Research by Country and Region
The International Food Policy Research Institute has collaborated with Chinese institutions for more than 10 years, with mutually rewarding results. IFPRI has learned from China's experience in agricultural and economic reforms and rapid poverty reduction and has shared these experiences and lessons with many developing countries. China has also benefited from collaboration with IFPRI on joint research, training, and capacity strengthening. The following is a summary of past major studies and proposed future research activities. For more information about IFPRI's China program, contact Shenggen Fan at s.fan@cgiar.org.
Although China's overall economy will certainly gain from the country's entry into the WTO, these gains will not be equally distributed among sectors and across regions. The agricultural sector will be challenged by competition from cheap imports. Smallholders, particularly in the northwest and southwest, will gain very little or may even lose, since farmers in these areas are still predominantly engaged in grain production, in which China has no comparative advantage. These producers will suffer the most if appropriate policies are not implemented to help them adapt.
The objectives of this proposed study are to analyze the impact of WTO entry on smallholders in livestock-predominant rural western areas in China, and to offer policy options, particularly public investment policies, that will lead to faster economic growth and poverty reduction and buffer against shocks resulting from WTO membership.
The study will use a multilevel analysis at the household, community (township and village), and regional/national levels. The household-level analysis will focus on the determination of rural household income, nonfarm employment, and rural wages, using a household model. The village/township-level analysis will evaluate how local government policies and institutions affect farmers' welfare and the efficiency and effectiveness of public provisions. The regional/national-level analysis will quantify the effects of China's macroeconomic and trade policies, such as the impact of WTO accession, on different regions, particularly the less-developed western rural regions, and on farmers' welfare. The study will use a series of multilevel simulations (that is, interactions among the macroeconomy, sectors, regions, communities, and households). The multilevel modeling system will then be used to evaluate alternative policy interventions to help the western regions adapt to WTO accession.
It is difficult to measure the exact degree of China's support to agriculture, considering its complex pricing and financial system. However, the general trend is that China is in transition from taxing to subsidizing its agriculture. The proposed study will help develop support measures that are consistent with both Chinese pricing and financing systems and WTO standards.
The Green Revolution that began in many developing Asian countries in the late 1960s and 1970s has led to rapid growth in agricultural production and to large reductions in poverty. However, intensive use of fertilizers, pesticides, water, and other industrial inputs typical of the Green Revolution has also led to degradation of natural resources and the environment, including underground water depletion, soil salinity, and wind and water erosion. Environmental degradation in turn has led to a slowdown or even decline in agricultural growth, in addition to its negative impact on human health and the ecosystem.
The key hypothesis of the proposed study is that intensive use of inputs may increase agricultural production rapidly in the short run, but that it may cause the growth rate to decline or even stagnate over time-and that agricultural growth and sound natural resource management need not be at odds.
Using regional data from China, the study will estimate the dynamic and causal relationship between agricultural growth and environmental degradation. Based on estimated results, an optimal path of input use will be derived to achieve long-term, sustainable growth in agriculture.
China (the dragon) and India (the elephant) have taken different development paths for the past two and a half decades. Although both countries began the reform process in the late 1970s, they implemented different processes and experienced different outcomes. While China and India have achieved considerable benefits in terms of increased agricultural development and reduced poverty levels, a large share of their populations continue to suffer from poverty, food insecurity, and malnutrition, particularly in India.
China and India are easily comparable. Both countries cover a large landmass, both have more than a billion people, and both are engaged in the reform process and moving toward a market-oriented economy. Yet, both show significant differences as well. For example, China has had a centrally planned economy, while India has had a much stronger private sector. Economic reforms were initiated earlier in China, with India following more than a decade later. China has been following a bottom-up approach, moving forward from sectoral reform, which has stimulated macroeconomic reforms; India has taken a broader approach to macroeconomic reform, fine-tuning sectoral reform later. In both countries, reforms have led to rapid economic growth, expanded international trade, and a large reduction in rural poverty. The objectives of the IFPRI project are
The Yellow River Basin in China has been chosen as one of seven benchmark basins that will be the focus of research projects under the CGIAR water and food challenge program. The policy component of the program will be implemented by IFPRI. The objectives of the Yellow River Basin research include
More detailed information can be found at http://www.cgiar.org/iwmi/challenge-program/index.htm.
For information on this program see http://www.cgiar.org/pdf/biofortification.pdf.
IFPRI has conducted studies to evaluate the impact of agricultural research on agricultural production growth. Many economists have analyzed the important impact on Chinese agriculture of the rural institutional and policy reforms that began in 1978. However, they have ignored the growth-promoting impact of technological change induced by agricultural research investment. IFPRI found that increased investment in agricultural research accounted for almost 20 percent of overall growth in Chinese agriculture from 1965 to 1993 (Fan and Pardey 1997). Moreover, the study found that, if the impact of agricultural research were omitted from growth estimations, the effects of institutional and policy reforms would be overstated by a large margin. Because institutional impact has been largely exhausted, future growth in Chinese agriculture will increasingly depend on technical change and improved productivity.
IFPRI research also estimated the economic returns to agricultural research investment. Studies found that the rate of return to research investment in Chinese agriculture ranges from 35 percent to 60 percent, which is much higher than commercial interest rates (Fan 2000).
