Rural China 2.0
How impoverished farmers were empowered by technology.
大家好 / Hello everyone 👋
The "2 Sessions" event, China's biggest political gathering that is currently discussing the draft of the new Five-Year Plan, is, well, in session.
One of the big recent statements from Xi Jinping 习近平 is the victory in terms of poverty alleviation, mostly focused in rural areas. Close to 100 million people were lifted from poverty according to the Chinese government in the last 8 years. These numbers are subjective and some critics mention that the "bar was set too low" though.
The fact is that rural China has been changing at a staggering pace in the last 20 years. In a world used to hearing about the gleaming skyscrapers of China's biggest cities, it is easy to overlook how far its rural villages have come in some aspects. This why I have been increasingly interested in learning more about this topic.
Rural China 2.0 is an enormous topic, and there are many great books written about it (I would be happy to recommend a good read, drop me a message on Twitter 🐦 @jorgegoncalo). Please bear in mind that, according to the name of this newsletter, I will be writing only an abridged version of how the government, private companies, and tech-savvy communities leveraged new technologies in order to bootstrap new businesses, transform villages, and make agricultural processes more efficient.
The goal of modernizing rural China.
Villages coming together.
New age farming.
The seeds for the future.
The goal of modernizing rural China
If you have in mind the size of a country like China, it is easy to imagine huge continuous fields of maize and corn like you can find in the rural USA. Those exist as well, but the majority of rural plots of land are actually quite small (around 0.96 acres) and allocated to individuals based on their rural hukou 户口 (the famous Chinese system of household registration). This means that for many it used to be hard to get a sufficient income to buy better tools, or even to sustain themselves solely by farming.
Deng Xiaoping initiated the process of reformation and opening of China in 1978 and with that the idea of decollectivisation and market reforms. According to Kristen E. Looney in her book "Mobilizing for Development" :
“Between 1978 and 1984, the replacement of the people’s commune system with household contract farming resulted in historic poverty reduction. Agriculture grew about 10 percent annually, and the number of people living in absolute poverty dropped from 250 million to 128 million (from 31 percent to 15 percent of the rural population).”
Even though this process achieved remarkable results, the size of the population living in extreme poverty in China was comparable to an entire population of Mexico. At the beginning of the 21st century, there was staggering contrast between the booming business with international oriented coastal cities and the still ailing rural Chinese interior.
After a decade of total neglect - due to prioritization of other issues - the task of rural reform came back with President Hu Jintao 胡锦涛 through policies that promoted provincial and local level funding, and product subsidies to communities in need. These policies though resulted in the demolition and entire reconstruction of villages.
Basically, the goal here was to bring urban ideas to a rural setting by transporting these communities to new villages, which in the end moved them too far from the fields, and increased the costs of living, since, for the first time in their life, these households had to pay for utilities like electricity.
Now, because Hu Jintao's 胡锦涛 policies relied too much on local governments' funding distribution, it would happen regularly that those funds were not correctly allocated in time, or that some part of the money would "disappear" (wink wink).
Xi Jinping's 习近平 efforts from 2012 took a different approach by directly distributing these subsidies to affected households in key impoverished counties and making a clear goal to completely alleviate poverty by the end of 2020. A sort of system of percentual progress bars was created, like a loading bar from a video-game, in which the number of counties lifted from poverty was shared in the news.
Villages coming together
In the past 30 years, waves of young men and women have headed to the big industrial hubs and cities in search of job opportunities, and the possibility of a better future for them, and their families.
China owes in part its economic success to these low-paid migrant workers who would spend hours and hours in manufacturing lines making products - from your teddy bears to your iPhones. These laobaixing 老百姓 - the common people - have been traveling thousands of kilometers for a job in a faraway city by themselves, in many cases, also leaving their parents and kids in their hometowns, only seeing them once per year, during the Chinese New Year celebrations.
As China has modernized itself and became an innovator in key industries, the automation level of factory lines doesn't warrant the need for such a large workforce anymore, therefore, more and more young people are returning to their hometowns.
