China and Russia Each Face Challenges in a Global Agricultural Market

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Both China and Russia have undergone an agricultural transformation over the past thirty years, moving from a communal farm approach to a market-based system. In the latest issue of Applied Economic Perspectives and Policy, two articles discuss the progress and impact these large countries have made and their current place in the global economy. While the agricultural sectors of both economies are expected to grow, each country has unique challenges that will need to be addressed, using tools like domestic subsidies or trade restrictions.

Both China and Russia have undergone an agricultural transformation over the past thirty years, moving from a communal farm approach to a market-based system. In the latest issue of Applied Economic Perspectives and Policy, two articles discuss the progress and impact these large countries have made and their current place in the global economy. While the agricultural sectors of both economies are expected to grow, each country has unique challenges that will need to be addressed, using tools like domestic subsidies or trade restrictions.

According to the article, China’s agricultural transformation created a huge productivity boom, as a result of individuals being given the ability to control small plots of land and keep the profits it generated. The country’s agriculture sector has experienced a steady level of growth, despite facing a growing scarcity of resources and an aging population. “China's agriculture has grown by over 4.5% per year on average since reforms, well above the growth rates in many other countries,” said Colin Carter, Professor at University of California, Davis and lead author on the article concerning China.

In contrast, Russia took an alternate approach in the 1990s, keeping its large farms together, under corporate, instead of government, control. This further perpetuated many of the inefficiencies of the Soviet system. Only in the past few years have Russian farms seen an increase in production, thanks to new standards in management and operation. “In particular, large vertically integrated enterprises, called agroholdings, have set a higher standard for Russian agriculture performance,” said Bill Liefert, Economist at the USDA-Economic Research Service and lead author on the article concerning Russia. “Yet, this improvement comes from Russian agriculture moving in the direction not of smaller farms but rather toward even bigger enterprises and operations.”

The current system in China is facing real challenges, according to Carter and his co-authors, as China looks to compete on the global market, forcing the country to adapt. “I think we'll see a very rapid decline in the rural workforce as the aging population moves on,” he said, “and a growth in farm size to the point where farmers can bring in machinery and take advantage of modern technology.” He expects to see an increase in government investment as China looks to continue its level of growth.

For Russia, Liefert expects to see more of the same, with new operators like agroholdings continuing to expand and improve Russian agriculture, especially in the production of grain. “Within 10 or so years, Russia could equal the United States as the world's largest wheat exporter,” he said. In addition, the Russian government is interested in expanding the livestock sector, and will likely use a combination of tariffs and subsidies to help lessen its large agricultural trade imbalance.

The full text of these two articles “Advances in Chinese Agriculture and its Global Implications” and “Russian Agriculture during Transition: Performance, Global Impact, and Outlook” will be available at aepp.oxfordjournals.org on Friday, February 10. These articles will be published in Volume 34, Issue 1 of AEPP. A companion podcast has also been produced featuring an interview with Carter and Liefert, which is also available on the AEPP website.

Applied Economic Perspectives and Policy is a journal of the Agricultural & Applied Economics Association and aims to present high-quality research to a broad audience of agricultural and applied economists, policy-makers and consumers. AEPP is published by Oxford Journals (http://www.oxfordjournals.org).

The Agricultural & Applied Economics Association is the nation’s largest professional association of agricultural and applied economists. AAEA strives to enhance the skills, knowledge and professional contribution of economists who help society solve problems related to agriculture, food, resources and economic development. Members work in various capacities including universities, private industry and government agencies. For more information, please visit http://www.aaea.org.

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