How China breaks the ice in the US-China grain dialing game

Abstract: The modernization of rural distribution is lagging behind, reflecting the fact that innovations in the distribution system seldom take into account the interests and requirements of the three rural areas. This paper only analyzes the institutional factors that constrain the circulation efficiency of agricultural products, identifies the main obstacles to development, and then discusses the policies and measures to reduce the institutional bottleneck. The policy implication is that the elimination of institutional bottlenecks constraining circulation efficiency is not only conducive to resisting foreign shocks, but also directly related to the functioning of the agri-food chain. At the same time, the market mechanism to guide the domestic division of labor, confirm the comparative advantage and make use of it, is an effective way to improve the overall competitiveness of agriculture and the fundamental to participate in international competition.

Keywords: agricultural products; circulation efficiency; institutional bottlenecks

I. Introduction

To change the backwardness of traditional agriculture, it is necessary to increase the public ****support for agriculture and rural areas, but more importantly, it is necessary to improve the efficiency of inputs and resource utilization, including the efficiency of agricultural production, processing and circulation. In this paper, only on the constraints on the efficiency of the circulation of agricultural products system bottlenecks to explore, mainly based on the following considerations: First, by the historical, cultural and other factors constraints and influences, China's "heavy production, light circulation" of the traditional thinking is y rooted, this tendency greatly restricts or hampers the circulation of agricultural products in the agricultural structural adjustment in the guidance role should be. This tendency greatly restricts or hinders the proper guiding role of agricultural circulation in agricultural structural adjustment. In fact, circulation in the whole agri-food chain plays an important function of the upper (production) and lower (consumption), the whole agricultural industry and rural resource allocation, structural adjustment plays an irreplaceable role. In short, the circulation of innovation and efficiency issues related to the circulation of the agricultural economy and national economic development can become a "gas pedal" rather than "bottleneck". Second, the challenges facing agri-food logistics and value-added chains include not only increasing investment in infrastructure and improving the efficiency of transportation and distribution networks, but also eliminating administrative jurisdictions and market segregation that constrain distribution. In other words, it is a matter of removing both physical and institutional bottlenecks that constrain flows, with the latter task being more daunting for countries in transition. Many observers predict that China's food processing industry will achieve double-digit growth if institutional and regulatory barriers are overcome (Brang Gilmour, Cheng, 2004). Third, under the condition that domestic and foreign markets are open to each other, the elimination of institutional bottlenecks and the improvement of circulation efficiency from the reality of international competition are not only conducive to the export of China's agricultural products, but also conducive to resisting the impact of foreign agricultural products. The production prices of China's staple food products such as wheat, corn, rice, etc. are not high compared to the international market, but they add at least 30% to the costs in the field of distribution and foreign trade (Xu Xiaoqing, 2003). For non-food labor-intensive products, the intermediate costs are much larger than the production costs, e.g. the intermediate costs of vegetables account for 90% of the whole price. Further, the efficiency of distribution of agricultural products is also directly related to the operation of the industrial chain as a value-added system for agricultural products, and to producers' returns, shippers' profits and consumers' welfare, as well as to the efficiency of resource allocation. Therefore, eliminating bottlenecks and improving circulation efficiency are of great practical significance for the transformation of Chinese agriculture, the internationalization of agriculture and the increase of farmers' income.

II. Circulation Efficiency: Challenges from Institutional Bottlenecks

China's accession to the WTO promises to complete the transition period by 2005. To cope with the challenge of WTO, the key is to strengthen the affordability of opening up to the outside world, and the key to strengthen the affordability is to step up to complete the integration and improvement of China's market economic system, and fundamentally improve the quality of China's economic operation and competitiveness (Wang Yaotian et al., 2004). Increased market liquidity will certainly reduce the cost of market operation either by lowering the cost of gathering information or, due to economies of scale, by increasing the volume of transactions and lowering the cost of circulation, which can significantly reduce the cost of market operation. For transition countries, it is generally recognized that this rules and institutional facilitation is far more significant than the effects brought about by liberalization.

