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Posed on a knife - Edge

It is easier to understand past production successes than tradeoffs inherent in future solutions

by Peter Timmer, Walter Falcon and Gerald Nelson

Food policy in China

Given China's past success with food production and distribution, a turnabout from agrarian priorities toward industrialization might be expected. Such does not appear to be the strategy for the next five to ten years. At the Fifth National Peoples' Congress, Chairman Hua Kuo-feng announced a 1985 production goal for Chinese agriculture of 400 million tons of grain, an annual growth rate of about 5 percent. Such a rate is very high by world standards and by China's own performance in the past three decades. The possible reasons for such a high growth target, given the already adequate availability of food grains for human consumption, and of the mechanisms used to achieve this target are important for both China and the rest of the world.

For China, the implications are enormous for the type of diet consumed, regional autonomy, the contrast between farm and factory work, and the role of personal economic incentives. For the rest of the world, the alternative possibilities of China emerging as a major exporter of both wheat and rice or as a major importer of feed grains could alter the entire food resource picture a decade from now. If China intends to become a major grain exporter, the projected increase in production of 120 million tons by 1985 is very large. Total international trade in rice and wheat has averaged about 9 million tons and 60 million tons respectively in recent years, and the projected Chinese increase dwarfs other agricultural plans throughout the world.

The rising demand for meat

Four possible reasons might explain the high growth target. First, increased agricultural output in a number of lagging provinces would make these regions more self-reliant and help satisfy a latent demand for grains among consumers. Second, if internal production were to increase rapidly, the additional freedom for China to function actively in world grain markets might be important both politically and economically. Third, population will continue to increase, although the present rate of about 1.5 percent annually is low by world standards. Further, a target rate of 1.0 percent per year increase in population is now written into official policy documents.

A fourth and more plausible need for more grain is livestock production, particularly pork. Although the data are sparse, the growth in livestock output has been important, and livestock productivity is increasing for those animals owned collectively. Pig numbers, for example, increased from about 60 million head in 1952 to nearly 300 million head at present. These pigs added enormously to the supply of animal protein in the diet, to organic fertilizers, and probably to the internal demand for grains of various kinds. The most productive swine herds in model areas appear efficient by developed country standards - eleven pigs per litter and 200-lb market pigs in less than six months (versus about five months in the United States). Similarly several herds of dairy cattle shown to visitors have averages of more than 11000 pounds of milk per cow annually. (The United States national average in 1950 was only 5 300 lb and is now about 11 500 lb). Certainly, not all animals in China are on high energy-protein diets, and "wastes," sweet potatoes and other root crops are particularly important for feeding privately owned pigs. However, the renewed focus on communally owned livestock and the growth in animal numbers suggest that there will be increasing interactions between the feed and livestock sectors.

Increased grain output thus appears as part and parcel of a rise in real incomes within China and a corresponding increase in demand for livestock products. China, like the Soviet Union, will be faced increasingly with a series of interrelated strategy decisions dealing with production, consumption, crops and livestock. Some observers would argue that China should stay with vegetable protein (grain) diets for health reasons (the leading cause of death in China now is cardiovascular disease), as well as the smaller burden on natural resources. However, if the rising demand for meat is to be permitted and to be met domestically, grain availability will have to increase at a rate substantially above the rate of population growth. If the grain output does not increase, decision-makers will then be faced with the problem of either curtailing the growth of livestock production or entering the international market for feed grains.

With respect to the international grain markets, China can be described appropriately at present as being posed on a knife-edge. If grain production expectations materialize, it could enter significantly on the export side. If they do not, it could become a major purchaser in the international feed-grain market. These important issues are conditioned both by weather and by policy decisions. However, one thing does not seem at issue. The decisions about grain are important mainly as concerns the livestock economy and have little to do with China's basic ability to provide adequate calories from domestic production for human consumption.

Fertilizers. Given the knife-edged trade position described above, it is important to assess the basis for China's plan to increase grain output by more than 5 percent annually. Obviously, fertilizer will play a central role since China's scarcity of nitrogen continues despite major efforts to use virtually all forms of organic nitrogen. Total fertilizer application rates on average are low compared to those in certain other parts of Asia such as Java, Korea and Japan. There is clearly untapped potential for large amounts of nitrogen use. Particularly in areas where three crops are grown per year, the fertilizer requirements are high. Few areas appear to be using more than 70-80 kg of nitrogen per hectare per crop, of which half is frequently in organic form. It seems highly plausible that large grain-to-nutrient ratios will be possible with up to double current dosages.

