Capital flow to the countryside : agrarian change and rice production in China

Abstract

Based on the theoretical framework of Marxist political economy, this research explores the capital dynamics of agricultural vertical integration (nongye chanye hua) through a case study of an agribusiness enterprise in County Pingwan of Hunan province. The extended case method is employed in the research. Data is collected primarily through in-depth interviews in over six months' fieldwork. The agribusiness enterprise, which is specialized in agricultural inputs manufacturing/marketing, has contracted large tracts of land from the countryside. The control over land allows the enterprise to integrate the agricultural inputs manufacturing/marketing, agricultural cultivation and products marketing in its industrial chain. Underlying the agricultural vertical integration, essentially, it is the agro-capital flowing to countryside. The capital accumulation mechanism of the enterprise, the role of state in promoting the agricultural vertical integration, and the impact of the entry of the company on the rural society are examined, attempting to theorize the on-going agrarian transformation and the role of agriculture in China's industrialization. The exploration of the source of profits of the agribusiness could explain why capital flows to the countryside. It has shown that the agribusiness company derives profits primarily from the 'upstream' (agricultural inputs sales) and 'downstream' of farming (paddy marketing). The control over land enables the enterprise to establish market monopoly in agricultural inputs sales on its contracted land and obtain extra profits. It is the extra profits that motivate the agribusiness to extend the industrial chain. Moreover, the role of the local state has also been explored, showing how capital flows to the countryside. As the project funds, transferred from the central finance, have become more and more important in funding the fiscal gap of local government, the local government is highly motivated to promoting land circulation in order to introduce in the agribusiness enterprises, as the latter are able to complete the governmental projects more effectively. The collaboration between the agribusiness enterprise and the local government also allows the company to integrate the governmental supporting funds in its capital accumulation. In order to further examine the capital accumulation mechanism of the agribusiness, the land operation strategies adopted by the enterprise have been explored. What is remarkable is that the large-scale farm operation which is based exclusively on wage labor has been replaced by the strategy of 'company + contracted tenant household'. How the contracted tenant households contribute to the capital accumulation of this company is then scrutinized, finding out that the seemingly independent contracted tenant households are actually in indirect employment relations with the company, and the 'family labor' of the contracted tenant households are in effect quite similar to hired labor. Although the contracted tenant households are in the shape of 'household farming', the shape is preserved because the social networks of these households could be utilized to facilitate the land operation. Further, the entry of the agribusiness also has deepened the on-going rural social differentiation. As the enterprise contracts land from the villagers through paying land rent, which the medium producers could not afford, the differentiation of the medium-scale farming households is accelerated. A large number of the medium producers are forced to fall back into the stratum of small producers, whereas only a small number of them are able to transform themselves into the capitalized family farmers (or capitalist producers) through 'collaborating' with the company. The small-scale farming households, however, derive their household income more and more from off-farm activities, which means that their positions in the capitalist system as 'wage labor' have been more and more fixed. What should be noted is that capitalist producers have emerged inside the countryside, and they may share the same motivation in industrial chain extension as the agribusiness. Both the flow-in of the exogenous agro-capital and the formation of endogenous capital in the countryside have been threatening the household-based farming system.