than 5 percent). Moreover, despite low initial levels of involvement in the off-farm sector, participation rates for women grew more slowly than those of men. In the 1990s, however, the participation rate of women in the off-farm sector increased faster than that of men.

The rising participation rate of women has been driven by increased entry into all job categories, although the most striking absolute gains have come from migration. Throughout the entire decade of the 1980s, less than 1 percent of women le. to work for a wage. Since 1990, however, the rate of growth has been higher than any category of job types for either men or women. By 2000, nearly 7 percent of the female labour force worked as wage-earning migrants. One interpretation of this rise in the participation of women is that as labour markets became more competitive, the scope for managers to exercise their discriminatory preferences declined, therefore opening up new employment opportunities for those who had previously not been able to participate. Alternatively, the rise in women’s work could have occurred as the types of industries that have a preference for the skills of women prospered.

The nature of the work of women, like that of the entire labour force, is also rapidly changing (Table 2). Not only were fewer women working in 1990, most of them tended to work at jobs in local factories, close to home. For example, in dividing migrant workers into three groups - those the worked at jobs within their own county; those that worked at jobs outside their county but within their own province; and those that worked outside of their province (frequently thought to be the highest paid and have the most secure jobs by migrants) - it can be seen that 47 percent of women migrants worked in their own county and only 26 percent migrated out of the province (Row 4). By 2000, however, the most likely destination of female migrants changed. The percent of women migrants working in their own county fell to 35 percent while the percent that worked outside of the province rose to 33 percent (Row 2). Although the rise in the percentage of migrants leaving their own province was relatively small (only 7 percentage points), the absolute number rose sharply by more than 10 times (from 5 to 54). For female migrants under 30, the shift in destination followed the same pattern (Rows 6 and 8). If the better jobs are in the labour markets that are far from home (typically in coastal area for the inland rural residents), the trend shows that females, like their male counterparts, are gaining access to the jobs.

Table 2. Comparison of location of migration employment by age and gender in 2000 and 1990

Source: Authors’ survey.

Notes: The table compares workers who were, for example, 25 years old in 1990 with workers who were 25 years old in 2000. a Figures in parentheses are percentages of the total number of migrants for the respective category. Percentages sum to 100 across rows, subject to rounding error.

Perhaps most poignantly, specialization of another type is emerging and becoming common, especially for younger women. While participation rates for all women are still lower than that for men in 2000 (by 41 percentage points; i.e. 72 percent for men and 31 percent for women), the gap narrowed for the younger age groups and disappeared for the youngest (Table 3). Both men and women in the 16-20 year old age groups have equal participation rates (74.7 percent for men; 75.6 percent for women). Like the men, in fact even more so, women in this category were increasingly specializing in off-farm labour. In 2000, for instance, when young women performed off-farm jobs, they usually no longer worked on the farm (i.e. 59 percent of those that worked off the farm worked only off the farm). This contrasts sharply with the situation in 1990 when most of those with off-farm jobs continued to work on the farm on a part-time or, at the very least, seasonal basis. The emergence of specialized modes of production in different villages across China’s geographical landscape has been facilitated by the emergence of labour markets (Mohapatra 2001).

With older women, however, the gender gap in off-farm employment participation remains. These trends embody the roots of the feminization of agriculture (Table 3). For example, the difference (in percentage points) between male and females widens to 25.3 percent for 21-25 year olds; 39.1 for 31- 35 year olds; and 48 for 41-45 year olds (Rows 2 to 6).^[33] Moreover, the participation rates in agriculture of older women (either full time, part time or seasonal) are almost as great as in the 1990s. With men both working more (columns 1 and 3) and specializing more (i.e. not working in agriculture - not shown in table), this means that it is the older women who are being asked to do the farming. While it is beyond the scope of this paper to say if this is a good or bad thing, we will next examine the effect on production of having women heavily involved in farming.

Table 3. Comparison of off-farm labour participation rates by gender, 1990 and 2000

Source: Authors’ survey.

The feminization of farming and agricultural incomes

Although the youngest age group of women (16-20 year olds) have caught up to their male counterparts in terms of access to off-farm employment and are not being discriminated against in any greater degree as regards wage earnings, older women have increasingly taken over the responsibility of managing farm work. This raises new questions on whether or not their participation in agriculture has led to lower earnings.

Internationally, women-headed households and women-cultivated plots have produced lower yields and revenues (World Bank 2001). Women were found to be less efficient producers for a variety of reasons (Saito et al. 1994; Quisumbing 1994). If this is so in China, then part of the gains that women have gained in the off-farm sector may have been offset by the lower incomes they receive in farming.

In order to answer the question of whether women-headed households are more, less or equally efficient in cropping, we use a fixed-effects regression approach. Specifically, total cropping revenue (and total revenue for rice, wheat and maize) for each household plot is regressed on plot, household and village characteristics that are thought to determine plot-specific income. The basic model is:

where y_hv denotes total income per capita or from one of the three specific sources for household h in village v. The variable, X_hv, is a vector of plot characteristics (e.g. relating to irrigation, land quality, topography, distance from the household and the size of the shock) and household characteristics (e.g. the value of household assets, farm size, number of household members and age and education of the household head). The variable, Z_v, denotes village characteristics including a community’s topography, its distance from the county seat, the number of phones per capita and the proportion of villagers that work off-farm or migrate during the year studied (1990). In addition to X_hv and Z_v, we also add a measure of the level of participation of women in farming. Since there is no a priori best measure of such a variable, we employ three different indicators in three different versions of our model. Specifically, we use an indicator variable that takes the value of one if the household head is female (and zero otherwise); a variable that measures the proportion of the household’s total labour force that is female; and a variable that measures the proportion of the household’s agricultural labour force that is female.

