China’s state-run cooperatives and food kitchens do not signal reversal of opening-up policy, analysts say
- Uncertainty over China’s economic policy direction under the new leadership has roused suspicion of a return to planned-economy era that experts say is unfounded
- So-called cooperatives and food kitchens are closely associated with China’s unsuccessful planned economy from more than four decades ago, but now lack administrative powers
The resurgence of state-run “cooperatives” and food kitchens in communities across China does not suggest that Beijing is reversing its market-reform and opening-up efforts, according to analysts.
But discussions over these types of community-level operations – popular during China’s planned-economy era and into the 1980s – come amid rising public concerns and a lack of confidence following the recently concluded 20th party congress, where a leadership reshuffle has shrouded the future of Chinese economic policies.
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In a note in 2020, Xi highlighted the pivotal role that the cooperatives play in serving farmers, driving rural development and alleviating poverty. By the end of that year, official figures put the total number of such cooperatives at 37,652 across China – 5,187 more than in 2019.
“We should deepen the comprehensive reform of supply and marketing cooperatives, improve the system and widen its service coverage – let it become the bridge between the government and the farmers,” Xi said.
But researchers from Anbound, a multinational independent think tank, noted how the concepts of such state-run cooperatives and food kitchens are closely associated with China’s unsuccessful planned economy from more than four decades ago.
They also said that the heated public discourse reflects, to a certain extent, a lack of confidence in the current domestic market.
“Many people are beginning to have growing concerns about China’s adherence to the implementation of the socialist market economic system; adherence to reform and opening up; and protection of private property rights and private wealth,” said an Anbound report published last week.
[T]he new cooperatives are there to serve the market economy and provide a distribution channel to sell and buy farmers’ produce
But linking these new cooperatives with China’s old command economy “is a myth and misleading”, according to Wu Changhai, deputy director of the Capital Finance Institute at the China University of Political Science and Law.
“In the past, the old cooperatives were intended to solve the shortage and distribution of agricultural supplies and commodities, and they serve the planned economy system. While the new cooperatives are there to serve the market economy and provide a distribution channel to sell and buy farmers’ produce.”
From a legal standpoint, he added, they do not have administrative powers any more, and they only provide guidance and services in production and marketing for farmers.
Last month, the provincial federation of supply and marketing co-operatives in the central province of Hubei said that they had successfully restored and expanded rural supply and marketing cooperatives, with the number of rural members reaching a total of 452,000 in the province, while the number of farmer members quintupled in five years and reached 333,000 in 2021.
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Their counterpart federation in Ningxia province also said last month that the state-run stores span 92.7 per cent of the province’s rural regions, compared with 56 per cent in 2017.
But lingering fears of a potential economic regression in the world’s second-largest economy were recently exacerbated by the news of the establishment of state-owned food kitchens in the northern province of Hebei.
The province said that every city needs to set up at least 50 nutritional kitchens this year, and that every city should have at least 500 such facilities by 2025.
The Ministry of Housing and Urban-Rural Development also issued an announcement last week with plans to set up pilot service infrastructure systems in selected neighbourhoods, including convenience stores, food kitchens, and delivery package stations.
However, the authorities said the neighbourhood food kitchens are meant to provide local residents – especially the elderly demographic – with convenient dining services, as the country is grappling with a rapidly ageing population. Last year, China had 267.36 million people aged over 60, accounting for 18.9 per cent of the total population, according to official figures.
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Despite playing a less dominant role, community-level co-ops have never disappeared, and now the country is attaching greater importance to such institutions, especially as platforms to push rural revitalisation.
The supply and marketing co-operatives were highlighted in a government document issued earlier this year in the layout of a rural commercial system, as well as in the rural logistical system.
The All China Federation of Supply and Marketing Cooperatives reported that the country’s supply and marketing co-operatives showed steady sales growth in the first half of the year, as total sales climbed 19.1 per cent to top 2.94 trillion yuan (US$409 billion).
Online sales on the fupin832.com platform, which was established in 2020 to support poverty relief and help sell agricultural products across China, have increased by 33 per cent over last year, the federation said.
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The system helped meet the demand for fertiliser in the face of a shortage, contributing to stabilising prices and the country’s food security, according to the federation.
Nearly three years of strict zero-Covid measures have taken a toll on the world’s second-largest economy, the push for reform and opening up has slowed, and some economic progress has been compromised, rousing market concerns that the economy could regress into a more closed and conservative direction.
Foreign investors and private entrepreneurs alike have also been crippled by constant production disruptions and dampened expectations.
The party has also reaffirmed its resolve to “unwaveringly” open up the market further to foreign investors and continue to improve the country’s business environment.
And with China placing more emphasis on self-reliance in the face of extremely complex external challenges with intensifying geopolitical tensions, the downward economy has eroded market confidence to the point that even uncorroborated news reports and speculation can spark considerable unease.
The 20th party congress report said China will “uphold and improve the basic socialist economic system, unswervingly consolidate and develop the public economy, unswervingly encourage, support, and guide the development of the non-public economy, give full play to the decisive role of the market in resource allocation, and better play the role of the government”.
The report also emphasised Beijing’s vow to bolster and protect private enterprises while continuing to “promote high-level opening up”, and to “create a market-oriented, legalised, and international first-class business environment” for foreign businesses.
