China’s Agricultural and Rural Development: Implications for Africa


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China-DAC Study Group on Agriculture, Food Security and Rural Development,
Bamako, April 27–28, 2010

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China’s Agricultural and Rural Development: Implications for Africa

  1. 1. China’s Agricultural and Rural Development: Implications for Africa Shenggen Fan, Bella Nestorova, and Tolulope Olofinbiyi1 China-DAC Study Group on Agriculture, Food Security and Rural Development, Bamako, April 27–28, 2010 1. Introduction Sub-Saharan Africa has made notable progress in economic recovery in recent years but has lagged behind other developing regions in growth and poverty reduction in the past couple of decades. The consensus is to focus on the importance of agriculture and rural development as an engine of growth in Africa2 and as a viable response mechanism to new challenges for growth and food security, such as the global recession, volatile food prices, and climate change. As national leaders and donors are looking for new strategies to sustain high levels of agricultural growth in Africa, it is useful to examine the experiences of other countries, such as China, that have been successful in agriculture-led broad-based development. Learning from China’s development pathways is particularly timely in lieu of the recent strengthening of China and Africa’s economic cooperation, which also offers new development opportunities. This paper seeks to draw lessons from China’s development experiences, particularly in the areas of agricultural and rural development, to increase growth and reduce poverty in Sub-Saharan Africa. It also examines China’s rising economic involvement in Africa and makes recommendations for how the win–win outcomes from this involvement can be strengthened. While the discussion and recommendations in the paper emphasize the commonalities between the countries in Sub-Saharan Africa, it does not overlook the fact that these countries have their own specific economic, political, ecological, and social environments. The second section of the paper compares the trends in economic and agricultural growth, as well as poverty and hunger reduction in China and Sub-Saharan Africa. The third section examines strategies for development—in particular, agricultural and rural development—and poverty reduction. The fourth section reviews China’s economic engagement in Africa in the areas of trade, investment, aid, and technical cooperation. The fifth section discusses the policy implications for development strategies in Sub-Saharan Africa, which can be drawn from China’s development experiences. Finally, the paper concludes with a discussion on increasing the win–win outcomes of the China–Africa economic cooperation. 2. Growth and poverty reduction in China and Africa China and Sub-Saharan Africa exhibit distinct patterns in overall economic and agricultural growth over the past couple of decades (see Figure 1). Emerging from stagnation in the 1980s, China experienced three decades of sustained economic growth. This growth has been 1 Shenggen Fan is director general of the International Food Policy Research Institute (IFPRI). Bella Nestorova and Tolulope Olofinbiyi are research analysts at IFPRI. The authors thank Ousmane Badiane, Xiaobo Zhang, and Kevin Chen for their insightful comments. 2 Throughout this document, “Africa” refers to Sub-Saharan Africa. 1
  2. 2. consistently high—averaging 10 percent per year from 1980 to 2008—when compared to only 3 percent in Sub-Saharan Africa during the same period. China sustained double-digit annual growth through the mid-1980s, early 1990s, and mid-2000s. This rapid growth started from a GDP level slightly lower than the one in Sub-Saharan Africa; in fact, in 1980, the GDP per capita was more than three times lower (World Bank 2009). However, economic output in China surpassed output in Africa in 1983, and ten years later, Chinese GDP per capita surpassed African GDP per capita. In contrast, Sub-Saharan Africa continued to stagnate throughout the 1980s and early 1990s and experienced negative growth in some years. Even though growth in Africa has not yet reached the high levels obtained by China, it is worth noting that Sub-Saharan Africa has sustained growth since the mid-1990s, with a clear upward trend in recent years. Growth has not fallen below 5 percent per year since 2004. Figure 1. Annual GDP and agricultural GDP growth, percent China Sub-Saharan Africa 15 15 Agriculture Agriculture GDP GDP 10 10 5 5 0 0 -5 -5 Source: World Bank 2009. Agricultural growth in China has been greater and steadier compared to agricultural growth in Sub-Saharan Africa but much lower than economic growth on average. Chinese agricultural growth surpassed overall GDP growth only briefly in the early 1980s and in 1990. In Sub- Saharan Africa, agricultural growth has been much more variable, at times even exceeding economic