China, People's Republic of : Rural Economic Transformation and Upgrading by the Integration with Internet Plus

Agriculture, natural resources and rural development / Agricultural policy, institutional and capacity development - Agro-industry, marketing, and trade

The Government of the People's Republic of China (PRC) requested technical assistance (TA) from the Asian Development Bank (ADB) on Rural Economic Transformation and Upgrading by the Integration with Internet Plus. The TA is included in ADB's country operations business plan for the PRC, 2016 2018. ADB fielded a reconnaissance mission to Beijing on 15 18 March 2016 and held discussions with the National Development and Reform Commission (NDRC) to clarify and agree on the TA's scope, impact, outcome, outputs, implementation arrangements, cost, and financing arrangements.

The TA will review international and national practices and policies of internet plus agriculture business models. The TA will also identify constraints and opportunities for participation of farmers and farmer organizations in internet plus economy. In addition, a policy note will be prepared comprising regulatory and investment recommendations to develop PRC's internet plus economy in the agriculture sector. The TA also aligns with ADB's core area of operations and the strategic priorities outlined in the Midterm Review of Strategy 2020. Supporting inclusive economic growth is a focus of ADB's country partnership strategy for the PRC, 2016 2020, which supports rural development by promoting good practices to strengthen agriculture productivity and value chain participation of rural households. Improved value chain linkages and enhanced food safety are key priorities of ADB's Operational Plan for Agriculture and Natural Resources. It is envisaged to achieve these priorities through ADB operations support for the application of information and communication technology in agriculture and food value chains. The ADB lending program in the PRC provides support to agriculture value chain development including by linking agribusinesses and local entrepreneurs with poor farmers.

Although agriculture has been developing and making substantial contributions to the PRC's overall economic development since 1978, agricultural production and rural livelihoods have lagged behind industrial production and urban livelihoods. The agricultural infrastructure is insufficient and fragile, technological development and adoption levels are low, and constraints on natural resources and the environment intensify challenges to agricultural development. There is also an urgent demand for the sector to upgrade to modern technology and business models to boost production scale, develop value chains, and improve product safety.

Agricultural modernization is regarded as a fundamental way to ensure food security, develop the rural economy, and close the income gaps between rural and urban areas. One priority of the Fifth Plenary Session of the 18th Central Committee of the Communist Party of China, held in Beijing on 26 29 October 2015, was for the PRC to improve its food security capacity. The integration of the agricultural sector into the wider economy is identified as a strategy to boost agricultural productivity. The internet has shown to be a great advantage in integrating, transforming, and upgrading agriculture value chains. In the PRC, the need for the combination of internet and agriculture is urgent to rebuild the information and distribution channels, and to coordinate value chain actors' practices in agricultural production, supply, and sales systems. High production costs and farmers' disadvantaged status against market competition are a few characteristics of the existing complex agricultural and food value chain. In addition, negative externalities, such as non-point source pollution and food safety problems, are often a result of a lack of coordination, aligned incentives of value chain actors, and traceability of environmental and public health sensitive inputs and production practices.

The PRC is already implementing the so-called internet plus policies for the integration of agriculture value chains into secondary and tertiary industries. Several pilot projects have been initiated for enhancing the use of internet technologies to transform and integrate the rural economy. In 2014 and 2015, the Ministry of Commerce selected 256 counties to pilot e-commerce in rural areas, and each pilot county will receive CNY10 million in funding support from the central government for rural logistics, an e-commerce service station, and primary processing facility development, as well as quality control systems and brand establishment. The implementation of pilots to develop internet plus agriculture has shown many challenges and constraints regarding non-defined roles for government institutions in coordinating with the private sector, insufficient information and communication infrastructure in rural areas, data standards, and insufficient participant incentives. This TA will focus on analyzing the challenges and constraints of internet plus development from the perspective of farmers and farmer organizations. Farmers and farmer cooperative organizations are not aware of the potential benefits of internet technology use and also lack the necessary capabilities and skills. Further research, targeted at farmers and farmer organizations, is required to analyze farmers' internet technology knowledge, awareness, and practices.

International and national practices and policies of internet plus agriculture business models reviewed.

Constraints and opportunities for better participation of farmers and farmer organizations in internet plus economy identified.

Policy, regulatory, and investment recommendations to develop PRC's internet plus economy in agriculture sector formulated.

Project Management Activities

The consultants were fielded in October 2016. TA workshops were conducted on 16 November 2016 (inception), 23 July 2017 (interim), and 5 December 2017 (final). International workshops were also held in Beijing on 15 November 2016 and in Dunhuang on 21 July 2017.

An international study tour to San Francisco, California, United States of America (USA) was completed on 5 9 June 2017, which provided the delegates with an opportunity to learn the policy development, institutional setup, and approaches and programs in promoting internet agriculture in the USA. The second study tour scheduled in November 2017 for New Zealand was cancelled due to diplomatic reasons. Field visits/surveys were conducted in Gansu, Hubei, Shandong, Yunnan, and Zhejiang. TA inception report was submitted on 16 January 2017, interim report on 31 August 2017, and draft final report on 5 December 2017.

A request for extension by 6 months from 31 December 2017 to 30 June 2018 was approved on 13 December 2017 for the preparation, publication, and launching of the TA knowledge product.

A request for minor change on the proposed recruitment of a knowledge product publishing and research specialist to supplement the completion of the remaining TA activities and outputs was approved on 25 January 2018.

A product publishing and research specialist was engaged on 22 March 2018. KP launching is scheduled on 6 November 2018.