China’s Agricultural and Rural DevelopmentImplications for Africa Shenggen Fan Director General China DAC Study Group on Agriculture, Food Security and Rural Development, Bamako, April 27, 2010
Key messages Different strategies and pathways have led to different development outcomes There are important lessons to be learnt, but with caution There are opportunities for win-wins
Growth is higher in China, but picking up in Africa CHINA SSA % % Source: World Bank 2009.
The share of agriculture in GDP has shrunk Agriculture, value added (% of GDP) But it continues to employ a large share of the workforce (44% in China, 86% in Ethiopia, 82% in Madagascar, 76% in Tanzania) Source: World Bank 2009.
Poverty remains entrenched in Africa Share of people living below $1.25 a day, % Poverty is even higher in rural areas Source: Chen and Ravallion 2008.
Hunger is on the rise in Africa Number of undernourished people, millions Source: FAO 2009.
China: Major reforms Improved smallholder incentives for production Liberalized and reformed agricultural markets Liberalized trade Created a robust rural non-farm sector Initiated programs targeted at the poor
China: “Firing from the bottom” Source: Gulati and Fan 2007. Growth in agriculture contributed 4 times more to poverty reduction than growth in manufacturing and services (Ravallion and Chen 2007)
China: Gradual, trial-and-error approach Experimentation with new policies in isolated areas Scaling-up based on evidence from experiments Heterodox policies as a result (e.g. two-track reform and gradual trade liberalization)
Africa: Donor-influenced reforms Adopted WB/IMF structural adjustment programs Improved incentives for agricultural production through market liberalization Did not correct for market failures in some cases (e.g. lack of access to key inputs and services) Implemented reforms incompletely, in a “stop-and-go” manner
Africa: New Africa-owned framework Comprehensive Africa Agriculture Development Program (CAADP) endorsed in 2003 Target of 6%annual agricultural growth by 2015 Commitment to allocating 10% of national public budgets to agriculture Focus on sustainable land and water management market access food supply and hunger agricultural research
China-Africa trade in agriculture is rising SSA exports to China, US$ mil. SSA imports from China, US$ mil. Imports dominated by food Exports dominated by raw materials Source: UNCTAD 2009.
But the share of agriculture trade is small China-Africa trade by product group in 2008, % Source: UNCTAD 2009. Note: Agriculture = agricultural raw materials + food.
Possible trade and FDI impacts on Africa There are also indirect impacts through trade in third markets, Chinese impact on world prices, etc. Source: Adapted from Jenkins and Edwards 2006.
New approach of Chinese aid Market-based framework Innovative delivery methods: joint ventures, cooperation contracts, public-private partnerships Switch from support for large-scale state-owned farms to smallholder farmers
China’s aid to Africa is rising Source: Brautigam 2009.
2006 FOCAC plan for Chinese assistance to Africa Double assistance by 2009 Set-up $5 bil. development fund for firms investing in Africa Send 100 senior Chinese experts in agriculture Set-up 10 agricultural demonstration centers
Implementation is on track and exceeding some FOCAC plans
China-Africa development fund established in June 2007, with initial capital of US$1 billion
104 senior agric. experts sent to 33 African countries
14 agricultural demonstration centers established in:
Concerns about labor practices (e.g. workers from China often work on aid projects)
Failure to raise local environmental standards Low transparency of aid and coordination with other donors Poor not necessarily benefit
Lessons need to be drawn with caution Different initial conditions in Africa compared to China (e.g. rural infrastructure, institutional capacity, agric. research and extension) Different external conditions Different economic, political, ecological, and social environments in different African countries Reforms need to be tailored accordingly
Achieving win-win outcomes (1) China-Africa cooperation needed to ensure Fair competition Stronger linkages with domestic markets Greater engagement of the local workforce Adoption of higher environmental standards Greater transparency and cooperation with other donors in aid delivery
Achieving win-win outcomes (2) China-Africa cooperation needed in agriculture to: Diversify trade towards agriculture Increase FDI in agriculture Build up agricultural research and extension systems in African countries Continue investment in infrastructure and policymaking capacity