China is about to enter its second major period of agricultural reform since the 1980s, with the goal of shifting to large farms and “professionalized” farmers who are more productive than those working on a small scale, a high-level central government official said on Wednesday [4 November 2015]. The coming 13th Five-Year Plan (2016-20) will start the change, said Chen Xiwen, deputy director of the Central Rural Work Leading Group. In 30 years, about 85 percent of China’s supply of farm products will be provided by 7 percent of its labor force, said Zou Lixing, a research official with China Development Bank…Full Article: Nov 2015

Key Points

  • As of 2014, China reportedly had 22 million small plot farm workers in the country.
  • The upcoming reform will incentivize Chinese farmers to contract out their land to entrepreneurs or companies.

ChinaAg Comments

  • In early March 2015, the mainland’s China Banking Regulatory Commission (CBRC) urged domestic banks to improve rural lending services in order to modernize the country’s agriculture sector.
  • In December 2014, the Chinese government announced that it would extend tax breaks on interest revenues banks generate from loaning money to farmers (i.e. revenues are exempt from sales tax and corporate income tax, and tax will only be paid on 90% of interest revenues). In addition, the PRC government announced that the ceiling amount for small loans to farmers will be raised from CNY 50,000 (US$8,130) to CNY 100,000 (US$16,275). Lastly, the 3% discount on sales tax (county level payable) from insurance was extended through the end of 2016.
  • In August 2014, China announced that its farmers will soon be allowed to use their contracted land as collateral for bank loans. Additionally, local governments and organizations will reportedly push for lower interest rates, extended maturity for loans, and favorable credit ceilings for farmers.
  • In April and June 2014, China cut its reserve requirement ratio (RRR) for banks that lend to agricultural enterprises by 2% and 0.5%, respectively.
  • In March 2014, China’s central bank announced the establishment of a credit system for serving small and micro-sized companies and farming households. The system, which will aid farmers to receive small loans, was to be piloted in 31 cities and 32 counties, including Gaoling County, Shaanxi Province.
  • In February 2014, China’s central bank announced they will institute customized financial services in order to modernize farming practices. For example, farmers who cultivate fruit or other crops will long growth cycles will be eligible to receive loans that have a maturity length of up to 10 years.

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