Winds of Change
China looks to co-ops to help farmers duplicate success of its industry
By John Dunn
Director, Co-op Resources &
Management Division
USDA Rural Development
he winds of change are
blowing across the
cooperative landscape
in China. In October
2006, the People’s
Republic of China (PRC) adopted new
cooperative legislation, providing
formal recognition of a new cooperative
model forged in the spirit of that
nation's evolving acceptance of private
business as the key to economic
prosperity.
Evolving co-op model
Cooperative businesses have
operated in China since the early 20th
century. Prior to World War II, most of
the cooperatives in China were involved
with credit. Following the communist
takeover, emphasis changed in
cooperative development to promote
farm marketing and farm supplies. But
these cooperatives were formed on the
communal-farm model.
This system of combining
cooperatives and government hurt the
enthusiasm of farmers to produce and
hindered farm production. Following
the Cultural Revolution, a slow
transition began away from communal
co-op models toward a more Westerntype
co-op model that rewards private
initiative.
There are presently an estimated
160,000 farmer cooperatives with 23
million farmer-members in China.
Many of these cooperatives were
initiated or formed by the government
as a way of rationalizing and supporting
supply and marketing channels, which
are often run by government-owned or
-control enterprises.
Prior to the new Chinese legislation,
entrepreneurial cooperatives had
become the predominant cooperative
model being promoted and adopted.
These are actually business
organizations formed by individuals or
processing companies to "capture
farmers" in a manner that locks the coop
to an individual's business.
The small farmer in an area
controlled by this type of "cooperative"
has the choice of being in the
cooperative or not. But if farmers
choose not to join, they may be left with
no alternative markets, sources of farm
inputs or access to other benefits that
the government provides strictly
through cooperatives. This model has
been widely promoted, in particular by
local authorities who depend on
agricultural taxes to support their
government operations. This model
provides a larger and more assured flow
of tax revenues.
The All China Federation of
Cooperatives, formed in 1950, is the apex
organization of national-level
cooperative associations. Its members are
national cooperative enterprises that are
the primary supply chains — for inputs
and outputs — of the agricultural sector,
including basic materials production,
manufacturing, processing, distribution,
marketing, retail and finance.
The span of the Federation is far
wider than agriculture, covering such
industries as recycling, tourism, catering
and international trade services. The
Federation has been closely linked to
the government and the promotion of
its cooperative models since its
inception. It has played a significant role
in organizing and assisting in the startup
of new farmer cooperatives and is
expected to continue as a key player in
the development of the new model
cooperatives.
New cooperative law
China's new cooperative law is the
first codification of cooperative enterprise
in post-World War II China. The statute
contains broad definitions of cooperatives
as user-owned and -controlled businesses
in a manner that generally conforms to
the statement of cooperative principles
adopted by the International Cooperative
Alliance (ICA).
Before the new law, cooperatives
were loosely regulated or supervised by
three PRC ministries: Agriculture,
Science and Technology Association,
and the Commerce and Industry
Bureau. Under the new law, the
registration (incorporation) of
cooperatives will be the sole
responsibility of the Commerce and
Industry Bureau. Agronomic and
scientific advice to farmers will be
provided by the Science and Technology
Association, while cooperative support
will be provided through the Ministry of
Agriculture's Ag Bureaus, primarily
operating at the township level.
In December 2006, a conference on
"Promoting the Development of
Farmers' Cooperatives" was held in
Beijing. Speakers included cooperative
experts from many parts of the world,
yet primarily represented an extensive
range of government leaders, including
representatives from USDA Rural
Development, led by Under Secretary
Thomas Dorr, scholars and legal experts
from throughout China.
The new law will need to be
promulgated through a set of
regulations yet to be developed. This
cooperative conference was a part of the
deliberative process in developing those
regulations.
Challenges lie ahead
Observers of the cooperative
conference in Beijing were thrilled to
hear Chinese leaders articulate concepts
of cooperation so central to cooperative
philosophies and principles. Speaker
after speaker talked about democratic
control, local autonomy, freedom of
choice and education. The spirit of true
cooperation was in evidence.
Yet there are tall challenges to this
new cooperative approach in China.
The Chinese farming sector has lagged
behind the tremendous successes of that
nation’s industrial sector. Poverty and
social strife are significant. China looks
to the cooperative business model as the
hope to overcome the significant and
systemic problems of its rural areas.
These many challenges include:
How can the government redefine and
reduce its role in cooperatives? How
will local Chinese government, which
dominates local economic life through
the distribution of government benefits,
carry out its role as primary cooperative
startup assistance providers? How will
small farmers of China gain the
knowledge to manage their cooperative
businesses and the trust that they have
the ability to do so?
Great hope is evident in the
cooperative movement in China.
Cooperation and partnership with
Western governments, cooperatives,
educational institutions and non-profit
organizations will open the doors to
wealth creation and productivity for the
farmers of China. The rewards of
success in this experiment will extend
through generations.
