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Guest Lecture: Professor Scott RozelleChina's Rural Economy and the Path Towards a Modern Industrial State: Trade, Biotechnology, and Marketization

Page updated 20 Sep 2007

Slides and abstract from Professor Scott Rozelle's Guest Lecture presented at the Treasury on 07 March 2006.

Professor Scott Rozelle

University of California, Davis

Professor Scott Rozelle is Professor in the Department of Agricultural and Resource Economics in the University of California, Davis. Dr. Rozelle received his B.Sc. from UC, Berkeley, M.Sc. and Ph.D. from Cornell University. Before moving to the University of California in 1998, he was an assistant professor in the Food Research Institute and Department of Economics at Stanford University. Professor Rozelle has received numerous honors and awards in recognition of his outstanding achievements. He is the U.C. Davis 2000 Chancellor Fellow, an award given each year to on the university’s outstanding faculty members.

Dr. Rozelle's research focuses almost exclusively on China and is concerned with three general themes; a) agricultural policy, including the supply, demand, and trade in agricultural projects, b) the emergence and evolution of markets and other economic institutions in the transition process and their implications for equity and efficiency; and c) the economics of poverty and inequality. He is fluent in Chinese and has established a research program in which he has close working ties with several Chinese collaborators. He is the chair of the International Advisory Board of the Center for Chinese Agricultural Policy.

Abstract

China’s rural economy faces many serious problems in its development as it enters the 21st century. The fiscal system is antiquated and has not been able to provide social welfare services for those in rural areas. The rural financial system has not been able to reform itself and constraints on the operations of the rural financial institutions and markets are hampering the rural sector. Poverty policies and investments have not been able to reach a segment of the poor that reside in remote, resource poor and minority areas. If the rural sector is to grow and become a more equal partner in China’s economic development, it is imperative that fundamental changes are made in some of the basic institutions that affect the lives and livelihoods of China’s rural residents.

But while the rural economy faces sobering challenges, the record of the rural economy has showed considerable improvement during the reform era. In the 1990s per capita grain output reached a level similar to that in developed countries.

Despite the negative image painted by some, we believe that three vital ingredients in the continued progress of China’s agriculture have not received adequate attention. They are the development of a functioning agricultural research and development system, including the capacity to produce novel and productivity-enhancing biotechnology breakthroughs, improvements in agricultural commodity markets and increasingly functional, albeit nascent, land rental markets. If China’s farmers can increase their productivity, specialize and market their goods and services and gain access to cultivated land, rural China’s most scarce commodity, even in the unique period of China that the nation finds itself in, those in the rural economy can gain.

In my presentation, I attempt to show to the extent that rising productivity, emerging markets and increased access of farmers to land are important parts of the development process, in looking at each of these three areas we find that China is capable of generating long-run sustained growth. Technology-driven TFP growth has become one of the main means of raising the returns in agriculture. China’s agricultural R&D system has become more than capable of generating new conventional technologies and those created by GM biotechnology. The analysis of commodity markets demonstrates that they are becoming remarkably integrated across regions: between the coast and inland and between county market seats and villages, even in remote areas. Finally, although the emergence of land markets has been fairly recent, in the past 10 years they appear to have begun to develop fairly quickly and have been having beneficial effects in terms both of allocative efficiency and equity. Land across China has begun to shift to households that still specialize in farming and away from those in the migrant labour force. Those with insufficient land endowments are finding that the rental markets are providing them access to land. In summary, according to all three indicators—agricultural productivity; the emergence of commodity markets; and the emergence of markets in cultivated land—China is making strong progress.

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