China Agricultural Innovation System: Issues and Reform Ruifa Hu 1,2, Jikun Huang 2 1. School of Mangment and Economics, Beijing Institute of Technology 2. Center for Chinese Agricultural Policy, Chinese Academy of Sciences
Average annual growth rate in agricultural GDP was about 4 times of population growth rates Annual growth rate (%) of population in 1980-2010 Average annual growth rate (%) of agricultural GDP 8 7 6 5 4 3 2 1 0 1980 1985 1990 1995 2000 2005 2010 8 7 6 5 4 3 2 1 0
Rural poverty incidence in China, 1978-2007 (Percent of Population) 35 Under official poverty line 30 25 Under $1/day in PPP 20 15 10 5 0 The fall in the poverty rates in China account for MOST of the entire world s fall in poverty between 1985 and 2005
Total Factor Productivity for rice, wheat and maize in China, 1979-94 200 Wheat Maize 150 Rice 100 After middle 1980s, technology has been major factor affecting productivity growth 50 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Output, Input, and TFP annual growth rate and Decomposition of TFP Main Grain Commodities and Cotton (1995-2004) 3 Output rises 2 1 Input reductions 0-1 Early Indica Late Indica Japonica Wheat Maize Soybean Cotton Output Input -2-3 5 4 Total Factor Productivity Rises 3 2 1 TFP 0 Early Indica Late Indica Japonica Wheat Maize Soybean Cotton Mostly Technical Change (rising of 6 production frontier) China is 4 already operating efficiently (at 2 frontier) 8 0 Early Indica Late Indica Japonica Wheat Maize Soybean Cotton -2 TE TC -4 Source: Jin, Huang and Rozelle.
Technology has been a major engine of food and agricultural growth in China Roles of agricultural research: engine of growth food security and poverty reduction competitiveness and farmer income environment preservation Changing agriculture requires changing technology new modern technologies (e.g., biotech) knowledge-intensive NRM conservation product quality high value products
Questions and policy issues What is the main reason that the R&D has contributed significantly to China s agricultural growth? What we can learn from China s experiences / lessons? What are the challenges which China should consider in its current agricultural R&D reform?..
Rest of presentation China s R&D system Challenges and reforms Concluding remarks
China s agricultural R&D system: Organization Chart for Agricultural Research (National level) National Level National Government State Council State Development Planning Commission Chinese Academy of Science Ministry of Finance Ministry of Science and Technology State Forestry Bureau State Bureau of Machine Building Ministry of Agriculture Ministry of Education Chinese Academy of Forestry Chinese Academy of Agri. Mechanization Chinese Academy of Agri. Sciences Chinese Academy of Tropical Agri. Chinese Academy of Fishery 6 Agricultural Universities 13 Forestry Res. Institutes Mechanization Institutes 40 Research Institutes/Centers 9 Research Institutes 8 Research Institutes Agricultural Res. Institutes National level research centers account for: 10% of total research staff 15% of total budget
China s agricultural R&D system: Organization Chart for Agricultural Research (Provincial and Prefecture level) Provincial Level Department of Education Provincial Academy of Science Department of Agriculture Provincial Governments Provincial Bureau of Finance Science & Tech. Commission Department of Forestry Other Departments Prefecture Level Prefecture Academy of Science Prefecture Government Bureau of Finance Science & Tech. Commission Provincial Agricultural Colleges & Universities Provincial Academy of Ag. Sc., Fishery, etc Research Institutes Provincial Institutes of Forestry Other Provincial Institutes Bureau of Education Bureau of Agriculture Prefecture Academy of Agricultural Sciences Bureau of Forestry Prefecture Institues of Forestry Other Bureaus Provincial research centers account for: 41% of total research staff 51% of total budget Prefecture research centers account for: 32% of research staff 34% of total budget
China s public agricultural R&D System: not only on basic research, but even more on the development research Research system: Central government established agricultural research institutes that covered most of agricultural products in the national wide Local government established agricultural research institutes that covered nearly all agricultural products in the region There are 1237 agricultural research institutes and 88 agricultural universities or technological academies that located in every province or prefecture The research fields covered nearly all agricultural products (Nominal are 109 products) in China 50 innovation product industries have been specially invested by MOA since 2008
China has the largest public agricultural R&D System in the world Number of agricultural R&D staff in 2004 120000 100000 101903 Total staff 80000 60000 62624 Active researchers 40000 20000 0 25400 25400 23609 23144 10452 China-1 China-2 USA Japan USSR India W.Germany Brazil Mexico
Number of Researchers / 1 million US$ of Agri GDP in 2004 0.8 0.7 0.69 0.6 0.5 0.4 0.3 0.4 0.46 0.2 0.1 0 0.16 0.14 0.14 0.13 0.05 China-1 China-2 USSR India W.Germany USA Mexico Japan Brazil China s research system: overstaffed
China s agricultural R&D System: public dominated, but changes fast Private sector s share of agricultural research staff in early 1990s (%) 60 56 50 40 37 38 37 30 20 16 10 0 0.7 6 8 9 5 0.3 Source: Alston and Pardey (1995); Huang et al., 2003; Hu et al., 2008
Government fiscal investment in agricultural research (billion yuan in 2005 price) Agricultural research investment intensity (%) in China 25.0 0.700 20.0 Annually growth15.9% 0.600 0.500 15.0 0.400 10.0 0.300 0.200 5.0 0.100 0.0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 0.000 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Since 2000, the rise in research investment has been higher in China than any other country in the world
Investment in agri biotech research had been doubled in every 4 years before mid-2000s (million yuan in 2003 price) 1800 1600 1400 1200 1000 800 600 400 200 0 2003: 1.65 billion yuan = US$ 200 million or US$ 950 million in PPP Plant Agriculture 1986 1988 1990 1992 1994 1996 1998 2000 2002 Huang et al., Science, 29 April 2005: 688-690 National Transgenic New Variety Development Program: 26 bil. yuan (US$ 3.8 bil.) in 2009-2020
120 100 80 60 40 20 0 103 101 China also has the largest public agricultural extension system in the world Staff under government agricultural extension system in China (100,000 persons) 106 104 101 98 93 88 83 84 1996 1998 2000 2002 2004 2006 79 120 100 80 60 40 20 0 Agricultural administrative villages (100,000) 74 74 74 74 74 71 70 68 65 64 63 1996 1998 2000 2002 2004 2006 The government agricultural extension stations located in each township, even in the most remote township in China. The system make sure the new innovation can be adopted in time.
