Review of the irrigation equipment manufacture and supply sector in China, Z. Weiping

Zhou Weiping
China Irrigation and Drainage Corp., Ministry of Water Resources,
Beijing, People's Republic of China

General situation of China's irrigation
China's irrigation equipment industry
Factors influencing prices of irrigation equipment
Analysis and recommendations for improving the supply of small irrigation equipment in Southern and East Africa

General situation of China's irrigation

China is situated in East Asia, with high terrain in the west and low in the east. Two-thirds of China comprises mountainous and hilly areas which are distributed as follows from west to east: Qinghai Xizang Plateau, Yunnan Guizhou Plateau, Loess Plateau, Inner Mongolia Plateau, Jiangnan Hills, North China Plain and Northeast China Plain.

China's total area is 9.6 million square kilometres. Thirty-three percent is mountainous, 26% plateau, 19% basins, 12% plains and 10% hilly areas. In one word, two-thirds of the country's total area is mountainous and hilly.

China is vast with temperate and tropical climate stretching from north to south. Most of the areas have an East Asian monsoon climate. In the north of China's Heilongjiang province, there is no summer while Hainan is blessed with summer all year round. Rainfall distribution is uneven both in terms of areas and seasons. Annual rainfall ranges from 1 500 mm in the south east coastal areas to less than 50 mm in the interior part of the Xinjiang region. There is little rainfall from November to March. Seventy to eighty percent of the national rainfall is concentrated in the period from June to September and is the cause of great difficulties for the development and utilization of water resources.

China has a population of 1.2 thousand million with 80% living in rural areas. Arable land area totals 130 million hectares, with a per caput arable land area of 0.11 ha. Owing to the special geographical conditions, 70% of China's people are distributed in the eastern part of the country. The middle and lower reaches of the Yangtze river. North China Plain and South China are the most populated areas. These areas are the country's industrial and agricultural bases. As a result of high population density, the land is very precious. Production of sufficient grain and other agricultural products on limited land is therefore crucial to the maintenance of China's sustained development.

Self-sufficiency and surplus in grains is one of China's main policy goals. Consequently, the Chinese government pays great attention to agriculture. The country's major grain producing areas (plain areas) all suffer from a shortage in rainfall as indicated in Table 1. Drought is the most limiting factor affecting grain production. The development of irrigation is therefore essential for securing grain output.

TABLE 1 Characteristics of precipitation for three irrigation zones in China

			Precipitation in different periods (mm)
Irrigation zones	Regions	Location of rainfall stations	Annual precipitation	June to Sept.	March to May	Oct. to Feb.
Perennial irrigation zone	Northwest China inland and the middle reach of Huangheiver	Jiuquan	84	56	18	10
		Yinchuan	202	146	36	20
Unsteady irrigation zone	Huang-Huai-Hai Plain Northeast China	Dezhou	573	446	73	54
		Huaiyang	879	514	203	162
		Harbin	559	431	75	53
		Shenyang	702	509	110	83
Supplementary irrigation zone	Middle and lower reaches of Chang-jiang River, Zhu-jiang and Minjiang River, partial southwest China	Yichang	1 145	509	286	186
		Guangzhou	1 648	902	508	238
		Yibin	1 169	777	206	186

Currently the irrigated area in China is 53.8 million ha, representing 41% of the total arable land and accounting for 80% of the total national grain output. Irrigation is thus very important for China's grain production and the national economy.

There are five types of irrigation produced in China - reservoir irrigation, river diversion irrigation, water lifting irrigation, well irrigation and fragmentary small equipment irrigation. Among them, reservoir irrigation, water lifting irrigation and river diversion irrigation are all systems developed by irrigation project facilities. Small irrigation equipment is usually used in well-irrigation and fragmentary type irrigation. The composition of China's various kinds of irrigated areas is shown in Table 2.

Table 2 shows that the irrigated areas which use small irrigation equipment represent over 30% of the total irrigated areas, amounting to 16.7 million ha.

China's irrigation management has different forms according to the scales of projects. Generally, large irrigation projects are managed by the water conservancy departments at various government levels. Small irrigation projects such as well-irrigated areas are managed by villages, farmers' cooperative teams or individual farmers.

TABLE 2 Situation of China's irrigation

Classification	Area (x104 ha)	Percentage (%)
Total area of irrigation	5 380	100.0
Surface water irrigation	3 706	68.9
Groundwater irrigation	1 333	24.8
Others*	340	6.3

*Fragmentary irrigated area: small irrigation equipment is used in both groundwater irrigation and fragmentary irrigation.