growth. As a result of the higher growth in China, the gap in agricultural output has increased. Agricultural GDP in China was twice as high as the corresponding figure in Sub- Saharan Africa in 1980 and more than three times higher by 2008. The importance of agriculture in the overall economy and trade over the past decades has been declining, particularly in China. The share of agriculture decreased sharply in China, with overall GDP decreasing from 30 percent in 1980 to 11 percent in 2008 (World Bank 2009). This diminishing role of agriculture has been accompanied by a rapid increase of the rural nonfarm economy and the manufacturing sector. In Sub-Saharan Africa, the share of agriculture in overall GDP decreased less drastically—from 19 percent in 1980 to 14 percent in 2008. The decreasing share of agriculture was accompanied by a rise in the service sector, which is relatively oversized for its level of economic development. Yet, in some countries, such as the Central African 2
  3. 3. Republic, Guinea-Bissau, and Liberia, agriculture continues to account for more than half of overall output (World Bank 2009). The share of agriculture in total trade declined from 11 percent in 1995 to 5 percent in 2008 in China, and 21 percent to 13 for in the same period in Africa (UNCTAD 2009). However, agriculture continues to account for 44 percent of the workforce in China and a much larger share in some countries in Africa—for example, 86 percent in Ethiopia, 82 percent in Madagascar, and 76 percent in Tanzania. Thus, agriculture continues to play a large role in both China and Africa in providing livelihoods for the majority of each population. China and Sub-Saharan Africa exhibit clearly divergent patterns in poverty reduction. The share of people living below US$1.253 a day in China decreased impressively from 84 percent of the population in 1981 to 16 percent in 2005 (see Figure 2). In the same period, the number of poor people decreased by more than four times, from 835 million to 208 million (Chen and Ravallion 2008). In Sub-Saharan Africa, however, poverty has remained deeply entrenched. The share of people in the population living below $1.25 a day remained virtually unchanged from 1981 (51 percent) to 2005 (50 percent). In the same period, the number of poor people almost doubled, from 202 million to 384 million. In both China and Sub-Saharan Africa, poverty remains largely concentrated in rural areas. The rural share of poverty accounts for an overwhelming 98 percent of the country’s poor in China and 70 percent in Sub-Saharan Africa (Ravallion, Chen, and Sangraula 2007). Worrisomely, the rapid decrease of poverty in China has been accompanied by a substantial increase in inequality. China’s Gini coefficient increased from 0.28 in 1981 to 0.39 in 2001, but it is worth noting that inequality actually decreased in the early 1980s and mid-1990s (Ravallion and Chen 2007). Figure 2. Share of people living below US$1.25 a day, percent 90 China Sub-Saharan Africa 60 30 0 Source: Chen and Ravallion 2008. The progress in hunger reduction also shows signs for concern, especially in Sub-Saharan Africa. The number of undernourished people in China decreased from 178 million in 1990–92 to 127 million in 2004–06, and the share of undernourished people decreased from 12 to 10 percent of 3 Throughout this document, “dollars” or “$” refer to U.S. dollars. 3
  4. 4. the population during the latter period (FAO 2009). Alarmingly, the number of undernourished people in Sub-Saharan Africa actually increased from 169 million in 1990–92 to 212 million in 2004–06, accounting for more than one-third of the total population. The number of hungry people in Sub-Saharan Africa is estimated to have further increased to 265 million in 2009, mostly due to the recent food crisis and financial crisis (FAO 2009). Why has growth in China and Africa not translated into a more rapid reduction of hunger? 3. Development strategies and pathways China and the countries in Sub-Saharan Africa have adopted diverse sets of reforms in the past couple of decades with the goals of stimulating growth and reducing poverty. Reforms initiated in the late 1970s in China were driven by strong political will and relied on a gradual but consistent trial-and-error process. Policymaking was based on evidence much more than on theory or ideology. Careful experimentation was essential for the design, sequencing, and implementation of many of the successful reforms in China. Experimentation was not random— in some cases, it was initiated top-down, often in isolated and poor areas; in many other cases, it was led bottom-up by small-scale experiments at the local level (Dollar 2008; Bruce and Li 2009; Zhang, De Haan, and Fan 2010). Experimentation helped reduce risks and improved the success rate of reforms through the scaled-up implementation of pilot projects that worked and the elimination of unsuccessful policy options that could have potentially had disastrous spillover