Innovation, Agricultural Productivity and Sustainability in China
The expansion of agricultural production in China has been remarkable, but at the expense of the sustainable use of its natural resources. To counter this, as well as to face problems due to rising labour costs and a rapidly ageing rural population, agricultural production must concentrate on a smaller number of more productive farms. It is in this light that this report reviews recent policy developments to assess whether they have been conducive to productivity growth and environmental sustainability. It finds that the conditions for structural change and innovation at the farm level in China could be further improved by securing the long-term stability of land rights as well as reducing transaction costs. Greater policy coherence with agri-environmental policy objectives could also be achieved through stricter enforcement of environmental regulations. Finally, the agricultural innovation system could play a greater role by placing the focus on public agricultural R&D in areas such as the environment and resource conservation, and in other areas which do not attract much private sector investment.
Economic and institutional environment in China
This chapter gives an overview of the performance of the overall economy, macroeconomic developments and challenges, governance and institutions, and general incentives in China for investments by firms, including farms, input suppliers, and food companies. It discusses basic conditions for investment established by the overall regulatory environment; trade and investment policy, which influences the flow of goods, capital, technology, knowledge and people needed to innovate; and access to credit. The general fiscal policy and the treatment of agriculture are then discussed. Specific obstacles and incentives for investment in the agricultural sector are dealt with in later chapters of this report.