Farmers in China depend mainly on agricultural production, township and village industries and small-sized processing industries for a living. They obtain enough grain for food from their limited land and sell other agricultural products. Irrigation is indispensable in their situation. Many farmers own small irrigation equipment. Even in some areas where water is obtained from reservoirs and river diversions, small irrigation equipment can be used to prevent or reduce grain losses during drought seasons. In mountainous areas, small irrigation facilities or methods are even more widely applied.

At the county and township levels, the Government has established anti-drought service teams. These teams can provide emergency irrigation services in time of serious droughts. The service teams also possess small irrigation equipment and receive government subsidies to assist them in their work.

China's irrigation equipment industry

The manufacturing industry for irrigation equipment in China has developed gradually in the recent past. This development partly reflects the requirements of economic development in agriculture. At present, production of irrigation equipment has become an important component of agricultural machinery. A rather complete system including product research and development, quality control, after sale service, marketing and numerous other enterprises have been formed. It is very convenient for farmers to purchase and use small irrigation equipment in China. Therefore, both their production output and volume of use are considerable. Table 3 shows the ownership of agricultural machinery for irrigation in the whole country.

TABLE 3 Year end ownership of agricultural machinery for irrigation and drainage (1995)

	farm motive power for irrigation and drainage		of which: diesel engines		electric motors		farm pumps	sprinklers
	104 units	104 kW	104 units	104 kW	104 units	104 kW	104 units	set
National	1028.6	8048.65	487.6	3812.93	534.22	4212.02	912.65	585458

Farm pumps situation

	farm pumps (104 units)
Region	total	1. state ownership	2. collective ownership	3. household ownership
National	912.65	11.57	168.87	732.21

Ownership of irrigation and drainage machinery by rural households (1994 - 1995)

Item	Units	Ownership (1995)	Ownership (1994)	1995 increase or. Decrease over 1994	1995 increase or decrease rate over 1994
motive power for irrigation and drainage	104 units	816.83	769.63	47.20	6.13
	104 kW	5352.82	5030.06	322.76	6.62

Features of China's small irrigation equipment formed in the development of the past decades

· Complete types. China can produce a wide range of small irrigation equipment. This equipment includes all types and specifications of pumps, small diesel engines, metal and plastic pipelines which are currently available in the world. Additionally, some simple equipment such as hand pumps are also produced to meet different user needs. Among the small irrigation equipment produced by China at present, the major products are water pumps, small motive machinery, pipelines, sprinkler and drip irrigation equipment. China has also produced some special equipment, for example, water-turbine pumps.

· Numerous enterprises and large output. Statistics show that in 1995 there were 166 irrigation equipment enterprises managed by the Ministry of Machinery, with 65 000 workers and staff members. Their industrial output value for the year was 2.62 thousand million RMB yuan. The outputs are shown in Table 4.

TABLE 4 Volume of production of irrigation and drainage machinery (1995)

Name of product		1995	1994	1995 growth or decrease over 1994 (%)
Total		2 605 316	1 857 848	40.23
1. Sprinklers		54 467	79 228	-31.25
2. Farm water well drills		1 291	800	61.38
3. Total farm pumps		2 549 558	1 777 820	43.41
	Large pumps (super large) (1995 = 262; 1994 = 182)	1 549	1 132	36.84
	Small and medium	1 135 494	671 481	69.10
	Mini-pumps	468 711	189 057	147.92
	Deep-well pumps (long-spindle) (1995 = 13 774; 1994= 14 419)	28 968	25 279	14.59
	Submersible pumps	75 250	78 498	-4.14
	Small submersible pumps	837 698	813 173	3.02
	Water-turbine pumps	1 888	332	468.67

Statistics show that the demand of China's agriculture for small irrigation equipment increased so rapidly that a developed market has already been formed. With the establishment of the current market economy structure in China, competition among enterprises is very fierce and will be conducive to promoting technological progress in irrigation equipment.

Ample service networks: Small irrigation equipment is mainly purchased and used by rural households. To facilitate the extension and after-sales service, China has established ample product sales service networks. Three major systems are responsible for this work. One system comprises the agricultural companies scattered in all counties throughout the country. These companies are state owned enterprises of agricultural machinery, and provide sales and after-sales service. The highest level of this organization is the China General Corporation of Agricultural Machinery while its lowest level is the county agricultural machinery companies. Most irrigation equipment is sold to farmers through this system. The second system is the water conservancy service under the administration of the Government's water conservancy department. At the county level, water conservancy service organizations have been established. These service organizations provide farmers with services such as planning and design, installation, operation guidance and technical services to enable farmers to use these equipment for irrigation operations. The government has also established related agencies for strengthening the leadership in extension and services of irrigation technologies in several ministries. The third system involves production enterprises providing direct services. Enterprises sell equipment directly to farmers and provide them with services. Table 5 shows the service network of agricultural machinery in rural areas in 1995.

