Internet Plus Agriculture

A New Engine for Rural Economic Growth in the People's Republic of China

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• Publisher: Asian Development Bank
• Year: 2018
• ISBN:
  9789292613235
• Topic: Business
• Subtopic: Agribusiness
• Index: Business

This publication reviews the practices and policies of Internet Plus agriculture business models in the People's Republic of China (PRC). It analyzes the agriculture value chain model, rural e-commerce platform, and Internet Plus agriculture service model. The Internet Plus rural economy is an emerging driver of comprehensive development in the PRC as a new production management and marketing tool for farmers and farmers' cooperatives. Its potential is seen as a foundation for vitalizing the countryside and key to achieving agricultural modernization.

1

Overview of the Internet Plus Rural Economy

1.1   Characteristics, Challenges, and Trends of the Rural Economy

The internet is exerting a profound influence on the global economy and plays an important role in economic restructuring. At the micro level, the internet can open a new and more efficient path of resource allocation; at the midlevel, it can facilitate the transformation and upgrading of global and traditional industries; and, at the macro level, it can regulate macroeconomic fluctuations and effectively balance supply and demand.

Since 2000, the People’s Republic of China (PRC) has been following the trend set by developed countries, such as Japan and the United States, and Europe, where internet information technology has quickly entered every aspect of their economic and social arenas. With the rapid development of internet technology in recent years, the number of internet users in the PRC has increased and is now reported as the highest in the world.

Since its economic reform and opening-up policy, the PRC has been swiftly growing to become the second largest economy in the world as of 2010. During 1978–2012, the average annual growth rate of the PRC’s gross domestic product (GDP) was about 10%. In 2013–2016, GDP’s annual growth rate dropped to about 7% as the country’s economy shifted from rapid to medium growth. In 2016, to promote its economic restructuring and development, the PRC government launched the “Internet Plus economy” model. Considered as a great economic engine, the model intends to integrate the Internet of Things (IOT), cloud computing, and other big data technologies with traditional industries to strengthen information sharing, reduce costs, improve efficiency, and promote the innovation and integration of different industries.

Since the 1978 economic reforms in the PRC, the agriculture sector has contributed significantly to the national economy, despite the sector’s structural unit being generally small-sized and highly scattered. Average farm size in the country is still smaller than 1 hectare,¹ which is many times smaller than the average farm sizes across the member countries of the Organisation for Economic Co-operation and Development. This difference has profound implications in terms of technology choices, particularly with respect to the degree of reliance on mechanization, farm-level infrastructure, and other factors where economies of scale are important.

As production has primarily been the focus of family-operated farms, services along the value chain have somehow been neglected, thus resulting in high production costs, low profit margins, and disadvantaged status of farmers in market competition. Misaligned interests and actions of stakeholders along the value chain have generated negative externalities, such as nonpoint source pollution and food safety problems. Agriculture production activities are sometimes not friendly to the environment nor safe to public health, and they likewise lack accountability and traceability.

With the rapid development of internet technology in the PRC since the beginning of the 21st century, a set of Internet Plus technologies has made influential impacts on the national economy and the rural economic sector. The internet has demonstrated great advantages; and the urgent need for integrating, transforming, and upgrading the rural economy, especially the agriculture industry chain, leisure agriculture, and the agriculture social service system.

The “Internet Plus rural economy” model refers to an economic phenomenon of applying internet technology—e.g., mobile internet, IOT, cloud computing, and other big data applications—to improve the efficiency of the rural economic sector, from farmers’ daily consumption to the production, processing, and circulation (trade) of agriculture products. The coverage of internet application encompasses the following main areas: (i) establishment of e-commerce platforms and associated business processes and models; (ii) streamlining of agriculture logistics; (iii) provision of extension and coordination services to farmers; and (iv) strengthening of coordination and traceability of product flow from farm to fork (or from farm to table—i.e., from harvest to the point of consumption) through a traceability system that is enhanced by information and communication technology (ICT).

The continuous development of the Internet Plus rural economy model is becoming an important force in the PRC’s overall Internet Plus economy blueprint. First, the application of internet technology to the rural economy has fuelled a new engine for the transformation and upgrading of the traditional rural economy. Through a set of IOT, mobile internet, big data applications, and cloud computing technology, many traditional industries have been transformed to modern production modes, which, in turn, have enhanced the efficiency and productivity of the rural economy. Second, internet technology subverted the conventional concept of time and space—space has become smaller, time periods have become shorter, and information has become more symmetrical. The fast, real-time, and reliable information provided by the internet benefits agriculture production, particularly high-quality agriculture products sold within and outside the country; as well as influences the effective supply of agriculture products. Third, internet technology has provided a new platform for rural entrepreneurship and innovation, and has encouraged a large number of aspiring young people to actively engage in rural e-business enterprises. Finally, the Internet Plus program builds an electronic information bridge for small farmers to dock to the modern economic system, which provides them with more cost-effective and efficient platforms for the sales and distribution of their agriculture products. This also opens a new channel to increase farmers’ income and lift poor households out of poverty.