The Chinese understand the importance of nitrogen and other forms of fertilizer, and virtually no animal wastes are burned as fuel. In addition, China now has under construction thirteen urea plants with an average capacity of approximately 1500 tons per day. These plants are just beginning to come on stream and, despite some reported construction delays, should provide a significant production boost during the next several years.

On the other hand, there are constraints to substantial increases in fertilizer application rates. At the present time, approximately 8 million tons of chemical fertilizers (nutrient basis) are being used annually. About two thirds are nitrogenous in form, and, of the total chemical fertilizers in use, about 15 percent are imported. The thirteen new urea plants would add potentially about 3.3 million tons of elemental nitrogen to China's yearly supply. This is a very large quantity - equivalent to about 160 000 train-car loads of fertilizer per year. But even assuming an 8 to 1 grain-to-nutrient ratio, full capacity utilization of fertilizer plants and all of the urea used on grains, the incremental effect from this additional fertilizer is "only" about 26 million tons of grain. This large absolute quantity would be less than one fourth of the 120 million-ton increment sought by 1985. Under more realistic assumptions, an addition of 15-20 million tons of grain from increased fertilizer use would be a remarkable achievement.

There are three ways in which the chemical fertilizer constraints in China could be eased further. The first would be to expand the number of largescale chemical fertilizer plants. With substantial oil and gas reserves, fossil fuels per se are not a particular constraint to fertilizer manufacture within the country. On the other hand, supporting infrastructure could be a limitation.

It is surely no accident that the plants currently being erected are on gas fields scattered throughout the country. Such a spatial pattern is consistent with a general emphasis on decentralization; however, it is also consistent with limited capacity in the transportation system and the difficulty of moving large quantities of fertilizer (or grain) about the countryside. Greatly expanded domestic fertilizer production, which could be accomplished in two to three years from the time investment decisions were made, may be only the tip of the investment iceberg. To change the fertilizer input structure throughout the country radically may require large expenditures for infrastructure not contemplated at the present time in the overall investment plan.

A second alternative for relieving the fertilizer constraint would be to import substantially increased quantities. If the Chinese take the grain targets seriously, there may be few alternatives to such a strategy. Even though the transportation bottleneck could be serious also for imported fertilizer, many of the high-yielding areas are located near major ports and could be conveniently supplied by imports. Indeed, a process whereby China exports more grain and imports more fertilizer may look very attractive on economic grounds in the early 1980s. The possibility of bartering surplus Indonesian urea for Chinese rice has no doubt occurred to both parties.

No short-term panacea

Increased use of organic fertilizers offers a third alternative. If anything, however, the trend in use of organic materials is likely to decline rather than to increase despite a probable rise in livestock numbers. This judgement results primarily from the large labour requirement involved in using organic wastes. With a concern for relieving labour effort in agriculture, there will be strong pressures to have additional chemical fertilizer substitute for organic forms. Unless technical change takes place with respect to waste-handling systems, there may be strong disincentives for increased use of organic materials. Therefore, despite untapped technological potential from fertilizer, this input provides no short-term panacea to the problems involved in the future growth of grain output. In fact, decreased use of organic fertilizers could lead to other problems. Crop production does not now appear to suffer generally from trace element deficiencies despite land use for hundreds of years. This resilience may be due to the extensive use of organic fertilizers. However, as Chinese agriculture shifts increasingly toward chemical fertilizers, trace element deficiencies may become more prevalent and reduce the effectiveness of nitrogen increments.

Mechanization. In assessing China's agricultural prospects, it is important to distinguish between two very different mechanization questions: to what extent does mechanization actually increase output, and, to what extent is mechanization simply a substitute for labour? The second effect may be highly desirable if the manpower so released can be employed productively but, in more narrow agricultural terms, mechanization of the second type may have little bearing on the achievement of growth targets for grain production.

A thorough assessment of these two effects must be taken up on a region by-region, crop-by-crop, and implement-by-implement basis that is well beyond the scope of this article. However, as a very rough generalization, the major production effects of mechanization come when tractors and implements expand the total area of cultivable land and/or increase the areas that can be double- or triple cropped. Thus, another way to ask the question is: in what regions do power constraints limit agricultural output?

To relieve peak labour demand

From a growth perspective, these areas appear to be smaller than the Chinese imply. One clear area of potential is in the northeast, where rainfall tends to be scattered over a two to three-month period. This is an area also where state farms are relatively more important and from which there have been continual reports that power constraints keep the areas sown to grain smaller than would be possible if there were additional power units to work the land during critical periods. It is quite conceivable, therefore, that increases in the number of tractors could have an important effect on growth in provinces such as Heilungkian and Sinkiang.

