China's agricultural industry has suffered less impact than expected in its first year as a World Trade Organization (WTO) member, with a sharply growing trade surplus for its farm produce.

But agricultural experts still warn against being overly optimistic about the sector's prospects because the better-than-expected performance may not be repeated in the coming years.

According to statistics from the Ministry of Agriculture, the country's exports of agricultural products reached US$11.1 billion in the first eight months of 2002, a year-on-year rise of 10.5 per cent.

In the same period, imports of farming products stood at US$7.49 billion, a year-on-year decline of 1.9 per cent.

The January-August trade surplus for farming products rose 46.9 per cent to reach US$3.62 billion.

"Considering earlier grim predictions that China's farming sector would be greatly affected by WTO membership, the industry's performance has been apparently better than expected in this first year," said Zhu Ming, a researcher with the State Information Centre.

Both government officials and researchers had initially feared that strong foreign competition in the wake of China's WTO entry would negatively affect the sector.

"Domestically, it was a common belief that agricultural would suffer the strongest impact," said Ke Bingsheng, director of the Centre for Rural Economy Studies under the Ministry of Agriculture.

The top two concerns were an anticipated influx of cheap overseas agricultural products and a predicted sudden plunge in the country's exports of farm goods.

Chinese farmers were expected to lose 28 billion yuan (US$3.38 billion) in combined incomes in the three years following WTO entry as a result of increased grain imports, a study by the Development Research Centre under the State Council once said.

But now statistics from the agriculture ministry suggest that the exports of all main farm produce, including rice, wheat, corn, vegetables, meat and aquatic products, saw a bigger increase between January and August, while imports of the same products decreased somewhat.

Zhu attributed the slow down in China's imports of major foreign agricultural products to a price hike on the international market for some mainstay grains, which helped contain the country's import demand.

A decline in output of some grains in main grain-producing regions like North America led to a price increase of these commodities in the first half of the year, with the price for wheat growing by 25 per cent and that of corn increasing by 30 per cent.

Zhu said the new rules regarding genetically modified (GM) farm produce enacted by the Chinese Government also contributed to the decrease in agricultural imports, especially GM soybeans.

Soybean imports recorded a year-on-year decrease of 34.5 per cent in the first eight months of this year.

"What should be pointed out is that all these seemingly advantageous factors, including the price fluctuation on the international grain market and protection from State policies, will only benefit China's farming sector in the short term and will not last," Zhu said.

"A real challenge resulting from WTO entry may still lie ahead for the sector."

Echoing Zhu's views, Ke said that the country's agricultural industry has already met with potential problems in attempting to further improve its export margins and compete with foreign counterparts.

For instance, domestic cotton, high in price but poor in quality, may be threatened by imports of cheap but good quality foreign cotton as the country's quota for imported cotton is expected to rise to 894,000 tons in 2004, up from 743,000 tons in 2000, which comes in line with China's WTO commitment.

Meanwhile, China's competitive edge in labour-intensive farm produce such as fruit, vegetables, meat, aquatic products and flowers, is being weakened by a rising number of technological and "green" trade barriers being set by developed countries, according to Ke.

In the first eight months of this year, imports of these products only saw a slight increase, also at lower prices.

The expert said that these newly-set trade barriers have caused economic losses of several billion dollars to China's exports of farm goods.

In 2001 alone, China's farm produce exports fell by US$7 billion as a result of the "green" trade barriers.

And in yet another blow, on January 25, the European Union imposed an embargo on all animal-organic products and products containing honey from China.