The study found that the competitive advantages and disadvantages of Chinese and American food and oil products, in addition to the gap between the two countries in the quality of the products, the key is the inefficiency of China's circulation and high circulation costs, thus weakening the production cost advantage. For labor-intensive agricultural products, the high cost of transportation and marketing, circulation spread is more obvious. For example, the retail price of vegetables is 80%-100% higher than the wholesale price, the seller's profit is 2-3 times higher than the producer's, and the producer's income is 1/4 to 2/5 of the retail price. the high cost of circulation is a direct factor affecting exports (Weng Ming, Chen Jinsong et al., 2003). Another study shows that the significant regional differences in the prices of agricultural products in China are transportation factors and institutional factors compared to seasonal differences (Ke Shuangsheng, 1995). Indeed, institutional transformation and system change have added many extra costs to the distribution of agricultural products in China. Such as: the monopoly of the state-owned sector keeps the circulation cost high; the poor circulation system leads to the realization of self-sufficiency by over-investment in the regions that do not have self-sufficiency, which raises the cost; the system of responsibility of the governor of the rice bag is not conducive to the deepening of the regional division of labor, which exacerbates the regional contradiction between supply and demand; and the transshipment and logistic services of the cargoes are under strict control, and so on. All of these constitute challenges to the logistics of agricultural products. The result is that China's agricultural products have failed to give full play to its advantages.

Analyzed further, the impact is even more far-reaching as the efficiency, growth and adjustment of the agri-food chain is hampered. This is because the harmonious functioning of the industrial chain system is a strategic goal of agricultural economic policy and an important way for small farmers to compete in the market. Inefficiencies in the middle links of the value chain will affect the upstream and downstream of the chain, preventing them from developing healthily and weakening their competitiveness when they compete with foreign products in the Chinese and other markets. Only when the agricultural industry chain develops together with the market economy, the circulation of agricultural products will play a role in improving the efficiency of the industry chain.

The challenges and impacts of institutional bottlenecks also reflect the lag in innovation in circulation systems and management: incomplete and imperfect functions and structures coexist with overlapping institutional functions, and management modes capable of integrating effective planning, service, and supervision have not been set up, while departments contrary to productivity development have not yet been abolished. To the current quality and safety inspection of agricultural products, for example, there are three dangerous tendencies (Chen Xiwen, 2003): the first is to take advantage of food safety and surge in consumption; the second is to take advantage of the inspection of food quality and safety, the departments of the new power struggle; the third is to take advantage of the issue of food safety in the country to set up market barriers between the regions, do not allow other places to enter the product. All three phenomena now have a tendency to expand outwardly.

Improvement of the external environment and agricultural international trade system to improve the international competitiveness of China's agricultural products is of great benefit to a small number of developed countries led by the negotiation of the formation of the current WTO "Agreement on Agriculture" does not protect the basic interests of developing countries. However, there is a big gap between the reality and the ideal efficiency standards, and often only provisions with big discrepancies can be chosen. The urgency also lies in the fact that in the expanding Chinese coastal market and nearby Asian markets, inefficient distribution and high costs make it difficult for China's inland producers to compete with coastal and foreign producers. Only by significantly reducing distribution costs will it be possible for inland agricultural and livestock products to have greater access to the coast, which will reduce the difficulties of transporting inputs and agricultural and livestock products that would otherwise widen regional income disparities. Obviously, improve the domestic circulation, not only is a realistic choice to deal with international competition, but also in the future for a considerable period of time, but also can alleviate China's food security, farmers employment, income generation pressure; In short, agricultural product circulation system innovation and efficiency issues, can not be regarded only as a means of economic growth point, but also should be regarded as a source of the agricultural economic chain under the market economy.

Three, reduce the constraints on the efficiency of the circulation of agricultural products system bottlenecks

(a) system bottlenecks to reduce one of the maintenance of competition and market integration

Currently certain areas of the country in the collection of taxes, traffic management, product sales, etc., the existence of local protection and regional discriminatory policies, it is difficult to achieve the effective allocation of various types of resources in the domestic market will inevitably result in the market the wrong signal, the result is that the reduction in the number of agricultural products. signals, with the result that it reduces producer income, increases consumer spending, and reduces choice opportunities. The following case study is used to illustrate the challenges of administrative jurisdiction and market fragmentation on the agri-food chain in the country and the impact on resource allocation.

