Page 156 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
secure grain supplies. The real effort to create another to better evaluate performance of the subsidies and
green revolution, however, is happening back home punish misuse of the fund (Reuters Staff ).
where entrepreneurs are embracing technology to
transform the nation’s rural landscape. A growing In 2016, the amount of agricultural insurance
number of the nation’s farmers are no longer looking premiums collected totaled US$6.3 billion with the sum
to the skies to see if it will rain. They are using a micro- insured of US$328 billion. About 115 million hectares
irrigation system based on an array of soil sensors that of main crops were covered, accounting 75 percent of
feed data wirelessly to smartphones. They are growing national cultivated area. In 2016, agricultural insurance
vegetables in climate-controlled shipping containers payouts reached US$5.2 billion with a combined loss
and using drones to apply computer-formulated doses ratio of 83 percent. There were about 26 insurance
of pesticides. Such farms are still a tiny minority, partly companies operated on agricultural insurance market
because of the difficulty in acquiring enough land to run in 2016. Around 93 percent of agricultural insurance
an efficient operation (Bloomberg, Farming the World). business was divided between the major six insurance
companies: People’s Insurance Company of China,
Meanwhile, to counter domestic production China United Property Insurance Company, Sunlight
shortcomings, Chinese companies are investing in Agricultural Mutual Insurance Company, Guoyuan
agriculture-based assets abroad. China is currently Agricultural Insurance Company, Anhua Agricultural
the fifth-largest landholder in Australia as well as Insurance Company and Groupama AVIC Insurance. In
that country’s largest foreign source of agribusiness 2016 People’s Insurance Company of China (PICC) was
investment. Chinese investments in food production have the main agricultural insurance provider and held a 54
also extended to the US. In 2013, China’s largest meat percent of market share (Krychevska et al.).
processor, Shuanghui International, acquired American
Smithfield Foods for US$4.7 billion, marking the largest The total crop insurance premium from China was
Chinese acquisition of a US company in history. China, US$6.3 billion in 2016. Government subsidy, an engine
along with the UK and US, now stands as one the three for the rapid premium growth in the US during the
most active land traders in terms of trading partners in 1990s, is currently propelling the expansion in China,
the world. By 2018, China had purchased or leased land but the government subsidies in China take a different
in 33 countries, three more than the UK and five more form. There are no A&O subsidies so premium rates are
than the US. This strategy is indicative of a larger trend, loaded with expense ratios. China’s premium subsidy is
whereby wealthier countries often acquire agriculture split among Central, Provincial and Local governments,
resources in poorer, underdeveloped states (China resulting in different subsidy levels among crops and
Power Team). regions. Usually, wealthier regions have a higher subsidy
level. The overall premium subsidy percentage ranges
Agriculture Insurance from 65 percent to 80 percent. The central and state
governments share the difference between the actuarial
China issued new guidelines on distribution of its rates and what the farmers pay equally. In China,
agricultural insurance subsidies in 2017 to help improve the primary protection is for the cost of production.
the efficiency of a program aimed at supporting its huge The terms and conditions including premium rates,
farm sector. Beijing has heavily promoted agricultural maximum sum insured and premium subsides are
insurance in the past decade to mitigate greater risks discussed and agreed by three levels of government
to farmers as it begins to take steps to deregulate entity each year before the planting season commences
commodities markets and move away from subsidizing in May and June (Zhang and Shi).
farm output and towards supporting incomes. In 2016,
China spent 15.8 billion yuan (US$2.3 billion) on subsidies Chinese government continues to support the
for farm insurance, a 7.5 percent increase on the prior development of agricultural insurance in the country by
year, and seven times the amount spent in 2007. The new providing premium subsidies that cover with years more
measures from the finance ministry are to clarify how and more areas and agricultural produce. However, there
the subsidies should be issued, via what agencies and is still need for further improvement and adjustment on
in support of what products. In addition to subsidizing the level and scope of the premium subsidies. The major
insurance for key crops, it also offers subsidies for insuring issue is that insurance covered sum is generally lower than
livestock and aquaculture production. Beijing also wants the farmers expected based on the actual market prices.
