Modernizing China's agriculture key to tackling slower economy: Premier

[February 16, 2015]  By Dominique Patton

BEIJING (Reuters) - Modernizing Chinese agriculture will help in countering slower economic growth by driving investment in rural infrastructure and boosting consumption, Chinese Premier Li Keqiang said.

The Chinese economy grew at its slowest pace in 24 years in 2014 as property prices cooled, hitting demand for a range of commodities.

Investing in infrastructure in rural areas could help digest some of the excess capacity in China's steel and cement industries, as well as create new jobs, wrote Li in the latest issue of the Chinese Communist Party journal Qiushi.

Overhauling farming models and improving efficiency in distribution systems could also boost rural incomes, Li said in the article published late on Sunday.

"Farmers are the country's largest consumer group...by increasing farmers' incomes through accelerating agricultural modernization, we can activate farmers' huge potential consumption demand."

About 45 percent of China's population, or 630 million people, still make a living from agriculture, estimate analysts, but their productivity lags far behind that of developed countries.

Although the country is self-sufficient in its most important food crops, it has paid a huge price for its intensive farming practices with excessive use of fertilizers, pesticides and plastic sheeting causing serious environmental damage and threatening food safety, said Li.

Farmers need to focus on consumer demand rather than on production volumes, said the Premier, and urged them to produce safe food and specialty products including organic ones.

"Currently, the quality and safety of agricultural products is generally stable, but hidden risks linger and people still frequently break the law," Li wrote.

The agricultural sector also needs to integrate processing so that farmers get added value from their output, and more efficient distribution would help reduce farmers' costs, he said.

"There are many steps in the distribution of farm products so costs are high. There is much wastage and efficiency is low, leading to farmers having trouble selling their products while consumers pay too much. This has long been a chronic problem."

Li reiterated the need to promote new types of farming models such as larger family farms and encourage transfer of land rights to allow people who remain in the countryside to expand their farms.

All Chinese farmland is owned by the state and the right to farm the land is leased to rural residents. Beijing has recently allowed rural residents to transfer farming rights to others but critics say larger farms struggle to get financing to increase their output.

(Reporting By Dominique Patton; Editing by Anupama Dwivedi)

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