The coefficient of the women-participation variable, g, provides the test for our hypothesis: holding all other things equal, women-run farms are equally efficient in generating farm income when compared to male-run farms.

Using more than 5 000 plots (observations) for the analysis that examines the effect of women-headed households on overall farming efficiency (Table 4), we find results that are somewhat at odds with results from other countries in other parts of the world (World Bank 2001). According to our data, when all of the other variables in our model are held constant, households in China are actually more efficient when women are more involved in farming. For example, women-headed households ceteris paribus produce 11.3 percent higher revenues overall than their male counterparts (Column 1, Row 1). The positive and significant coefficient on the women-headed household indicator variable in the analyses using observations on rice and maize plots show that the results are the same for these crops (Columns 2 and 4).^[34] Moreover, coefficients on the alternative measures of the participation of women (columns 5 and 6) show that our estimations are robust. Although only the coefficient on the gender variable in column 5 is significant, the coefficient on the gender variable in column 6 is still positive. Taken at face value, even this result means that women are at least as efficient as men in farming activities and agricultural feminization has no impact on crop revenue earnings. Additional evidence is found when running crop-specific regressions with the alternative measures.

Table 4. Analysis of the effect of women-headed households on the efficiency of farming, all crops (regression results with village-fixed-effects)

Notes: Absolute value of t statistics in parentheses. Estimates were corrected for clustering.

* means significant at 10%; ** means significant at 5%; and *** means significant at 1%.

^a Equation 5 is the same as equation 1 except we replaced the female-headed household indicator with a variable that measures the proportion of the household’s total labour force that is female.

^b Equation 6 is the same as equation 1, except we replaced the female-headed household indicator with a variable that measures the proportion of the household’s agricultural labour force that is female.

Hence, according to our findings, although older women have been increasingly working in the agricultural sector during the course of rural China’s recent development, farm earnings have not suffered with them in charge. The most direct interpretation of this result is, of course, that women are either better farmers or that they are more focused on cropping activities (unlike their male counterparts, who often work part time off the farm) and produce greater revenues per hectare.

However, we are unable to reject alternative interpretations. For example, it could be that since women-headed households are frequently (though not always) those in which the husband permanently works outside of the village, such households face fewer capital constraints and therefore are able to produce more. In addition, it could be some other unobserved household-specific factor that is associated with households in which the female is responsible for farming. But, regardless of the source, our analysis suggests that cropping revenues earned by women-headed households are not less than that of male-headed ones.

Major findings and policy implications

In the past 20 years, China experienced rapid economic growth. In this study, we found that although China has not suffered a major economic crisis in the past 20 years, there exist fluctuations in economic growth. Agriculture experienced a decline in total GDP share. Thus, the employment structure has shifted accordingly. More and more rural labourers have been employed off the farm, away from their home villages and in the cities. This kind of population movement is what we have categorized as the migration population. Given the current social safety nets setting in China, under which rural residents seem to be heavily biased against, the social viability role of agriculture becomes extremely important. Indeed, the rural sector has shielded migrants from economic shocks as revealed by their frequent returns to home farms during downturns as well as rural-urban remittances.

In general, the findings of the study support the argument that agriculture plays a buffer or shelter role during economic fluctuations in China. Previous studies have shown that the decision to migrate is not only affected by individual characteristics but also by household and community traits. This, to some extent, reflects the close ties between migrants and their families.

Lack of long-term job security in the city has made agriculture more important. Farming businesses and agriculture have been acting as a buffer zone to accommodate return migrants. Our analysis of remittances also shows that both individual characteristics and family traits have an impact on decisions regarding remittances. The results show the coexistence of both an exchange and altruism motive in making remittances. However, due to the limitations on information availability, the study only uses cross-section data for one time period for empirical analysis. Thus, extension of the findings to other parts of the country or to other countries should be used with caution.

As an important part of this analysis, women’s role in contributing to food security has been reflected by their participation in off-farm employment and their role in agricultural production. This study concludes that despite the existence of an obvious gap between men and women in off-farm employment participation, women (and especially young women) are catching up fast. Sending the household head away to work off the farm and leaving the female in charge of the farm does not have a negative impact on household crop production. Further analyses on the actual causes have yet to made but a couple of explanations can already be given. First, household size is relatively small in rural China. Thus, the negative impact of migrants withdrawing their labour force from agriculture would not be very large. Second, the increased remittances from migrants actually improve household production conditions by easing credit and cash constraints.

The analysis of the determinants of migration and remittances and women’s participation in off-farm employment and their contribution to agricultural production lead to the following policy conclusions.

Given the existing social safety nets in China, agriculture is extremely important in contributing to social viability and ensuring food security. Policies that can have a positive impact on agriculture include improved land tenure arrangements, technological improvements that pay attention the changing role of women in the farm sector and provision of social services such as health care, credit assistance in rural areas. All these play a vital role in increasing the efficiency of agricultural production and sustaining agricultural growth, thus contributing to food security.

Labour market development in China has had equity impacts on both income and gender. Policies that can further promote rural labour migration and their participation in off-farm sector will have to include increased investment in human capital development and provision of rural credit services for the development of small rural enterprises.

Breaking the barriers between rural and urban areas such as removal of the hukou system will contribute to the increase in migration between rural and urban areas. China still has a two-class system where urban residents have access to social services in the city while farmers have none. Although complete elimination of the current system is politically impossible, there are many policy measures that have been and can be implemented in the future. Access to housing, education and health services are absolutely essential to allow the current rate of transition from rural to urban to continue. A concerted effort by national and regional leaders is needed to establish the rights of citizens in all parts of China regardless whether they are from rural or urban areas, in farms or in cities.