effects. Chinese political leadership was supported in these reforms by the evidence and guidance of research institutions such as the China Development Research Group, the Chinese Academy of Social Sciences, and the Development Research Center of the State Council. As a result of these experiments, China developed rather heterodox policy measures, which differed from the policies that would have been prescribed by outsiders. The success of China’s reforms largely contributed to these unorthodox policies, such as the two-track approach (both market and command economy) to reform and the initial partial implementation of trade liberalization (Rodrik 2004). In addition to economic success, the gradualism of the reform process and its reliance on evidence from local experiments helped secure political support and reinforced its credibility (Hofman and Wu 2009; Ravallion 2009). Another distinctive feature of China’s reform is its strong initial emphasis on agricultural growth. The “firing from the bottom” reform approach began with reforms in agriculture before moving to the service and manufacturing sectors (see Figure 3). In fact, growth in agriculture in China is estimated to have contributed to poverty reduction four times more than growth in manufacturing and services (Ravallion and Chen 2007). The impressive impact of agricultural growth on overall growth and poverty reduction also benefitted from good initial conditions in rural infrastructure, agricultural research and extension services, and capacity of institutions. Agricultural growth in China was stimulated by improved smallholder farmers’ incentives for production. The first stage of Chinese agricultural and rural reform (1978–1984) focused on decollectivization of agriculture, decentralization of rural production, introduction of a household responsibility system for securing land rights, and launching of a new pricing policy that involved increased procurement prices (Fan, Gulati, and Dalafi 2007). The introduction of the household responsibility system, a key institutional change, is estimated to have contributed to 60 percent of the growth in the early 1980s (Lin 1992). Investment in the development and large-scale 4
  5. 5. adoption of improved seed varieties, such as hybrid rice, also boosted agricultural growth and food security (Li, Xin, and Yuan 2009). Poverty reduced rapidly and rural incomes doubled from 1978 to 1984 (Fan, Zhang, and Zhang 2002). The second stage of reform in China (1985–1993) focused on both administrative and market-led domestic agricultural marketing reforms, including fertilizer market liberalization and a modified procurement system that moves from a mandatory-quota system to a contract system. The increase in agricultural productivity and rural incomes created by these reforms allowed for the accumulation of surplus capital and workforce in the rural nonfarm sector. As a share of total national income, rural nonfarm income in China rose from 4 percent in 1978–80 to 28 percent in 1997 (Hazell, Haggblade, and Reardon 2007). The township and village enterprises that led this growth were a significant institutional innovation. Despite their collective and public nature, township and village enterprises provided strong production incentives to participants and produced for the market. Figure 3. China reform pyramid: “Firing from the bottom” Source: Gulati and Fan 2007. After the boost in agriculture and nonfarm rural economy development, the third stage of reform in China (1994–2001) focused on gradual external openness and further decreases in government liberalization. Reforms in this phase included the creation of special economic zones, unification of the exchange rate pegged to the U.S. dollar, and liberalization of foreign direct investment (FDI). The monopoly of agricultural trade by state agencies ended and agricultural trade was opened up to nonstate enterprises. These reforms resulted in increased market access and decreased domestic grain prices. However, they also disadvantaged poor grain producers, who could not participate in the opportunities of the rural nonfarm sector (Fan, Gulati, and Dalafi 2007). In the period after 2002, grain marketing reforms were accelerated and the procurement system was abolished. Foodgrain markets were fully liberalized, agricultural taxes were reduced, and new land reform was implemented to address the drawbacks of the household responsibility system, which negatively impacted agricultural growth. These reforms were sustained by a rapid expansion of infrastructure, increasingly financed not by the central government but by local governments as well as public and private investors from China and abroad (Dollar 2008). 5