The different application structures of the Internet Plus rural economy model include (i) Internet Plus agriculture (agriculture IOT); (ii) Internet Plus processing of agriculture products; (iii) rural e-commerce (e-commerce platform, logistics of agriculture products, industrial consumer goods downstream, etc.); (iv) Internet Plus agriculture social services (agriculture finance, agriculture precise operation, technical services); (v) traceability system for the quality and safety of agriculture products; and (vi) Internet Plus leisure agriculture and rural tourism. In short, the model is becoming a new framework for agriculture organization and production, a new tool for farmers for production and management, and a new hub for comprehensive rural development. Given that the Internet Plus rural economy covers all aspects of agriculture production, management, and services, it provides a good foundation for the promotion of a countryside revitalization strategy and the achievement of agricultural modernization in rural areas.

1.2   Internet Development and Application in Rural Areas

The internet has become one of the key driving forces to accelerating economic development in the PRC. According to the China Internet Network Information Center, the number of internet users in the country has grown significantly, reaching 772 million in December 2017, with an internet penetration rate of 55.8% (up by 2.6% from the end of 2016). For the same period, the proportion of internet users from the PRC’s rural areas is 27%, equivalent to 209 million users (4% more from the end of 2016). The number of mobile internet users has reached 753 million (8.2% higher from the end of 2016). The ratio of internet users making online payments via mobile phones has increased from 50.3% (2016) to 65.5% (2017) at the national level; and from 31.7% to 47.1% among rural internet users. The government’s thrust to promote the construction of internet infrastructure has substantially increased rural internet coverage. According to data from the National Statistics Bureau, by the end of 2016, 90% of administrative villages in the PRC already have broadband access.² The Ministry of Industry and Communication will invest 140 billion yuan (CNY) during 2015–2020 to achieve 98% broadband coverage in these administrative villages.

This publication is based on the findings of field surveys in five provinces in the PRC (Gansu, Hubei, Shandong, Yunnan, and Zhejiang) undertaken through a technical assistance project of the Asian Development Bank (ADB), the Rural Economic Transformation and Upgrading by the Integration with Internet Plus (TA 9132-PRC). All provinces have started to carry out various Internet Plus activities to promote the transformational upgrade of the rural economy, inject new vigor into the Internet Plus rural economy program, and create new opportunities through e-commerce. From the field surveys, it was gathered that the rural sector has three main types of internet application: (i) construction of agriculture informatization, (ii) use of IOT, and (iii) rural e-commerce.³

1.2.1  Building of Agriculture Informatization

In the five surveyed provinces, informatization efforts mainly involve the provision of agriculture information through the construction of information platforms and information service stations. Agriculture information covers the whole industry chain of agriculture production, including preproduction, production, and postproduction.

The construction of agriculture information platforms in the provinces focuses on implementing the 12316 specialized agriculture information service system project of the Ministry of Agriculture, which aims at effectively spreading such information as agriculture technology, market, and policies. In 2006, in cooperation with local agriculture departments, the Ministry of Agriculture created the public welfare 12316 Information Service System for Agriculture, Farmers and Rural Areas. This is a comprehensive agriculture information service platform with multiple channels, forms, and multimedia that integrate the 12316 hotline for agriculture, farmers and rural areas; agriculture information websites; agriculture television programs; and mobile phone short messages and multimedia messages. The 12316 online information gets about 8.6 million visits daily, while the 12316 hotline receives more than 20 million phone calls annually. The PRC has also built agriculture information service stations in villages, called “Farmer Friendly Information Station.” By the end of 2017, a total of 80,000 stations have been built. According to the Ministry of Agriculture, the target is to cover 80% of the PRC’s administrative villages by the end of 2020. The Ministry of Agriculture and its branches at local levels are responsible for the establishment and operation of the 12316 platform, and cover all related costs through fiscal funds, although some of the information technology services may be contracted out to the private sector.

1.2.2  Use of the Internet of Things

The general level of IOT application in agriculture is relatively low and is still at the demonstration and marketing stages in the PRC. Usually, stronger agriculture enterprises use IOT and rely on government subsidies. IOT is mainly used for cash crops of high economic value or large-scale cereal crops. However, different regions display different IOT features, with a higher level of application in developed and plain regions than in underdeveloped and mountainous regions. According to the Ministry of Agriculture, by the end of 2017, the regional IOT demonstration programs had expanded to nine provinces; and 426 new products, technologies, and models on agriculture IOT had been invented. The target is to increase the application of IOT from its 2015 ratio of 10.2% to 17.0% by 2020.

1.2.3  Rural E-commerce

All over the PRC, the Internet Plus rural economy model has displayed a shared feature, i.e., e-commerce for agriculture products is the most active application structure, particularly in terms of sales. E-commerce has provided new avenues for sales of agriculture products, reduced transaction costs, and simplified trading procedures. It has also built a two-way platform for the flow of consumer goods to villages and agriculture products to cities.