156
secure grain supplies. The real effort to create another to better evaluate performance of the subsidies and
green revolution, however, is happening back home punish misuse of the fund (Reuters Staff ).
where entrepreneurs are embracing technology to
transform the nation’s rural landscape. A growing In 2016, the amount of agricultural insurance
number of the nation’s farmers are no longer looking premiums collected totaled US$6.3 billion with the sum
to the skies to see if it will rain. They are using a micro- insured of US$328 billion. About 115 million hectares
irrigation system based on an array of soil sensors that of main crops were covered, accounting 75 percent of
feed data wirelessly to smartphones. They are growing national cultivated area. In 2016, agricultural insurance
vegetables in climate-controlled shipping containers payouts reached US$5.2 billion with a combined loss
and using drones to apply computer-formulated doses ratio of 83 percent. There were about 26 insurance
of pesticides. Such farms are still a tiny minority, partly companies operated on agricultural insurance market
because of the difficulty in acquiring enough land to run in 2016. Around 93 percent of agricultural insurance
an efficient operation (Bloomberg, Farming the World). business was divided between the major six insurance
companies: People’s Insurance Company of China,
Meanwhile, to counter domestic production China United Property Insurance Company, Sunlight
shortcomings, Chinese companies are investing in Agricultural Mutual Insurance Company, Guoyuan
agriculture-based assets abroad. China is currently Agricultural Insurance Company, Anhua Agricultural
the fifth-largest landholder in Australia as well as Insurance Company and Groupama AVIC Insurance. In
that country’s largest foreign source of agribusiness 2016 People’s Insurance Company of China (PICC) was
investment. Chinese investments in food production have the main agricultural insurance provider and held a 54
also extended to the US. In 2013, China’s largest meat percent of market share (Krychevska et al.).
processor, Shuanghui International, acquired American
Smithfield Foods for US$4.7 billion, marking the largest The total crop insurance premium from China was
Chinese acquisition of a US company in history. China, US$6.3 billion in 2016. Government subsidy, an engine
along with the UK and US, now stands as one the three for the rapid premium growth in the US during the
most active land traders in terms of trading partners in 1990s, is currently propelling the expansion in China,
the world. By 2018, China had purchased or leased land but the government subsidies in China take a different
in 33 countries, three more than the UK and five more form. There are no A&O subsidies so premium rates are
than the US. This strategy is indicative of a larger trend, loaded with expense ratios. China’s premium subsidy is
whereby wealthier countries often acquire agriculture split among Central, Provincial and Local governments,
resources in poorer, underdeveloped states (China resulting in different subsidy levels among crops and
Power Team). regions. Usually, wealthier regions have a higher subsidy
level. The overall premium subsidy percentage ranges
Agriculture Insurance from 65 percent to 80 percent. The central and state
governments share the difference between the actuarial
China issued new guidelines on distribution of its rates and what the farmers pay equally. In China,
agricultural insurance subsidies in 2017 to help improve the primary protection is for the cost of production.
the efficiency of a program aimed at supporting its huge The terms and conditions including premium rates,
farm sector. Beijing has heavily promoted agricultural maximum sum insured and premium subsides are
insurance in the past decade to mitigate greater risks discussed and agreed by three levels of government
to farmers as it begins to take steps to deregulate entity each year before the planting season commences
commodities markets and move away from subsidizing in May and June (Zhang and Shi).
farm output and towards supporting incomes. In 2016,
China spent 15.8 billion yuan (US$2.3 billion) on subsidies Chinese government continues to support the
for farm insurance, a 7.5 percent increase on the prior development of agricultural insurance in the country by
year, and seven times the amount spent in 2007. The new providing premium subsidies that cover with years more
measures from the finance ministry are to clarify how and more areas and agricultural produce. However, there
the subsidies should be issued, via what agencies and is still need for further improvement and adjustment on
in support of what products. In addition to subsidizing the level and scope of the premium subsidies. The major
insurance for key crops, it also offers subsidies for insuring issue is that insurance covered sum is generally lower than
livestock and aquaculture production. Beijing also wants the farmers expected based on the actual market prices.
156
