An Analysis of the Effect and Experience of China’s Agricultural Industry’s Utilisation of Foreign Capital - 中欧社会论坛 - China Europa Forum

An Analysis of the Effect and Experience of China’s Agricultural Industry’s Utilisation of Foreign Capital

Authors: Qin Fu, et al,

Extract from ” Chinese Agricultural Economy,2002“

This article uses the WEP project as an example and presents an in-depth analysis of the economical, social, environmental benefits of the agricultural industry’s utilisation of foreign capital.

There is a difference between direct and indirect benefit of foreign capital used by the agricultural industry. Direct benefit can be shown in the massive increase of the total and net production. Agricultural GDP and net production increased dramatically, and agricultural production efficiency enhanced remarkably. Indirect benefit is reflected in the decrease of agricultural loss; the scale efficiency formed by food aid; the advancement of secondary and tertiary industries in rural villages.

The social benefit of agriculture industry’s use of foreign capital is shown in six aspects: it effectively helped farmers in project areas alleviate poverty; it enhanced food safety; and public welfare is developed. For instance, the enrolment rate of primary and secondary schools in rural villages has increased; the sanitary status of health care has been improved; farmers’ health has improved in project areas; the channel for spreading information is popularised, and in a more advanced way; the status of drinking water and water usage has improved; traffic congestion has been relieved etc.; the production mode and the living condition has improved, including the rise of modernisation level, the change of farming system, the decrease of labour strength, the improvement of living condition, etc. The population’s living quality in project areas is improved. As farmers’ production skills improved, competitiveness grew, and thinking patterns are fundamentally changed; employment is increased in project areas, and immigrants are better settled.

The environmental benefit of agricultural industry’s use of foreign capital is shown in two aspects. The implementation of food aid project enabled comprehensive development of all industries including agriculture, forestry, animal husbandry, and fishery industry; it improved the environment dramatically and effectively boosted positive cycle among all industries in project areas. The coordinated development of environmental protection and proper utilisation of resources is better; for example, erosion of water and soil is controlled, saline-alkali land is ameliorated, forest coverage rate increased, and fishing amount decreased, etc.

Seeing from the situation of Chinese agricultural industry’s use of foreign capital, China’s main experience is that it did not passively depend on foreign capital, but it used Free aid and loans as a means that is beneficial for the time being, and by providing work as a form of relief, agricultural resources is developed, agricultural production is developed, the ability of self-reliance is enhanced. It concentrates the resources and run a large scale comprehensive development scheme. Moreover, considering the reality, project content is designed rationally and scientifically, and it strengthens all the regulations, guarantees the quality of the supervision and monitoring of the construction project. Furthermore, the government’s strong support and action for the project also ensures the effectiveness of agricultural industry’s utilisation of foreign capital.

Chinese agricultural industry has more than a few problems in terms of the utilisation of foreign capital. For example, there is difficulty with the raising of local supporting fund; the loan’s project unit lacks sources of foreign exchange, which enlarges the risk of exchange rate; there are problems with the project’s planning and design; the sectors’ cooperation cannot link up effectively; in terms of the execution of the project, some NGOs act a bit less.

Aiming at the problems of the agricultural industry’s utilisation of foreign capital, the article proposes countermeasures in terms of two aspects: the agricultural industry’s utilisation of the loans from international financial organisations and free aid. In terms of the utilisation of the loans from international financial organisation, the composite of national sectors build national asset allocation fund using foreign capital, in order to improve the situation of the lack of allocation investment; to insist on multi-channel capital raising, adjust the initiative of all aspects, direct all capitals to the investment of agricultural industry; to optimise agricultural industry by the direction and distribution of international financial loans, and keep increasing the project’s management efficiency; to introduce foreign countries’ advanced agricultural technology with aims, and to focus on the digestion, absorption, popularisation and application of the result; to establish a sound repayment mechanism of agricultural utilisation of international financial loan, strengthen the exportation policy of the project’s products; to endeavour to cultivate executive talents by international financial loans, and strengthen the management of these talents. In terms of the utilisation of free aid, continue the use of WFP’s “poverty and vulnerability analysis mapping system” and “participatory rural appraisal” to determine assisted areas and beneficiaries in the future, to assure that the resources are given to the most vulnerable people; to strengthen the project’s post-construction maintenance and sustainable developments, value project’s whole implementation process, enlarge propagation and communication, actively strive for WFP food aid resources; and plan carefully, paying attention to the flexibility and novelty of the design of the backup project.

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