Supported by the Special Panel on Impact Assessment (SPIA) of the Consultative Group on International Agricultural Research (CGIAR), IFPRI also completed a study to quantify the impact that international agricultural research by the International Rice Research Institute (IRRI) and the International Center for the Improvement of Maize and Wheat (CIMMYT) has had on China's agricultural growth and poverty reduction. Researchers found that more than 20 percent of China's rice and wheat production value can be attributed to agricultural research, and that international agricultural research centers have played a key role in promoting agricultural production in China. For example, even using a conservative attribution rule, IRRI's contribution to China's agricultural production growth in 2000 was more than double IRRI's entire budget for that year.
Lester Brown's 1995 book Who Will Feed China? led to a vigorous debate on whether China can feed itself with its own production or whether it will have to import a large amount of grain from the international market. The latter would lead to higher global grain prices and therefore would harm many of the world's poorest countries and people.
From the beginning, IFPRI has participated in this debate by providing scientific evidence from its own research. Supported by IFPRI's 2020 Vision Initiative, a China model (part of IFPRI's global projection model) was built, based on empirical data and econometric parameters. The results from the model show that, contrary to Lester Brown's claim, China will not starve the world, and China's rapid development can actually help the poor in developing countries (Huang, Rozelle, and Rosegrant 1997). These results were also compared to and found to be consistent with projections made at other research institutions using rigorous modeling approaches (Fan and Sombilla 1997).
China has reduced rural poverty enormously since 1978, as a result of institutional and policy reforms, technical change, and increased efficiency in the agricultural sector induced by government investment in agricultural research. Education and infrastructure improvements have also contributed to rapid growth and poverty reduction in rural areas.
Supported by the Australian Centre for International Agricultural Research (ACIAR) and the Japanese government, IFPRI undertook a study to analyze the impact of public investment on rural growth and poverty reduction. The research found that investments in education, agricultural research, and rural roads are the most cost-effective ways to reduce rural poverty and increase agricultural growth in China (Fan, Zhang, and Zhang 2002):
The research findings also indicate that additional investments in the less-developed interior regions are more effective than investments in the more-developed coastal areas in further reducing poverty and achieving regionally equitable patterns of development. Several types of investments in these underdeveloped areas now yield the highest productivity returns and the greatest poverty reduction and regional equity in development compared to more-developed areas.
To discuss these issues, an International Conference on Rural Investment, Growth, and Poverty Reduction was held November 5-6, 2001, in Beijing. The conference was jointly sponsored by IFPRI, the Institute of Agricultural Economics of the Chinese Academy of Agricultural Sciences, the Center for Chinese Agricultural Policy of the Chinese Academy of Sciences, and the Industrial Development Research Institute of the State Development Planning Commission. More than 100 policymakers and researchers from central and local governments in China attended, along with researchers from Australia, India, Japan, and Vietnam, and researchers representing a number of international organizations. The conference received wide coverage in both the Chinese and English-speaking media.
Supported by the Japanese government and ACIAR, IFPRI conducted two lines of research in China at the village level. One looked at the impact of recent reforms that allow villages to elect their own leaders rather than be governed by appointed cadres. The second line of research examined how public investments in infrastructure and human capital at the community level affect farmers' private investment behavior.
IFPRI's research shows that elected officials tend to tax constituents less and provide them with more public services than do appointed cadres. This in turn leads to more rapid economic growth. Elections have made village leaders more accountable and have provided villagers with more checks and balances against the excesses of their leaders. However, elections alone cannot solve the problem of underinvestment in public goods in many underdeveloped areas, since the local tax base is too small to cover public investment needs. This will require a greater transfer of public funds from central to local government (Zhang, Fan, Huang, and Zhang 2002). IFPRI research also found that farm households' investment in agricultural production is largely dependent on their access to infrastructure, credit, and technical and education services. This relationship highlights the positive role government investment plays in agricultural growth, in this case through its indirect encouragement of private investment in agricultural production (Liu, Zhang, and Fan, 2002).
China was formally admitted into the World Trade Organization (WTO) in December 2001. The overall impact of China's entry on its economy will be positive, but certain regions and sectors may gain relatively little or even suffer. IFPRI constructed a regional computable general equilibrium (CGE) model of China to analyze the impact of China's WTO accession on the agricultural sector and rural income. The results show that total welfare will improve but regional income gaps will widen in China. The agricultural sector will suffer if only agricultural trade is liberalized. Lifting trade barriers in both agriculture and nonagriculture will benefit farmers at the national level. However, the increase in rural income is still smaller than the increase in urban income, which implies that the rural-urban income gap may further widen. Farmers in less-developed rural areas will benefit little or even suffer because agriculture, especially traditional agriculture, is still an important source of their income. For more information see TMD Discussion Paper No. 87 at http://www.ifpri.org/divs/tmd/dp/papers/tmdp87.pdf.
In the early 1990s IFPRI and the Chinese Academy of Social Sciences collaborated on innovation in rural finance. Extensive surveys of households and communities as well as institutions were undertaken to establish the data foundation for the research. The research highlighted that family and friends are the biggest financial "institutions" in rural China. As a result of this research, it was agreed that further studies with innovative rural finance organizations would be conducted. The findings are published in Ling, Zhongyi, and von Braun (1997) and in Zeller and Meyer (2002).