As rural villages and towns 5 years ago were only populated by old people and small kids, it was somewhat strange to see groups of young men idling around in these locations. Something that Scott Rozelle mentions in the introduction of his book, "Invisible China".
With President Xi Jinping's 2012 proposal, there was also an increase in other methods of aid besides agricultural subsidies, such as job training, relocation, social welfare, and general education. This was to be the spark that would ignite these hopefully entrepreneurial returnees.
There were many kinds of strategies that could be used in order to modernize a community. The selection of it would depend on the location, level of association with the local government, and general cooperation spirit of the village/township. Let's take a look at these examples.
Revitalization through tourism
The travel & leisure industry was one of the most successful options for the revitalization and modernization of Chinese rural areas. Through it, these villages' infrastructures could be recovered, and the community's culture maintained and even celebrated.
There are several examples of villages like this, but I reckon that the best one to write about is Fenghuang County in China's Hunan province.
This city, where half of its population belongs to the Miao 苗族 and Tujia 土家族 minorities, has a treasure of historic buildings in its picturesque old town, split by the Tuo river in half, but in 2005 it was still one of China's "National Poor Counties" due to lack of investments and poor agricultural results.
In 2002 the local government sold the management rights of key tourist attractions in the area to a private company and the Phoenix Ancient Town Tourism Co. Ltd (PAAT) was established. Investments started pouring in and changes came along, even though they were not what people were expecting.
Domestic tourists started pouring in but the infrastructure could not keep up with it. The Tuo river was polluted due to the lack of a proper waste management system from new restaurants and lodging. Its local population felt ostracized and frustrated by not reaping in the profits from the new tourism boom, as the monopoly was with PAAT.
These details are being mentioned therefore to clear the picture that poverty cannot be alleviated just with funds, like with a magic wand in a Harry Potter book. It was a process of learning and adapting for the local population, the tourism investors, and the local government.
This former Qing Dynasty military garrison is nowadays a national AAAA (4A) level scenic spot (China's second-highest level), and one of the top ten cultural heritages in Hunan Province. It also applied for a UNESCO World Heritage status.
Villages are also able to enter the globalized e-commerce scene and it's possible that one of the items that you recently ordered from Aliexpress or Wish comes from there. One such example is the concept of Taobao Villages 淘宝村 due to their connection with Alibaba's and China's most popular e-commerce website where you can find anything that you want, www.taobao.com .
The idea of Taobao Villages was initiated in 2009 with the village of Dongfeng where a thousand households got together and started making furniture to sell online. Nowadays a rural community is considered a Taobao Village when 10% of its population is engaged in e-commerce activities, and there were 5,425 villages of this type in China as of September 2020.
E-commerce empowered these villages and provided opportunities for their young residents as well, as it provides employment for millions of people in the Chinese countryside and has become an important way for migrant workers returning home to earn a living.
In order to serve farmers, innovate agriculture and make rural life better, Alibaba plans to invest 10 billion yuan in three to five years to establish 1,000 county-level service centers and 100,000 village-level service stations. At least 1/3 of the counties and 1/6 of the rural areas in China will be covered.
When you visit one of these locations you will see banners and monuments commemorating Alibaba for the training, logistic infrastructure, and changing their lives. In the first 9 months of 2020, Taobao villages and towns (basically a cluster of villages working in e-commerce) made a total of $153 Billion in online sales according to the company.
New Age Farming
Agriculture as an industry is a somewhat recent concept in China. Although large conglomerates exist, namely in the livestock, cereals, and wheat sectors, most agricultural businesses are family/local based. The distribution of agricultural land is a complex topic in itself but what I want to reiterate is that it wasn't easy until now to incorporate new methods in order to increase production output. Even the crop plantations would sometimes work on the basis of just copying what your more successful neighbor planted and profited from on the market this year. Of course, next year the price of that specific product would decrease as the supply would be more than the demand.