  6. 6. In addition to economic reforms, China implemented programs targeted at the poor. The first official plan for poverty alleviation in 1986, which focused on poor rural areas and areas with large minority populations, however, was flawed by poor targeting. Many potential beneficiaries —namely many of the urban poor and poor people who lived in nonpoor areas—were left out because the targeting criteria adopted were not comprehensive enough (Zhang, Rozelle, and Huang 2007). Since the mid-1980s, substantial funding has been allocated to subsidized loans, food-for-work programs, and grant funds. In rural China, food-for-work programs have contributed to reducing poverty directly by increasing household income and indirectly by improving local infrastructure, such as rural roads. Subsequent plans experimented with new approaches to better reach the poor. In the 1990s, China also took the approach of integrated multisectoral rural development projects, which combine agricultural development, infrastructure construction, off-farm employment opportunities, institution building, and rural enterprise development. They have been much more successful in poverty reduction than other programs (World Bank 2001). By the early 2000s, drawing on lessons from past poverty-alleviation experiences, China formulated its current plan for poverty reduction, which incorporates components of market-led agriculture production, new pro-poor science and technology, and human capital development. Compared with China, reforms in Africa have been more directly influenced by external theoretical paradigms and policy strategies. The macroeconomic and sector reforms of the 1980s and 1990s were shaped by the World Bank and International Monetary Fund structural adjustment programs, based on a neoliberal economic paradigm (Delgado 1997; Heidhues et al. 2004). The first phase of structural adjustment (1980–1984) was led by broad principles of exchange rate liberalization, unification of tariffs, fiscal austerity, and markets liberalization, which were not successfully translated by African governments to concrete strategies in agriculture and other sectors (Delgado 1997). Structural adjustment programs in the mid- to late-1980s and the 1990s sought to provide a more proactive strategy for the agriculture development and improving equity. Implemented after a period of long-term strong bias against the agriculture and emphasis on state-subsidized industries, the structural adjustment reforms were a welcome change. These reforms decreased the cost of ineffective and expensive government support programs and institutions. They also corrected some of the obstacles for agriculture’s growth—from output price distortions to export taxes on agricultural products—and thus improved smallholders’ incentives for production. In Kenya, for example, liberalization of the markets for fertilizer and maize and exchange rate reforms in 1992 boosted the number of rural fertilizer and hybrid seed retailers and substantially increased the availability of these inputs to smallholder farmers (Ariga and Jayne 2009). In other cases, however, the correction of government failures in the agricultural sector resulted in serious market failures. The dismantling of parastatals and elimination of input subsidies left smallholders in many African countries with insufficient access to major inputs and services, such as credit, fertilizer, and seeds, to realize the potential of the new incentives provided. In Tanzania, for example, the liberalization of agricultural input markets in the early 1990s resulted in a monopoly of private traders in remote parts of the country and decreases in the availability of agricultural inputs for smallholder farmers (Meertens 2000). The reforms that started in the 1980s and 1990s laid the foundations for economic growth in Africa by decreasing trade biases against agriculture and interventions in both domestic markets 6
  7. 7. and pricing (Badiane 2008). They also succeeded in relative macroeconomic stabilization for more than two decades. However, despite some similarities with the reforms in China, reforms in Africa did not manage to achieve their main goal of high rates of growth and did little to alleviate poverty. The unsatisfactory performance of the structural adjustment programs can be attributed to a combination of factors such as incomplete “stop-and-go” implementation, inappropriate design of policy components, and unfavorable external factors (Heidhues et al. 2004). In turn, the failings in policy design and low quality of implementation in Africa can be considered factors of the lack of ownership and leadership of the reform. In fact, many externally driven reforms were met with national government resistance. Governments have recently adopted promising Africa-owned and Africa-led development actions, which acknowledge the important role of agriculture for growth. As part of the New Partnership for Africa’s Development (NEPAD) adopted in 2001, African governments made commitments to take concrete steps toward eradicating poverty, promoting sustainable growth and development, increasing integration in the world’s globalizing economy, and accelerating the empowerment of women. NEPAD’s Comprehensive Africa