Financial Times writer James Kynge describes an incredible economic transformation in rural China. “Reforms in rural finance, the monetisation of agricultural land and social welfare appear poised to turn China’s countryside from an indigent backwater to a driver of national economic growth over the next five to 10 years,” Kynge reports.
The biggest change is the opening of a market in land. Until recently, rural land was an “inert asset,” according to Kynge. Beijing is now encouraging the sale of land and as a result rural land is now being accumulated into larger parcels. This is “spurring the creating of larger, more mechanized and more profitable farms, boosting the sales of both agricultural machinery companies such as First Tractor and farming enterprises such as Zhongpin.” Small farmers are starting to use land as collateral to borrow money and expand their operations. And this is increasing the number of new companies being formed in rural areas. The Chinese government is also backing loans to farmers and this is increasing productivity in rural communities. In one peculiar Internet venture, an entrepreneur is buying pig farms an then broadcasting his pigs development to pork buyers in cities.
“Already this year the growth rate in rural retail sales has outpaced that in the cities,” Kynge writes. “It remains to be seen if this can be sustained but the rollout of a rudimentary social welfare system – including an ambitious plan to provide healthcare in every village and pension cover for all rural residents by 2020 – might free up disposable income.”