China's agricultural sector opening further
By Dai Yan (China Daily)
Updated: 2004-07-26 08:22

Foreign firms will get wider access to China's agricultural wholesale and retail sector, a State Council document reveals.

The move is intended to beef up the sector's hitherto weak distribution system.

This is according to a State Council document on the distribution of agricultural products, which was drafted and submitted by eight bodies, including the Ministry of Commerce, the Ministry of Agriculture, and the State Development and Reform Commission.

"There will be no limits on the location, shareholding and capital requirements for foreign companies opening wholesale markets and farm produce retail outlets," explained Ministry of Commerce official Xu Ming.

Xu, the deputy director of the Department of Market System Security under the Ministry of Commerce, said foreign investors would be encouraged to establish and restructure agricultural produce wholesale and retail markets.

Some foreign companies have already expressed an interest in this and are discussing the matter with the government, Xu revealed.

Although agricultural produce distribution is a massive market in China, it remains very underdeveloped.

This latest move is a direct result of China's commitments to the World Trade Organization (WTO), Xu pointed out.

China promised to scrap joint-venture requirements and lift curbs on the location and number of foreign-funded stores after December 11 this year, according to the Administrative Measure on Foreign Investment in Commercial Areas, as part of the nation's commitments to the WTO, which went into effect on June 1 this year.

Under the current rules, foreign firms can only have a maximum 65 per cent stake in joint venture firms in the sector.

Xu revealed that the State Council document calls for the standardization of the current wholesale markets and the drafting of a set of national standards to cover the sector.

Around 2,000 of the current 4,150 wholesale markets are expected to meet these requirements in three years.

Xu added that urban supermarkets and convenience stores will also be encouraged to sell more agricultural produce.

One-third of agricultural produce is expected to be sold in this way within the next five years.

Makeshift open-air agricultural produce markets are currently filled with fake goods and are the site of many illegal practices due to a lack of supervision or adequate regulations.

Registration fees, commission and taxes have raised business costs and therefore discouraged farmers from taking part in the markets.

Rural retail outlets should also be upgraded, Xu said.

China will develop supermarkets and convenience stores in counties and major rural towns, transforming rural fairs and rural grocery stores into chain stores within five years.

China's rural population has a disproportionate consumption capacity, despite accounting for 70 per cent of the country's population.

Consumption in rural China fell to 34 per cent of the national total in the first quarter of 2004, a record low since the 1990s, according to the National Bureau of Statistics.

Farmers' low incomes and an inefficient distribution network are believed to be the major factors for shrinking rural consumption. There is only an average of 1.6 rural markets for every 60,000 farmers, according to Xu.

The government will encourage businesses to develop cheap but durable products tailored to rural needs, said Xu.

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