Agriculture Development Programme (CAADP) set a common target of 6 percent average annual agricultural growth beginning in 2015, defined principles for more effective policy design and implementation, and provided support for national efforts to boost agriculture growth through development assistance and partnership. In their 2003 Maputo Declaration on food and nutrition security, African governments committed to allocating 10 percent of national public budgets to the agriculture sector by 2008. Despite increases in spending on agriculture, however, only a handful of countries have met that target (Fan, Omilola, and Lambert 2009). Many African countries also face severe public resource constraints in the area of social protection. Safety net programs in Africa are typically small and poorly targeted, but the large-scale programs implemented in Ethiopia and South Africa have demonstrated that effectively scaling up social protection is achievable for African countries (Adato and Hoddinott 2008). Going forward, it is important to keep in mind that African countries have different potential for agricultural growth, but agricultural growth is essential for poverty reduction. Diao et al. (2006) classifies low-income African countries based on the differences in their initial conditions, such as geography and endowments, as countries with either favorable agricultural potential (coastal, landlocked, and mineral-rich) or countries with less-favorable agricultural potential, which are home to only 10 percent of Africa’s population. Taking five countries as examples of each one of these categories, the study shows that growth driven by agriculture consistently contributes more to poverty reduction than growth driven by nonagriculture. 4. China’s engagement in Africa China and Africa are now developing a new partnership, which can offer new opportunities for mutual development. China is not a new actor in Africa, but it has considerably increased its role as an economic and political partner in the past five years. At the 2006 Beijing Summit of the Forum on China and Africa Cooperation (FOCAC), China confirmed its long-term commitment to a “new type of strategic partnership” with Africa in the 21st century, “featuring political equality and mutual trust, economic win–win cooperation” (FOCAC 2006). China’s increased 7
  8. 8. engagement in Africa in terms of trade, investment, aid, and knowledge exchange, including in the area of agriculture, merits special attention. For the past 10 years, trade between China and Sub-Saharan Africa has been growing much faster than overall Chinese trade, primarily because of China’s rising demands for natural resources, the expansion of the African market, and a decrease in trade restrictions. The value of trade has increased exponentially—from $3 billion in 2000 to almost $80 billion in 2008 (UNCTAD 2009). Agricultural trade has also grown rapidly, favored by Chinese trade agreements with Africa which include clauses on zero tariffs in agricultural products. Both imports and exports in food and agricultural raw materials quadrupled from 2000 to 2008 (Figure 4). While agricultural exports from Africa to China are dominated by raw materials (namely, cotton from Benin, Burkina Faso, and Mali, and tobacco from Zimbabwe), agricultural imports in Africa are primarily food. Figure 4. Trade in agriculture between China and Africa, US$ millions Exports of Sub-Saharan Africa to China Imports of Sub-Saharan Africa from China 1,600 1,600 Food Food 1,200 Agricultural raw 1,200 Agricultural raw materials materials 800 800 400 400 0 0 Source: UNCTAD 2009. Despite its recent growth, trade in food and agricultural raw materials as a share of total trade between China and Sub-Saharan Africa remains small—around 3 percent in 2008 in both exports and imports (UNCTAD 2009). Exports from Africa to China have been concentrated in primary commodities, such as oil, natural gas, ores, and metals, while imports in Africa from China are typically textiles, apparel, and footwear, as well as machinery, transportation equipment, and manufactured materials (Broadman 2007). Chinese trade is also largely concentrated only on a few resource-rich trade partners in Africa. While imports from Africa to China are still channeled predominantly through state-owned companies, private companies have overtaken state-owned companies in exports from China to Africa. As many scholars have pointed out, the general China–Africa trade patterns have not directly benefited African agricultural and rural development. Some argue that African countries actually do not have a strong comparative advantage in producing China’s main agricultural imports, 8