TABLE 5 Service network of agricultural machinery in rural areas (1995)

Item		Units	Township shops	Village group shops	Repair households
Number of repair shops			21 070	11 511	156 442
Year end number of employees		person	106 059	34 871	331 549
	repairmen		71 529	26 191	259 661
	technicians		22 533	5 619	54 208
Facilities			107 541	32 085	370 820
	Processing and forging facilities	unit	27 757	6 912	68 848
	Special repair equipment		52 869	17 438	192 051
	Testing equipment		11 566	2 551	26 200

Effective research and development system. In China, the government pays great attention to technological progress and allocates special funds every year for research and development. Since 1996, the State Science Commission has allocated 30 million RMB yuan for research and development on water saving irrigation equipment. The state has established special research academies to conduct basic theory research and development of new products. More than 100 scientific research institutions in China are engaged in research related to small irrigation facilities and equipment and in the solution of technical problems in extension work. In addition, enterprises also invest huge amounts of capital for improving their products. The research and development efforts greatly promote technological progress of small irrigation equipment.

Effective work of the state technology inspection control system. There is a complete system of standards. There are national standards or industry (ministerial) standards for every kind of product and service. Enterprises also have their own standards. Then there is a product quality certification system. The certifying institutions designated by the State test and issue certificates on every kind of product on sale. There is also a set of quality control systems. Government has established technical inspection institutions at national, provincial and other levels. They can inspect the quality of products by sampling at any time, publish the results in newspapers, magazines and other media and make recommendations to users. Finally, enterprises have their own quality inspection units to ensure product quality.

Great government concerns. The mechanization of agriculture is a target of the Chinese Government. Government institutions play a forceful role in striving to achieve this target. At present, relevant departments of six ministries at the central level are working in areas such as machinery production, sales, services, circulation and technologies to advance the mechanization process. Furthermore, the state comprehensive departments such as the Ministry of Finance, the State Planning Commission, the State Science Commission, the State Economic and Trade Commission, the State Tax Administration Bureau and banks carry out different functions and responsibilities. Owing to the importance of irrigation and drainage services to farmers, the state has favourable taxation policies and reduced product prices. For example, the State generally stipulates a value added tax rate of 17% for industrial and commercial enterprises. However, a rate of 13% has been adopted for enterprises engaged in the production of irrigation equipment. Enterprises selling such equipment are tax exempt. Favourable tax policies are also extended to the foreign investors investing in farm machinery and agriculture.

Due to the above-mentioned factors, production and sale of irrigation equipment are very active. The domestic market situation of irrigation and drainage machinery in 1995 was better than 1994 and has an annual sales income of 2.384 thousand million RMB yuan, a growth rate of 24.17% over 1994. Products which sold very well include water-turbine pumps, well drills, small, medium and large pumps. The sales volume of long-spindle deep-well pumps and portable sprinkler sets declined. The imbalance in sales for different enterprises widened. Domestic production and sales of irrigation and drainage equipment in 1994 and 1995 are shown in Table 6.

TABLE 6 Output and sales volume of irrigation and drainage equipment (1994, 1995)

Classification	1995	1894	1995 increase or decrease fate over 1994	Annual sates volume
Machinery for irrigation, drainage & water conservancy	55 865	80 136	-30.29	60 021
portable sprinkler set	54 467	79 228	-31.25	58 484
farm well drills	1 291	800	61.38	1 360
Total number of farm pumps	2 380 026	1 635 163	45.55	2 221 295
large	1 549	1 132	36.84	1 742
super large	262	189	38.62	270
small & medium pumps	1 135 494	671 481	69.10	1 059193
mini-pumps	468 711	189 057	147.92	422 509
deep-well pumps	28 969	25 279	14.59	27 698
long-spindle deep-well pumps	13 774	14 419	-4.47	13 725
submersible motor pumps	1 039 755	920 853	12.91	977 388
submersible deep-well motor pumps	75 250	78 498	-4.14	69 596
small submersible motor pumps	837 698	813 173	3.02	788 020
water-turbine pumps	1 888	332	468.67	1 709

TABLE 7 Export situation for farm machinery in 1995

Areas	Export value (in US$ 10 000)
Asia	32 060.1
Africa	1 803.3
Oceania	255.3
South America	1 842.8
North America	3 872.5
Europe	2 161.0
Total	41 995.0

China is paying great attention to the international market. In 1995 sales in the international market continued to grow and were better than in 1994. The value of exported goods (irrigation equipment) in 1995 reached US$ 26.45 million. The volume of export of farm pumps increased considerably. The major areas for export are some countries in South Asia, Southeast Asia and Africa. Table 7 shows the export situation for farm machinery in 1995.

