Winds of Change: China Looks to Co-Ops to Help Farmers Duplicate Success of Its Industry
Dunn, John, Rural Cooperatives
The winds of change are blowing across the cooperative landscape in China. In October 2006, the People's Republic of China (PRC) adopted new cooperative legislation, providing formal recognition of a new cooperative model forged in the spirit of that nation's evolving acceptance of private business as the key to economic prosperity.
Evolving co-op model
Cooperative businesses have operated in China since the early 20th century. Prior to World War II, most of the cooperatives in China were involved with credit. Following the communist takeover, emphasis changed in cooperative development to promote farm marketing and farm supplies. But these cooperatives were formed on the communal-farm model.
This system of combining cooperatives and government hurt the enthusiasm of farmers to produce and hindered farm production. Following the Cultural Revolution, a slow transition began away from communal co-op models toward a more Western-type co-op model that rewards private initiative.
There are presently an estimated 160,000 farmer cooperatives with 23 million farmer-members in China. Many of these cooperatives were initiated or formed by the government as a way of rationalizing and supporting supply and marketing channels, which are often run by government-owned or -control enterprises.
Prior to the new Chinese legislation, entrepreneurial cooperatives had become the predominant cooperative model being promoted and adopted. These are actually business organizations formed by individuals or processing companies to "capture farmers" in a manner that locks the co-op to an individual's business.
The small farmer in an area controlled by this type of "cooperative" has the choice of being in the cooperative or not. But if farmers choose not to join, they may be left with no alternative markets, sources of farm inputs or access to other benefits that the government provides strictly through cooperatives. This model has been widely promoted, in particular by local authorities who depend on agricultural taxes to support their government operations. This model provides a larger and more assured flow of tax revenues.
The All China Federation of Cooperatives, formed in 1950, is the apex organization of national-level cooperative associations. Its members are national cooperative enterprises that are the primary supply chains--for inputs and outputs--of the agricultural sector, including basic materials production, manufacturing, processing, distribution, marketing, retail and finance.
The span of the Federation is far wider than agriculture, covering such industries as recycling, tourism, catering and international trade services. The Federation has been closely linked to the government and the promotion of its cooperative models since its inception. It has played a significant role in organizing and assisting in the startup of new farmer cooperatives and is expected to continue as a key player in the development of the new model cooperatives.
New cooperative law
China's new cooperative law is the first codification of cooperative enterprise in post-World War II China. …