  9. 9. such as wheat, corn, beef, and soybeans (Zafar 2007). Looking at the effect of trade with China on terms of trade, the large producers of coffee and other agricultural commodities in Africa are actually estimated to lose from trade with China when agricultural prices do not increase (Zafar 2007). With the recent increase in food prices, however, the overall picture of winners and losers from trade in Africa would be more nuanced. Foreign direct investment to Africa— traditionally dominated by western European countries— has been low in comparison with FDI received by other developing regions. China has recently increased its share of investments in Africa, with most of the FDI channeled through Chinese state-owned enterprises that are actively encouraged by the government to invest abroad. Modeled after its own success, China is also experimenting with innovative approaches, such as investing in special economic and trade cooperation zones. Five such zones are already approved by the Chinese Ministry of Commerce for Africa (Brautigam, Farole, and Xiaoyang 2010). With investment focused on manufacturing (particularly textiles) and resource extraction, FDI in agriculture is just a small percent of total Chinese FDI. In 2007, FDI in agriculture accounted for only 1 percent of the total FDI (Brautigam 2009). Trend data on the flow of Chinese FDI to Africa in the area of agriculture is not publicly available, but there have been signs that FDI flows from China to Africa are becoming more diversified and include more agricultural-related investments (Broadman 2007). With high prices of food, foreign investment in land in developing countries, including the countries in Africa, has increased. Chinese state-owned enterprises have been involved in discussions about land acquisition in Africa, but the deals so far have not been large. The established “friendship farms” in some countries are owned by a Chinese parastatals organization, but are usually fewer than 1,000 hectares (Cotula et al. 2009). China’s concept of aid puts a strong emphasis on a mutually beneficial partnership. Chinese aid to Africa in the form of external assistance, concessional loans, and debt relief has increased rapidly in recent years. Overall aid from China to Africa is estimated to have almost quadrupled from $684 million in 2001 to $2,476 million in 2009, with preferential loans and credits from China’s Eximbank (Export–Import Bank) growing the fastest (Figure 5). Eximbank has given concessional loans to government projects in areas such as transport, electricity, and irrigation infrastructure. In the area of agriculture, Chinese aid in past decades has moved away from large-scale state- owned farms to support for smallholder farmers in Africa. China has also experimented with new methods of combining aid and economic cooperation such as joint ventures, cooperation contracts, and public–private partnerships (Brautigam and Li 2009). Since 1960, 44 countries in Africa have benefited from Chinese agricultural aid projects and 20 percent of China’s turn-key projects4 in Africa have involved agriculture (Brautigam 2009). As part of the 2006 FOCAC action plan, China pledged to double development assistance to Africa by 2009 and set up a $5 billion development fund for Chinese firms investing in Africa (FOCAC 2006). Chinese aid is also intertwined with knowledge exchange. The FOCAC action plan provisioned for technical assistance by sending 100 senior Chinese experts in agriculture to Africa and establishing 10 agricultural demonstration sites in Africa. Implementation of the FOCAC plans is 4 “Turn-key projects” refer to donor-built projects that have been delivered ready to use. 9
  10. 10. on track and exceeding targets in some areas. The China–Africa development fund was established in June 2007, with initial capital of US$1 billion, and 104 senior agricultural experts have already been sent to 33 African countries. Between 2006 and 2009, China established 14 agricultural technology demonstration centers in Africa (Brautigam and Li 2009). Figure 5. China’s aid to Africa, US$, millions 2,500 Debt relief 2,000 Eximbank MOF aid budget 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Brautigam 2009. 5. Implications for Africa The experience of China has proven that high economic growth and rapid poverty reduction are achievable, even from a less favorable starting point than the one Africa had in the early 1980s. Looking for effective development strategies, Africa can draw valuable lessons from the reforms in China. It is important, however, that these lessons take into account the substantive differences between the external environment (that is, more globalized and consumer-driven markets) and the initial conditions (such as infrastructure and institutional capacity) of African and Chinese reforms. In addition, it is important that the lessons drawn are tailored to the needs of the individual African country. In general, there are four main areas in which Africa stands to benefit from China’s experience: (1) agriculture and rural growth, (2) evidence-based policymaking, (3) pro-poor policies, and (4) institutions and capacity. • Agriculture and rural growth. The experience of China has demonstrated the benefits of agriculture-led growth, particularly