Factors influencing the market of irrigation equipment.

The first of the factors influencing the market of irrigation equipment is the growth of demand in rural areas. As a result of the opening of the Chinese economy and associated reform policies, growth has been high. Living standards in rural areas have improved as well as farmers' purchasing power. Furthermore, farmers' desire to improve their production conditions has become increasingly stronger. The second factor affecting the market of irrigation equipment is the government's attention to agriculture. In recent years, the central government has increased agricultural investment and loan programmes, which have been directly transformed into demands for agricultural production materials. The third is climate. In China, many areas, big and small, frequently suffer from drought every year. In cases where drought is nationwide or affecting large areas, sales of equipment increase considerably. The fourth factor is the formation of a complete system, including production, sales, services and technical security, which is conducive to market development.

In spite of China's above-mentioned achievements, the potential market demand is still very large. Water shortage, population growth, improved living standards, development of new agricultural production bases and updating old equipment are all factors in the promotion of production growth of irrigation equipment.

Factors influencing prices of irrigation equipment

Compared with other countries, the prices of Chinese small irrigation equipment are very low. The factors which influence these low prices are analysed below.

Labour cost

This is a very important point. For small irrigation equipment, for example metal products, the proportion of labour costs is usually 20-40% above of the total price. This proportion reflects the low level of automation of the factories. However, in most areas in China, labour costs are very low, bringing down the product prices.

Raw materials

In China, metals such as steel, iron, copper and aluminium, which are used for the manufacturing irrigation equipment are all domestic products. In recent years, price changes of raw materials have been very unstable due to the fluctuation of demand. The following chart shows price changes for aluminium:

The chart indicates large price changes. A similar situation occurs with steel products. Such changes exert great influences upon irrigation equipment. It should be noted that in China the prices of plastics and heavy metals already approach international market prices and are, in fact, influenced by the international market. Therefore, the prices of irrigation equipment in China are clearly related to the prices of raw materials.

Government incentives

Government incentives for irrigation equipment are as follows:

· low interest loans to factories and users;
· tax reductions and exemptions, with different production, marketing and export policies;
· rice inspection, (sometimes compulsory); high price increases by factories is not allowed;
· funding for extension services to reduce staff dependence on enterprises;
· equipment subsidies for farmers; and
· financial investment in research and development activities.

These government actions have helped to reduce equipment prices and enabled farmers to purchase more equipment.

Market competition

In China, the framework of market economic structure has been initially shaped. The market has already played the major role in regulating most of the industrial products. In China, many enterprises produce irrigation and drainage equipment. Product prices are usually reduced to attract users, to compete for market share and expand sales. Consequently, product prices and factory profits decline. This decline is favourable for farmers.

Low price of irrigation equipment does not only reflect low costs but is partly a result of factories sacrificing their profits to be more competitive. Under circumstances of low prices, factories have to reduce production costs if they still want to secure some profits. Factories must, therefore, effect economies of scale. Most of the enterprises producing irrigation equipment in China are small to medium sized. Enterprises are increasingly becoming more aware of the importance of alliances and economies of scales and are therefore encouraging intensified development. This intensified development is important for the reduction of irrigation equipment prices.

Other factors

Climatic conditions, grain prices and speed of economic development are all influencing the equipment prices.

Analysis and recommendations for improving the supply of small irrigation equipment in Southern and East Africa

There are many kinds of small irrigation equipment. Differences exist in technical complexity, production conditions and use and management requirements. Equipment varies from the simple (such as hand pumps) to the complex (for example, submersible motor pumps). Effective improvement of the local supply of irrigation equipment is related to the type of equipment, market, industrial base, service system and government intervention. The following is a discussion of the advantages, weaknesses and the conditions necessary for several forms of supply.

Import from abroad

Importation is necessary under the following circumstances: (i) there is market demand but no ability to produce the equipment locally; (ii) the quality of imported equipment is good and the price is lower than on the local market or is acceptable; (iii) new equipment never used in the locality is introduced; and (iv) equipment is obtained through international assistance. The advantages of importing from abroad include: (i) avoiding additional industrial investment in the production process; (ii) removing pressure on managerial and technical staff of production sectors; and (iii) flexibility in adjusting types and quantity of products.