(1) Case 1: Challenges to agricultural logistics and agri-food chains

Market Integration, also known as Market Integration, largely determines the efficiency of commodity flows. However, even for an industry such as logistics, which is typically concerned with economies of scale and uniform standards, there is now a situation of regional and inter-industry compartmentalization. The value of agricultural products has been seriously damaged due to chaotic market order, poor channels and many links. According to statistics, China's fruits and vegetables and other agricultural and sideline products in the picking, transportation, storage and other logistics links in the loss rate of 25% -30% or so, that is, more than 1/4 of the agricultural products in the logistics link is lost. Undoubtedly, in addition to physical facilities constraints, administrative jurisdiction and market fragmentation is the main cause of high logistics costs. Since the means of logistics support is subject to the jurisdiction of several government departments, each department takes actions based on the interests of its affiliated commercial organizations, failing to reach a unified standard and distinguish between the scope of jurisdiction and the scope of commercial activities. It is the integration of production and marketing in the supply chain that has resulted in China's high-value agricultural products not being utilized to their full advantage, and the underperformance of the food processing industry, which had great potential.Brang Gilmour, Cheng, and others (2004) have also predicted that if the economic jurisdictions of the different agencies were dismantled or restrained, and if the value-added chain efficiency could be improved, the value of China's food processing industry would be three times as high in 2015 as it is now, and three times as high by 2030. three times what it is now, and five times what it is now by 2030.

It is evident that the failure of agricultural logistics transactions to really get underway is due to the planned economic color of the supply chain and the lagging management system, in addition to the lack of facilities and the developmental factors of the market itself. Studies have shown that the institutional environment, economic and social incentives, managers' education and work experience, talents and preferences, make the middle part of the value chain over-managed and over-intervened (Brang Gilmour, Cheng Guoqiang, 2004). Another immediate fact is that the reform of the grain distribution system has been seriously lagging behind for many years due to the lack of confidence in the competitiveness of grain distribution and the hope of monopolization of the distribution area to protect the market, the result of which is to strengthen the ability of the state-owned grain distribution enterprises to play with the government (Hu Xiaoping et al., 2004).

Generally, incentives and competition linked to the price mechanism "provide more and better public social benefits than imperfect competition and incomplete control by monopolistic organizations" (Earlham, 1985), but there are still many limitations on the policy in terms of the boundary extension of the scope of competition. Therefore, it is necessary to break the regional blockade and sectoral monopoly, integrate the value chain of rural commodity circulation, gather value-added functions such as transportation, warehousing, packaging, processing, etc., especially in close connection with the modernization of agricultural industrialization and agricultural product circulation, unify the commercial flow and logistics in time and space, and give full play to the circulation's "effectiveness in reducing delays and pauses" ("减少延误和停顿的效能"). "

(2) Case 2: Market Integration and Resource Allocation Efficiency

Further research has found that strengthening the unity of the market not only improves operational efficiency, but also has an important impact on the optimization of resource allocation and rational industrial layout. Gradually deepening this process of optimal allocation to the whole range of industrial activities can make the national agricultural regional layout more reasonable and effective. China's long-standing pattern of "northward transfer of grain from the south" was transformed into "southward transportation of grain from the north" in the 1990s, and then gradually developed into "southward transportation of grain from the north", which is a change in the regional structure of supply and demand. This change in the regional structure of supply and demand is actually a deepening of the regional division of labor, which is conducive to the development of comparative advantages. However, some policies emphasize regional self-sufficiency, ignoring the principle of comparative advantage; various local strategies of mutual obstacles hinder the development of market advantages, so that mutually beneficial behaviors are constrained.