smallholder growth, for overall development and for poverty reduction. To sustain high levels of agricultural growth in Africa, reforms need to be designed to increase productivity by providing smallholders with incentives such as securing land rights, strengthening markets for inputs and outputs, and improving access to extension services. In addition, some of the initial conditions that were present in China at the onset of reforms need to be built up in Africa. To do that, investments in rural infrastructure, such as rural roads and irrigation, need to be scaled up, and investments in agricultural research need to be not only increased but also tailored to Africa’s specific conditions, such as predominant rain-fed agriculture. In general, total 10
  11. 11. investments in agriculture should at least meet the Maputo target of 10 percent of national public budgets. • Evidence-based policymaking. The reform process in China highlights the benefits of exploring alternative policies through careful experimentation and designing and implementing policies gradually based on the evidence from these experiments. To allow for successful context-specific policy innovation, African policymakers could initiate systematic field testing of policy experiments in selected districts before applying policies nationwide. Only policies determined to be successful would be scaled up, and failed policies would be used for learning purposes. An evidence-based approach could also be applied to sequencing, with policies first tested in stages before being introduced. To ensure reliability of evidence, adopting an evidence-based approach to policymaking should be accompanied by increased investment in information gathering, monitoring, and improving evaluation capabilities. • Pro-poor policies. The experience of both China and Africa has shown that economic reforms alone are not enough to reach the most poor and vulnerable populations. Pro- poor policy initiatives in China illustrate that proper scope and targeting of programs is essential. Pro-poor programs should target vulnerable people in both rural and urban areas, and they should not focus strictly on designated poor regions. In Africa, productive safety nets should be scaled up and better targeted. Using the experience of China, new approaches to better reach the poor and multisectoral development projects can be explored. Combining social protection with infrastructure building and employment assistance in Africa could be particularly beneficial. • Institutions and capacity. In China, strong institutions and capacity—both administrative and human capacity—were critical for the design, implementation, consistency, and sustainability of reforms. They were also essential for the high quality of evidence-based policymaking. African leaders should sustain their commitment to reform and build up existing institutions, including national agricultural research and extension systems, in order to support effective country-owned and agriculture-led development. In addition, human and administrative capacities should be strengthened through increased investment in education and training. Following China’s example, new institutional arrangements should also be actively sought to provide new development opportunities, for example, to support the development of the rural nonfarm economy. 6. Exploring win–win opportunities Both Chinese and African policymakers have shown political commitment for achieving win– win outcomes. This commitment needs to be supported by specific arrangements for enhancing the long-term benefits of trade and investment while minimizing any potential harm, particularly in vulnerable groups. These arrangements should ensure fair competition of Chinese trade and investment companies with local African enterprises, stronger linkages of investments with domestic markets, greater engagement of the local workforce, and adoption of higher environmental standards. In the area of agriculture, the large potential for mutual benefits should be better exploited by increasing and diversifying both Chinese agricultural imports from Africa 11
  12. 12. and agricultural investment in the continent. Africa has a comparative advantage in agriculture, and more emphasis should be placed on developing the agricultural exports from China to Africa. China’s engagement should also help promote the much-needed smallholder agricultural growth by continuing to invest in rural infrastructure, giving higher priority to building up the agricultural research and extension systems, and strengthening the policymaking capacity of African governments. The commitment for win–win outcomes should also be supported by increasing transparency and cooperation in Chinese aid delivery both to avoid duplication and to create synergies with other donors. By truly engaging as economic partners, Africa and China can further increase their mutual benefits. 12
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