Nowadays, technology is increasingly utilized in Chinese farms. Be it through blockchain technology in poultry farming, with the concept of food traceability in mind, social media usage in order to promote local and organic farmer brands, or to sell their products directly in Douyin 抖音, the Chinese version of Tik Tok.
In the last few years, more and more private technology companies have been essential to the development of China's countryside, like in the case with Taobao villages. This is happening by adapting technologies used already in urban areas and using the already built logistics infrastructure to their advantage.
Yujie Xue, from South China Morning Post wrote:
Alibaba Group Holding, the owner of the South China Morning Post, has been promoting so-called Taobao villages since 2009 to help rural residents sell their products online. Pinduoduo, a fast-growing online shopping platform, has been offering week-long training programmes in finance, business operations and online marketing to rural merchants. JD.com, another e-commerce giant, has created rural service centres that use drones and other technologies to expand its logistic capabilities.
Pinduoduo, China’s largest agriculture platform, is specialized in enabling its users to purchase and order delivery of fresh vegetables in an efficient and cheap way. Pinduoduo was founded in 2015 and has really focused their business on, according to their website: "transforming the way food is grown, transported and sold by connecting more than 12 million farmers directly to a user base of 731 million consumers." Their agriculture-related gross market value in the past year was $42 billion, having doubled year on year. Pinduoduo was apparently also recognized recently for its role in alleviating rural poverty.
Pinduoduo, besides providing a marketplace for its users to purchase and receive fresh produce on the same or next day, also helps users by organizing live streams, introducing new products to the general public (like the case of the yacon in Yunnan province), and standardizing practices for example:
Companies like Pinduoduo:
help farmers to plan their crop outputs more consistently in accordance to customer demands;
enable the promotion of lesser known agricultural products, like the yacon, in order to help more impoverished areas;
introduce economies of scale to small farm operations and eliminate added cost and waste;
allow farmers to have faster iteration cycles with almost guaranteed success;
In other ways, drones are being used to help farmers with tasks such as terrain mapping, dealing with pesticides, or seeding fields in a faster way. A big company in this field, XAG , has recently started discussions with the Thai government for future cooperation, and already helped the province of Sichuan in a grassland reclamation project.
The seeds of the future
Rural China is what fueled the "Middle Kingdom" throughout its history. If the country wants to break the economical middle-income trap, it must prioritize correctly the regions that it wants to aid and fund. The integration of ethnic minorities (that are mostly located in these regions) without forgetting their culture, the adaptation of infrastructure without destroying the connection of the local population with its fields, and the continuous creation of policies that aim to make these areas more enticing for families to stay, should be the current goal.
The focus of the central government in its countryside is one of the key remarks in the next Five Year plan. The goal will be to bring more educated young people back to their hometowns and to promote sustainable growth in these regions. Of course, technology will play a big role in it, more than ever.
The increased participation in the domestic commerce is providing the change to rural residents to become entrepreneurs by selling local products online. By raising their income levels they will also want to buy products that they do not have in their local stores, which in turn will boost even more their usage of e-commerce tools.
One final thing to have in mind is that online penetration of agricultural goods is only around 5% or less. China has, of course, other issues that might disturb its growth and development, but if rural China continues on with its modernization and growth path, we might even see the start of a reshuffle of the current dualism with the urbanized rural areas.
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My name is Jorge and China Abridged is where I write weekly about Chinese technology and society. I have a B.A in Asian Studies with the University of Lisbon, won a scholarship from the Confucius Institute for academic excellency and lived for 2 years in the Middle Kingdom.
For the past 4 years, I have been involved with one of the biggest fin-tech startups in the world and now I spend my time honing my language skills, perusing articles about 中国, and perfecting my RSS feed.
You can check out all past issues here. Also, I would be extremely thankful if you shared this article with your friends and colleagues if you found it interesting.
Any suggestions for topics or feedback? Let me know on Twitter 🐦 @jorgegoncalo.