For large countries, the state of domestic interregional division of labor affects the overall competitiveness of the country. China's vast territory, resources interprovincial differences, but due to historical and practical reasons, especially local trade barriers caused by the distortion of the domestic market not only reduces the efficiency of resource allocation, but also a serious constraint on the expansion of the product market. Studies have shown that the proportion of inter-provincial trade has been on a downward trend in recent years, with inter-provincial transfers of consumer goods to each other falling from 38% to 35%, and transfers of consumer goods from each other falling from 47% to 38%, showing a trend of movement in the opposite direction of world marketization (Lin Senmu, 1999). In this way, one possible outcome is that international competition is largely not an extension of the natural expansion of the domestic market, and that the development of international trade contrasts with the severe lag in domestic inter-regional trade.

The conclusion of the above analysis is that sustaining competition and market integration is both a key component for agricultural products to realize their value transformation and an important means of improving the efficiency of market allocation of resources.

(2) Institutional bottleneck abatement No. 2: Improving market functions

Many of the additional distribution costs are caused by imperfections in market functions. It can be said that the policy of guiding the development of the market is more reflected in the improvement of the market, not just the establishment of the market. Generally speaking, the improvement of market function mainly includes the following policies and measures:

1. Facilitate consumers to be able to make reasonable choices, especially the control and application of hygiene standards. Emphasis on food safety is beneficial to domestic consumers as well as to trade in China's labor-intensive, high value-added products. Linked to this is the design and implementation of classification standards. A set of scientific evaluation standards for the quality and safety of agricultural products should be established in accordance with food quality and safety standards and internationally accepted standards, and should be strictly enforced in production, processing, marketing and use.

2. Investigations and studies on distribution activities. In this field, some research, including those related to some aspects of circulation technology, is undertaken by the circulation organization itself, while some other basic research needs to be supported by the public **** policy. Taking the supply of circulation technology as an example, major agricultural product circulation technology research, the construction of integrated circulation system, circulation technology promotion and technical training and other agricultural product circulation technology activities, as endogenous factors, greatly change the traditional mode of agricultural product circulation in China, broaden the boundary of possibilities of circulation, and further reduce the dependence of the circulation of agricultural products on scarce natural resources (Han Song, 2004). It is worth exploring how to construct and cultivate a benign supply model.

3. Provision of market information. Adequate and unobstructed information is a prerequisite for maintaining market effectiveness. To centralize and unify the national agricultural business information platform to achieve information resources *** enjoy, eliminate the "information islands" in order to provide real-time, applicable information and analysis, consulting and other services, should also focus on the rural market circulation of the main body of information technology training. Moreover, compared with the private provision of information, the Government can easily arouse people's trust in fairness. In addition, as a market-based hedge and price guidance mechanism, the rational use of the futures market is one of the effective ways, but its efficiency also depends on the availability and distribution of market information.

4. Circulation management scientific. Circulation system and management innovation should pay attention to: market-oriented, integration of traditional commerce and trade, really play the market effectiveness of the circulation industry, driven by the integrated development of related industries; related management institutions and functions to adjust and re-engineer their functions, the implementation of the integration of agriculture, industry and trade, domestic and foreign trade; increase the management of the cost consciousness, to achieve the efficiency of the management organization; integration of management resources, change the cross-functional situation, and form the unity of management.

5. For countries in transition, it is necessary to develop the economy on the basis of the principle of transparency and the strengthening of property rights in order to improve the ability of market players to utilize market opportunities. Policies to regulate the market order increase market efficiency, reduce the abuse of market power, reduce information asymmetry as well as internalize externalities as much as possible (Lohmar et al., 2004). These policies reduce the risk of inefficiency while facilitating market activity and rational investment.

Reform experience has shown that creating markets and establishing property rights are the best ways to achieve growth and efficiency. In this regard, the transformation of government functions is crucial. This is done by reforming policy-related regulatory institutions to make them consistent with market principles, with the aim of seeking low-cost agricultural services and reducing market uncertainty, and with the condition that the quality and scope of government service provision is consistent with the production of agricultural products and the satisfaction of effective consumer demand.