There are also marginal areas between double- and triple-cropping systems where the possibility of ploughing with tractors rather than with animals, or harvesting by machine rather than by hand, would permit the growth of an additional crop. It is hard to say how important these regions are quantitatively, but they are probably fairly limited.

On the other hand, certain mechanical innovations may have very important implications for the release of agricultural labour even though the implements themselves have little direct output effect. The much talked-about rice transplanter might help to relieve that peak labour demand; similarly, an improved mechanical maize picker might eliminate certain labour bottlenecks in the maize region. Waste management appears to be another area where there are substantial opportunities for reducing the manpower-input in preparing and spreading manure and compost. Finally, it is possible that additional power units would also help to ease transportation (hauling) bottlenecks within communes and between fields and distribution centres. Indeed, it would appear that a high proportion of China's large and small tractors (more than 1 million units) are used primarily for moving inputs and products. While using tractors in this manner may not be the most efficient means of moving goods such activity is extremely important economically, especially given constraints on other forms of transport.

Mechanization is not synonymous with tractorization. The design and spread of new implements may be as important as the power units themselves. In addition, certain other forms of mechanical inputs, such as irrigation pumps, may be extremely important for increasing output. Use of pump equipment has increased in China from 0.1 to 1.8 million units during the period 1965-77, and further expansion of pump irrigation may be one of the most important sources of agricultural growth in the 1980s.

Behind the rest of the world

Finally, the contribution of agricultural machinery to increased grain output will depend on China's design and production capabilities. Indigenous capacity exists for producing small tractors - the 15-20 hp range models appear to meet world competition in terms of cost and quality. But the design of larger scale tractors (over 35 hp) is much more characteristic of 1950s technology in the West. And the crude designs for typical agricultural implements - cultivators, ploughs, planting equipment, and especially harvesting equipment - are very similar to the late 1930s and early 1940s in the United States when American agriculture was shifting from horse-drawn to mechanical equipment. In short, machinery design appears to be one field in which the Chinese policy of autarky has left the country considerably behind the rest of the world. The new emphasis on agricultural technology and mechanization in China suggests that trade and technological transfer from the rest of the world in this area might be reasonably expected.

To summarize the disparate aspects of agricultural mechanization within China, it will be a central element in the new agricultural strategy, but new machinery is not likely to provide the major basis for the anticipated growth in grain output.

Seeds. The most striking impressions of seed technology have to do with two aspects of Chinese agricultural production. The first involves the high and uniform yield report from most crops by all visiting delegations. Variations among communes and more broadly among regions do exist because national average yields are significantly lower than yields in frequently visited areas. But crop uniformity is very impressive, and the second impression, reinforced by specialists at the research institutions, is that there is little technology available at research institutes that is not already on most communes and state farms. While China gets extraordinarily high marks for moving its research results into the countryside and for having a widespread system of adaptive field testing, the short-term technological outlook appears fairly dim. The political and social disruption of the past ten years certainly did not assist, and may have impeded, the generation of new seed varieties and development of other new technological breakthroughs in agriculture.

Since China is on the yield frontier for most agricultural crops, there is little that the country can borrow usefully from abroad. More specifically, there are few foreign seed varieties for either cereals or legumes which, by direct importation, would give a dramatic increase in yields per hectare. As a consequence, it is unlikely that easy developments for grain-yield increase are just around the corner for China. For example, the experiments with hybrid rice in southern China, which were announced with considerable fanfare in Chinese news bulletins in March 1978, appear to be running into substantial difficulties.. The labour requirements in producing this seed and the relatively small yield effects of the new varieties suggest much more caution on their potential role than was implied in the early publicity.

Simply amazing

In the short run, therefore, providing enough fertilizer to use with existing varieties is likely to be more important than developing new seed strains. For the longer run, Chinese work on nitrogen fixation may add a new dimension to the green revolution technology that is already at an advanced stage within the country.

Pesticides. Problems of pests, weeds and diseases per se appear fewer in China than in other countries such as the Philippines and Indonesia. For rice in particular, problems of tungro virus, grassystunt, and planthoppers do not appear to have caused the severe havoc that they have played in southeast Asia in recent years. The programmes for breeding and integrated pest management that are followed in China appear to be very effective. Similarly, the commune has proved itself well suited for monitoring insect populations so as to spray large blocks at optimal times. While fine-tuning of pest control can always add to output at the margin, there does not appear to be any obvious new set of pesticide techniques that would greatly increase grain production.