Limitations of dependence on importation include: (i) the enterprises are not sensitive enough to the response to their products on the market because the production enterprises are located overseas; (ii) steady supply depends on the overseas enterprises; (iii) foreign currency has to used; (iv) development of national industries may be negatively affected and (v) tariff and transportation costs increase equipment prices.

Local production

Production of small irrigation equipment should be localized to ensure a stable solution to supply equipment in the long term. This is the ultimate long term and stable solution to the supply problem. If conditions and the requirements for the establishment of local production systems for various equipment are different, the time for completing the process of localization is also different. Some products can be localized relatively quickly, e.g. water transmission pipelines for (including cement pipelines and plastic pipelines) simple hand pumps and water hammer pumps. Other products require specialized industrial equipment, e.g. submersible motor pumps, pump units driven by diesel engines and more complicated water pumps. The manufacture of these types of pumps also requires skilled professional staff and decision-making of investors.

Provided the technical and managerial conditions exist, another very important issue is the market. The absence of a large enough market as a supporting condition means that investment in local production is not good. With respect to Southern and East Africa, it is very important to form a common market through coordination among concerned countries. These countries can quickly form the regional production bases and thus promote the localization of production of irrigation equipment. If this action is only limited to a particular country in Southern and East Africa, however, local production will develop slowly due to the limitations of the national market. One way to complement investment returns is the provision of government subsidies.

Another condition required for local production is the establishment of product research and development. If there is a limited selection of equipment in the region, careful research and study of the use of existing technologies in other developing countries, which have accumulated successful experiences, is very necessary. In fact, the research and development costs of all products from the very start are rather high and are not necessary at all if this approach is not used.

Suitable technologies can be introduced into the local enterprises through technology transfer arrangements. Technology transfer can help to avoid duplication of efforts in research and development and requires less investment. The success of technology transfer is based on one condition - that the local scientific and technical staff are familiar with the situation of small irrigation equipment of other countries, the advantages and limitations of these equipment and understand how to adapt the transferred technology to the local conditions. This familiarization requires a large amount of effective information and practical experience.

Role of the government

Production of small irrigation equipment is a commercial activity, while agricultural production and the improvement of rural living are social activities. The Chinese experience indicates that the government should take greater responsibility for this work.

· Tilting policies. Various measures for the promotion of agricultural production should be included as important components and guidelines of the government. Under the guidance of this general principle, they should be reflected in the concrete policies in science and technology, industries, agriculture and finance.

· Establishing a service system for the extension of science and technology. The task of the extension of irrigation technologies is to direct farmers to master new technologies and equipment, improve the conditions of agricultural production and achieve the aim of raising grain output. The focus of this non-profit activity is to establish expert networks and organizations in rural areas to provide services to farmers.

· Financial assistance. Financial support is important for farmers to help them to easily accept new equipment and reduce their burden. There are many approaches through which government can provide farmers with financial support.

· Efforts should be made to create an "attractive" environment for foreign investors to promote capital and technologies to quicken the pace of technology introduction.

· Cooperation among countries in the region. Exchanges in technologies, equipment, staff and information should be widely encouraged to form a common market.

· Staff training. Related special programmes should be set up in special schools, universities and research institutes to train different levels of technical staff. Research should be conducted on application and work done on extension and the formation of a team of experts.

Recommendations

· Irrigation experts, government officials, staff of enterprises and other institutions should be organized by UN organizations, regional organizations or through bilateral arrangements to engage in technical exchanges on the technologies and applications of small irrigation equipment. In particular, study tours should be conducted to other countries so that there is cooperation on the content, objectives, methods, direction of technological development and product choices of the major types of equipment.

· Demonstration areas of different types of equipment from other developing countries can be established in the region to provide local farmers with an opportunity to observe the effects of these small equipment and arouse interest to try out the equipment. Training bases can be situated nearby to provide farmers with training.

· Under the support of the United Nations or other international organizations, training courses, workshops can be conducted in the developing countries with the relevant experiences. Experts can be invited to give lectures to local participants, visit facilities and train local technical extension staff.

· International financial institutions should provide assistance for this activity.

· Governments in the region should make requests to countries with which they share experiences and develop relationships to promote technology transfer through intergovernmental arrangements.

· The United Nations organizations, especially FAO, should continue to encourage the development of the whole process, formulate further actions and programmes, and guide more governments, enterprises and groups to participate in this programme.