(C) System bottleneck abatement No. 3: Cultivating intermediate market organizations

"Small production, big market" is a direct and colloquial expression of the essential features of China's agricultural market structure, which reveals the real obstacles to farmers' access to the market: high circulation and transaction costs and low efficiency. This competitive structure shows that small farmers lack economic strength and market information, have weak management ability, and are in a completely unorganized state, and their bargaining power in the market is very weak. It can be seen that the liberalization of the market is only a necessary but not a sufficient condition for entering the market orbit, and that the market system requires independent market players and corresponding market organizations, otherwise it cannot operate effectively. The key to the problem lies in how to build an effective connecting mechanism between individual farmers and the market.

Adapting to changes in the external environment and the market and transforming the existing rural cooperative economic organizations -- grassroots supply and marketing cooperatives and socially run enterprises -- into chain operations is a potentially more realistic way to improve the rural commodity distribution network. It should be noted that, when transforming the grass-roots supply and marketing cooperatives, the interests of small and medium-sized agricultural products should be given priority consideration, so that farmers can enjoy full voice in the process of playing with the interests of the company and their own rights and interests are safeguarded (Industrial Development Research Center, Renmin University of China, 2004).

Another way is to form some institutions by the farmers themselves, typically such as the organization of agricultural industrialization: horizontal integration of marketing cooperative organizations to improve the bargaining power of farmers; production and marketing contractual system between the agricultural marketers and farmers to give both sides a stable expectation; vertical integration in the industrialized organizations to achieve the internalization of market relations. In recent years, contract farming has also been given a new dimension, with large-scale distribution supermarkets and retail organizations demanding regular supplies of the same varieties, which can only be met in vertically integrated operations.

But the continuing attraction for contract farming has led farmers to prefer joining various cooperative organizations rather than becoming individual farm producers. At present, China's leading enterprises are generally small, "companies and farmers" organizational mechanism of conversion to maintain the integration of production and marketing of the main form of organization, and the conversion of the interest risk mechanism as a breakthrough, aiming to make the company and the co-op (or farmers) to become a real **** the same body. At the same time, the incompleteness of the contract, the signing of the contract is not a total transfer of market risk, when the market has a significant change, to some extent, is required to partially exempt (Liu Fengqin, 2003). If the contract is enforced at this time, it will violate the principles of ****same and efficiency.

In reform practice, policy adjustments often produce results that deviate from the reform goals or even far from them, and one important reason is the lack of efficient market organization and governance mechanisms (Zhang Shuguang, 1995). Support for farmers' cooperative organizations in the industrial chain is important, including support and protection through laws and regulations, training in management and technology, and appropriate tax concessions. Farmers' cooperative organizations can assist the government in fulfilling relevant agricultural development plans, enhance the negotiating position of farmers, and also increase farmers' income through the economies of scale and radiation benefits of farmers' organizations, thus further developing their potential based on contract farming. It is imperative to establish systems and regulations that remove obstacles in the formation of circulation organizations.

Four, a short policy comment

Reality, the efficiency of agri-food chain, growth and adjustment of the impediment to show that the market transportation and marketing, information, trading system and industrial organization will constitute a constraint on market competition. It can be argued that policies to guide the development of market agriculture reflect more on improving markets than just establishing them. It is important to identify bottlenecks and address them before vested interests take advantage of them. This implies that governments need to intervene less in trade and give more attention and assistance to infrastructure development, enforceable property rights, market order, information services, and so on. The policy implication is that the abatement of institutional bottlenecks that constrain the efficiency of distribution is not only conducive to resisting the force of foreign shocks, but is also directly related to the functioning of the agri-food chain. At the same time, using the market mechanism to guide the domestic division of labor, identifying comparative advantages and exploiting them is an effective way to improve the overall competitiveness of agriculture and fundamental to participation in international competition. This leads to the conclusion that the issue of circulation innovation and efficiency - which is related to whether circulation can become a "gas pedal" rather than a "bottleneck" in the development of agriculture and the national economy - should be regarded not only as a means of economic growth, but also as the source of the agro-economic chain in a market economy. The source.