Summary China s agricultural R&D system is: the largest R&D system in the world top-down government research system more development research than basic research public sector dominated Largest agricultural extension system to make sure the agricultural innovation be adopted in time
Challenges by late 1990s Public dominated, private sector is lacking: Research program may not capture the most relevant and immediate problems faced by farmers Weak links between generation and dissemination of technologies, between technologies available and farmers real demand for useful technologies Decentralization: decentralized with weak coordination among institutions (central vs local; local vs local ) Duplication: duplication of research efforts contributes to wastage of scarce research resources Overstaff: low salary, lack of incentive, loss of quality scientists Low human capacity
Agricultural research reform in China Stage I: Initial reform period (1985-98) methods: -- gradually commercializing research Research grant: -- gradually moving from formula based allocation toward competitive grants
Changing sources of agricultural research investment (million yuan in 1998 price), 1985-99 7000 6000 5000 4000 3000 2000 1000 0 1985 1987 1989 1991 1993 1995 1997 1999 Total income Government investment Commercial and Others
Agricultural research reform Stage II: A new push for radical reform Goals: to have a market-oriented, effective, creative, and modernized agricultural research system Strategies: Researchers: Better scientists (keep 1/3) Radical commercialization (2/3) Investment: More investment Improve efficiency (competitive grant) Management: Incentive system reform More market-oriented reform
The government R&D investment increased at 15% annually during 2000-2005 300 250 Agricultural Research Expenditure (million yuan in 2009 price), 1991-2009 Annually growth13.1% 200 150 100 50 Total income Annually growth 15.9% 0 Public investment 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Rising R&D expenditure, but most are competitive grants: this is a new challenge. Source: Hu et al., 2007
3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Private agricultural R&D investment in China (Billion RMB yuan, 2006 price) 0.03 0.72 Contracted out In own firm 1.75 2.27 2.99 2000 2004 2005 2006 Does the government investment remarkably contribute to the rise of private sector s R&D investment? 0.1 0.17 0.26 Source: Hu et al., 2008
Investment in Agricultural R&D by Private Sector Privatization: No. of private agricultural firm 1.842 *** (0.279) Model 1 Model 2 Model 3 Model 4 Ln 1.799 (Private *** (0.279) R&D) 1.793 *** (0.278) Firm age 165.5 *** 168.2 *** 165.4 *** 168.1 *** 政府 R&D 投资 Public R&D Exp. -0.001*** (29.39) (29.42) (29.05) (29.06) Firm s sale revenues 0.003 *** 0.003 *** 0.003 *** 0.003 *** -- 基础与应用 Foundation+Application (0.000) (0.000) (0.000) 0.017*** (0.000) Private share (compared w/ State) 3.415 3.483 3.792 3.871 (3.22) (3.22) (3.18) (3.18) -- 开发投资 Development -0.004*** Foreign share (compared w/ State) 0.212 0.325 0.785 0.916 (7.75) (7.76) (7.66) (7.66) 公司年龄 Years started company 165.5*** 168.2*** Publically traded company 7446 *** 7443 *** 7336 *** 7330 *** 公司年销售额 Company s annual Public R&D investment lagged 3 years: revenue 私人公司个数 Number of private companies (856.7) (857.1) (847.0) (847.2) of the total R&D -0.001 *** -0.001 *** (0.000) (0.000) Ln (Private 1.748 *** (0.277) R&D) 0.003*** 0.003*** 1.842*** 1.799*** of public-r 0.017 *** 0.018 *** (0.005) (0.005) of public-d -0.004 *** -0.004 *** Public-dominated R&D investment restrict the private investment (0.001) (0.001) Government funding for private R&D 0.302 *** 0.310 ***
Concluding remarks Agricultural research has been an engine of agricultural growth in China in the past. With rising food demand in China, China s leaders believe agricultural technology is major solution to improve the nation s food security and have developed a national agricultural R&D system and also have tried to reform this system so that the technologies generated can be more response to farmers demand.
Concluding remarks China has also invested significantly in R&D in the past, particular in recent years. However, China s agricultural research and extension are also facing great challenges, a public dominated system has its pros and cons. The leaders are well aware of its cons and recently have tried to encourage private sector to join public sector in agricultural R&D system ---- if this is going to happen, it is expected a new era of China s agricultural R&D will come
Thanks