Entry of Chinese Small Farmers into Big Markets

Abstract

Over the past thirty years, reforms in China have pushed forward the integral development of the economy and opened up agriculture to modernization. Small farmers who obtained independent production and operating rights during the reform period must now confront the pressure of market competition. The "Investor-Owned Firm (IOF) + farmers" mode or leading-enterprises-led mode has pioneered agricultural industrialization in China. However, it has some limitations in terms of contract instability and its inability to ensure farmers' rights and interests. At the same time, cooperative organizations of small farmers have been legally accepted and supported by the government and are developing rapidly. In this article, we analyze the alternative modes of agricultural industrialization, especially the effectiveness and limitations of farmer cooperatives. We find that farmer cooperatives are going to play a more and more important role in the foreseeable future, while the leading-enterprises-led mode will also persist as a key contract form in agricultural industrialization.