Water control. Yet another input that might make a significant difference in agriculture in the 1980s has to do with expansion of irrigated land and with improved irrigation-water control. Short of major engineering investments, such as building crosscountry canals and pumping stations to move water from the Yangtse river to the Yellow river basin, it is hard to imagine what the Chinese might do to improve upon their water-control systems. The degree of water control at the field level, particularly in south China, is as highly developed as it is anywhere in the world. There is such control on moving irrigation water in, and draining excess water out of some areas, that it is possible to see fields at the same elevation which grow flooded rice in one parcel and other crops in adjoining fields. This irrigation system has been developed over hundreds, perhaps thousands of years, yet the recent improvements are simply amazing. No more sober word seems appropriate.

The story on irrigation, however, is much the same as that on other inputs. Except for some additions at the margin, such as the expanded use of pump irrigation, it is simply very difficult to know what can be done next. Most of the easy steps have been taken, and the water-control system in China leads most of Asia by a substantial margin. Except for the possibilities of long-run basin-to-basin transfers of water, which are apparently being talked about again after a hiatus of a decade, it is difficult to see any basis for expecting irrigation to play a leading role in the 5-percent growth projections.

Labour and management. A return to hierarchy is now taking place with respect to the organization of labour in China. Within farms, factories and schools, the days of extreme egalitarianism seem to be undergoing substantial modification. Managers and professionals are more in evidence, and the time spent discussing productivity has risen considerably compared to that spent in self-criticism. Much of the productivity discussions within agriculture have centred on mechanisms for relieving peak labour demands within the countryside.

The hard-working and organized nature of Chinese agricultural labour is especially impressive. Building on the agricultural tradition of thousands of years, the Chinese farmer clearly knows what he is about in the countryside. In addition, communes and state farms seem able to adjust factor proportions to the resources at hand.

Thus, labour intensities in the south are vastly different from those in the northeast. Even within the northeast, rice is grown with very different methods on state farms and communes, e.g., rice is typically sown broadcast on the former, but transplanted on the latter, largely as a response to relative availabilities of capital and manpower. This ability to use a wide range of potential techniques within agriculture is a fundamental reason for the impression that China has largely solved its labour surplus problem. Moreover, the absorption of labour into agriculture, coupled with severe restrictions on migration, are the main reasons why overt unemployment is not obvious in the cities.

For the future, the haunting question is again what the Chinese can do with respect to workers that they have not already done. It may well be that about the maximum has already been obtained from the use of group incentives and pressures. China has achieved extraordinary results with group efforts in the past, but only substantial increased individual flexibility seems likely to cause labour per se to be a major factor affecting growth in grain output between now and 1985.

Trade and livestock

As with any food system, it is easier to understand China's agricultural production successes and problems than it is to understand the policy tradeoffs inherent in future solutions. However, several policy issues are apparent even to outsiders.

One interesting feature of the discussion of agriculture in China relates to its almost exclusive focus on growth and productivity. In marked contrast to other countries where debates on income distribution, employment and basic needs are on centre stage in the policy arena, China appears to have solved many of these issues. Somewhat ironically, therefore, discussions in China resemble the growth-oriented discussions common in other Asian nations during the early 1960s.

Given the high existing standard of Chinese agricultural performance, projections of a 5-percent rate of growth in grain output seem very unlikely to be achieved between now and 1985. Fertilizer offers the best hope in the short run, but the investment demands even for this one input will be very substantial. Mechanization offers limited possibilities in several regions and may also be important in releasing significant amounts of labour from tasks of real drudgery. But taken as a whole, the input basis for a 5-percent annual growth seems very elusive, and a projected rate of 2 to 3 percent would appear far more credible.

If grain output fails to grow rapidly from indigenous inputs, there are likely to be two potential sources of adjustment. The first of these is trade, where China might reasonably be expected to enter the fertilizer, feed-grain and agricultural machinery markets - provided that such trade is consistent with its broader view of global economics and politics. The second and more likely adjustment is through livestock numbers. Failure to increase grain output will almost surely not result in the Chinese population suffering from calorie deprivation. The result will rather be a decrease in the potential quantities of meat made available to the population. It is in using livestock as an adjustment mechanism that China resembles much more the developed agricultures of North America, Western Europe and the USSR than it does most of its less developed neighbours in Asia.