Building a three-tier e-commerce service system in counties, townships, and villages, along with the corresponding logistics delivery system is the primary measure adopted by provinces to develop rural e-commerce for agriculture products. The three-tier service facility system consists of county service centers, township service stations, and village service sites. Public services, corporate incubation, technology training, product demonstration, and brand marketing are among the functions of the county service centers. The township service stations serve as the transitional link, resource coordination post, logistics reception, and dispatch units; whereas, the village service sites perform such functions as information collection, production supervision, and convenience services. Villagers can now make online payments and buy clothes, household appliances, production tools, and other goods at any of these three service facilities without getting out of their respective villages. Purchased goods will be delivered to the service facilities. In addition, villagers can sell their own agriculture produce at these facilities.

Rural e-commerce. The three-tier service facility system of rural e-commerce, which includes county, township, and village-level service centers, helps boost sales of local agriculture products and allows villagers to shop online for consumer goods without leaving the village (photo by Libin Wang).

How is quality of online goods assured and how are customer complaints handled? The e-commerce platform will first hold the payments made by online customers. After the customers receive their ordered goods and are satisfied with the goods, the customers then inform the platform to make payments to the online shops. However, if the customers are not satisfied with the goods, they need to give a valid reason and provide supporting evidence, such as photos, to the online shops. If the shops agree, they will inform the platform to return full or part of the payments to the customers. If the shops disagree to returning the payments, the customers can ask the platform to get involved to solve the disputes.

E-commerce displays a rapid growth trend in the PRC. The Ministry of Commerce reports that the 2016 national trade volume of e-commerce for agriculture products increased by 46.2% from 2015, and about four times the total volume in 2013. In 2017, the PRC’s e-commerce retail sales crossed the $1 trillion mark, validating the country’s status as the world’s leading e-commerce market.⁴ According to the PRC’s Ministry of Commerce, retail e-commerce sales in 2017 reached CNY7.18 trillion or around $1.15 trillion, a 32% growth from 2016. In terms of e-commerce sales and growth, the PRC outperforms the United States, the world’s second-largest e-commerce market, whose e-commerce retail sales in 2017 was estimated to grow by approximately 15% to $455 billion. Also, in 2017, the PRC ranked first in the world in terms of e-commerce sales as percentage of total retail sales at 23.1%, followed by the United Kingdom (19.1%), the Republic of Korea (16.0%), Denmark (12.6%), and the United States (9.0%).⁵

2

Government Support through Policies and Projects

To promote the development of the Internet Plus rural economy model in the PRC, the national, provincial, and county-level governments have successively issued a series of relevant policy documents for guidance, and funded several pilot projects. These pilot projects focus on improving access to e-commerce platforms and information for villages and rural households. The target is to extend the scope of these pilot projects to one-tenth of all counties and, by 2018, to over 100,000 administrative villages and 100 standardized and replicable county-level service stations for agriculture production and farm life services.

Some pilot projects supported the IOT application for agriculture machines, e.g., establishment of regional platform services that provide needed information on quantities and locations of available agriculture machines equipped with global positioning system (GPS), and nearby repair stations. These projects offer platform services to over 30,000 agriculture machines and popularize the application in regions with total area of 70 million mu,⁶ to boost the innovation and development of the “Internet Plus agriculture machine precise operation” model.

In Hubei Province, the Beidou modern agriculture project, which uses the Beidou Satellite Navigation System that combines high-precision positioning technology with sensor technology, has been piloted in Jiangling, Laohekou, Shayang, Xiangzhou, and other regions since 2013. By 2016, 674 sets of Beidou subsoil monitoring equipment and 33 sets of agriculture machinery autopilot systems had been installed; while, machine transplanting, direct seed precision planting, land cultivation, and pest prevention and control for over 200,000 mu had been completed.

In 2011 and 2013, the National Development and Reform Commission and the Ministry of Finance allocated funds to implement intelligent agriculture practices to two batches of national demonstration projects for IOT applications. In 2013, the Ministry of Agriculture allocated funds to launch the regional pilot projects for agriculture IOT. Among them, Heilongjiang Province established an intelligent rice bud production system with a daily output of 150 tons, which conducted real-time data collection through temperature and moisture sensors in greenhouses to achieve intelligent micro-spraying and electric shutter ventilation control.

Around 234 leading enterprises and farmers’ cooperatives in Anhui Province established and applied IOT, including the systems for monitoring wheat and other crop fields, and the systems for agriculture precision planting management applied in 3.265 million mu of land. Beijing established 5,000 mu as core application demonstration area of IOT technology for facility agriculture in eight districts and counties,...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Figures and Boxes
• Acknowledgments
• Abbreviations
• Executive Summary
• 1 Overview of the Internet Plus Rural Economy in the People’s Republic of China
• 2 Government Support through Policies and Projects
• 3 Development Models of the Internet Plus Rural Economy
• 4 Opportunities and Constraints for Farmers and New Agriculture Operators with Internet
• 5 Main Policy and Institutional Issues
• 6 Recommendations for Policies, Mechanisms, and Investments
• 7 Implications of the Internet Plus Rural Economy for Other Developing Countries
• 8 Conclusion and Way Forward
• Footnotes
• Back Cover