Agricultural supply-side reform of resource allocation is the key

Since the Fifth Plenary session of the 18th CPC Central Committee, especially recently, the CPC Central Committee and the State Council have repeatedly stressed the need to strengthen "supply-side reform", which is becoming the key word of China's economic reform. Supply-side reform is relative to demand-side reform, it emphasizes the need to eliminate excess capacity on the supply side, adjust and optimize the structure, and promote the industry to move towards the middle and high end. Agriculture, as the primary industry, is also facing the situation of deepening reform on the supply side.

To deepen agricultural supply-side reform is to introduce effective reform measures on the supply side in view of the major problems facing agricultural development at present. We should not only break the fence hindering the flow of agricultural production factors, let the market play a decisive role in the allocation of agricultural resources, but also give better play to the role of the government to ensure national food security.

At present, China's agricultural development is facing three outstanding problems: first, the prices of staple agricultural products such as grain, cotton, oil, sugar and meat are upside down. According to monitoring data, since the beginning of this year, the average wholesale prices of wheat, corn and rice are more than 30% higher than the import cost after tax payment on arrival; the domestic prices of pork and sugar are about twice the import price; and the prices of cotton and soybeans have also been higher than import prices for a long time. Second, the net profit of agricultural production is very low. While the prices of major domestic agricultural products remain high, the net profit of agricultural production is very low. Third, the stock of agricultural products is under the top, resulting in huge potential losses in collection and storage. According to a comprehensive judgment, the total inventory of corn, wheat and rice in China from 2015 to 2016 will reach 254 million tons, which will reach an all-time high. Take cotton as an example, China's cotton inventory accounted for about 50% of the global inventory in 2015. since 2013, cotton inventory has exceeded 10 million tons for three consecutive years. In the past two years, there is a large price gap between domestic cotton and imported cotton, and the potential loss of cotton storage countries at high prices is more than 60 billion yuan.

The phenomenon of "simultaneous increase of agricultural production, import and inventory" has appeared in China's agriculture, and the imported agricultural products have been consumed in large quantities, but their own increased output has been stored in the warehouse, which shows that China's agricultural production does not match the market demand. there is a problem on the supply side. This puts us in a "dilemma": on the one hand, if we lower the support prices of agricultural products to reduce the pressure on collection and storage, farmers' production profits will further decline and dampen farmers' enthusiasm for production; on the other hand, if we maintain or raise support prices to protect farmers' interests, the price reversal will be more serious, and the state will have greater potential losses on collection and storage.

This requires us to improve the efficiency of resource allocation in agriculture, promote supply-side reform, and take targeted measures to focus on solving the problem of distorted resource allocation. The first is to solve the problem of distorted allocation of domestic and international agricultural resources. There is a big gap in the prices of domestic and international agricultural products. from the perspective of grain prices, since 2010, the domestic spot price of wheat is higher than the international spot price by 1,000,1200 yuan per ton, rice by 1100,1600 yuan per ton, and corn by 900,1200 yuan per ton. It can be seen that the cost of grain production in China is very high and does not have a comparative advantage. While ensuring the production of food rations at home, we should strengthen the analysis of the potential, environment and risk of global agricultural development, and make full use of domestic and international resources and markets to ensure the supply of corn and other grains.

The second is to solve the problem of distorted resource allocation among the three industries. In China, the proportion of primary production employment is on the high side, and the ratio of agricultural product processing industrial output value to agricultural output value is on the low side, which shows that the resource allocation between primary industry, secondary industry and tertiary industry is distorted. In recent years, China's grain prices have risen year after year, which has slowed down the transfer of rural factors of production, especially rural labor to the secondary and tertiary industries. The allocation of labor resources between the primary industry and the secondary and tertiary industries must be adjusted through the market mechanism to improve the productivity of farmers. At the same time, we should promote the determination of rural land rights, speed up the flow of land elements, develop new six industries, guide the capital and technology of secondary and tertiary industries into agriculture, and promote the free flow of production factors.

The third is to solve the problem of distorted resource allocation among industries within agriculture. The comparative benefit of land-intensive agricultural products in China has been very low. According to the NDRC, the average net profit per mu of vegetables in 2014 was 2069.78 yuan, 10.1 times that of rice, 23.6 times that of wheat, 25.30 times that of corn, and there was a similar situation in apple planting, while the net profits of land-intensive agricultural products such as cotton, sugar and soybeans were all negative. This fully shows that the allocation of resources between China's land-intensive industries such as grain and cotton and labor-intensive and technology-intensive industries such as fruits, vegetables and aquatic products is unreasonable. In China, the per capita and labor per capita land resources are very low, so it is difficult to cultivate the comparative advantage of land-intensive industries. On the premise of ensuring the safety of food production, we should vigorously support labor-intensive agricultural products such as vegetables, fruits, silkworms and aquatic products, and strive to cultivate China's agricultural comparative advantages and improve China's agricultural competitiveness.

Rational allocation of resources among industries within agriculture, but also to deal with the relationship between the production of grain and other agricultural products. To implement the major policy of "absolute safety of rations and basic self-sufficiency of grain", we should give full play to the role of protective prices in regulating the scale and structure of grain production, maintain a reasonable and small increase in the minimum purchase price of rations, and ensure the safety of rations. At the same time, consideration should be given to creating conditions to gradually abolish price support policies for corn, soybeans, rapeseed, cotton and sugar, so that the market can play its due role in the allocation of agricultural production factors.

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Supply-side reform

"supply-side reform" means to promote economic development by liberating productive forces and enhancing competitiveness from the supply side and production side. Specifically, it is required to clean up "zombie" enterprises, eliminate backward production capacity, lock in new and innovative areas of development, promote industrial restructuring, optimization and upgrading, and create new points of economic growth. Supply-side reform can be traced back to the "supply school" in the school of economics. This school emphasizes the supply side of the economy and believes that demand will automatically adapt to changes in supply, hence the name.