Due date gongxiaosheor supply and marketing cooperatives, have attracted widespread attention as a report in the Hubei Daily in late October stated that Hubei Province had restored and reconstructed 1,373 local gongxiaoshe in almost every county and city.
Since such cooperatives were very common during the era of the planned economy, some people argue that their “re-emergence” is a sign of the return of the planned economy in China.
However, this is nothing more than an overreaction to normal development. The 20th National Congress of the Communist Party of China, which concluded on October 22, reaffirmed its commitment to the establishment of a high-level socialist market economy system, which shows that China is moving towards building a stronger, more efficient and sustainable socialist market economy. .
Apart from Hubei Province, the coverage rate of urban-level supply and marketing cooperatives in Ningxia Hui Autonomous Region has reached 92.7 percent, and the number of rural service cooperatives in Chongqing Municipality has increased to 6,120 with a coverage rate of 76 percent.
In fact, in the 2021 Central Document No. 1 — the first policy statement issued annually by the central authorities to outline the policy instruments to be used in rural areas — proposed a comprehensive reform of supply and marketing cooperatives, a pilot project. projects for “three-in-one” cooperation between production, supply and marketing and credit, and will also improve the quality of Internet platform services for farmers. Also in this year’s central document no. 1 states that supply and marketing cooperatives should establish district-level service networks as well as centralized procurement and distribution centers.
In the era of the planned economy, governments controlled the purchase, sale, production and supply of social materials through administrative planning due to shortages of agricultural goods and supplies. As a result, people were able to purchase agricultural and ancillary products from supply and marketing cooperatives.
Supply and marketing cooperatives were the only channels that provided goods to people in medium and small towns, especially in rural areas. Although cooperatives protected farmers by preventing them from buying substandard and sterile seeds and low-quality fertilizers, poor service quality and high prices limited their development.
After launching reforms and opening up in the late 1970s, China slowly opened up various sectors of the economy, invited foreign investment and allowed private enterprises to flourish, which eventually led to the disappearance of supply and marketing cooperatives. But in recent years, cooperatives have started to make a profit again thanks to deeper reforms and innovation-driven development. For example, the total sales of supply and marketing cooperatives in China reached 6.26 trillion yuan ($860 billion) in 2021, an increase of 18.9% over the previous year.
Therefore, it is wrong to associate the emergence of cooperatives with the planned economy, since they have become market players and operate like supermarket chains. In a socialist market economy, supply and marketing cooperatives can operate in three areas.
First, supply and marketing cooperatives can thrive in a country’s commodity flow network because they are its main sales channels. Such cooperatives are still a very important part of the supply channels of many farms and related products because of their ability to stabilize prices and ensure smooth supply.
For example, the All China Federation of Supply and Marketing Cooperatives, which operates under the State Council, China’s Cabinet, owns more than 10 conglomerates and is a leading player in the country’s cotton market. And some local cooperatives have built successful businesses, while others have vast amounts of fixed assets in counties and cities.
Secondly, such cooperatives play a greater role in rural revitalization. True, some have expanded their services to increase profits, but this does not mean that the government intends to return to a planned economy. In fact, cooperatives began to make a profit in the late 1990s thanks to reforms and changing market mechanisms.
Thirdly, these cooperatives can ensure the security of the supply chain at the local level and thus ensure the supply of goods and services to people, especially in remote rural areas, where ordinary market participants may not be active or unwilling to participate due to lack of profitability. In fact, the rural logistics network, which is mainly formed by cooperatives, plays an important role in securing the supply chain at the local level by providing a smooth channel for the sale and purchase of farmers’ products.
Supply and marketing cooperatives complement conventional market units by providing guidance and services to farmers in remote areas rather than replacing them. There is no way for China to return to a planned economy after more than 40 years of unrelenting reform and opening up, and given the irreversible trend of high-quality development driven by the socialist market economy.
However, municipalities should focus on the quality, not the number of cooperatives under their jurisdiction. They should also carefully allocate resources to the economic development of rural cooperatives and reduce administrative interference, while ensuring that the executive boards of cooperatives are elected by farmers to promote the rural economy and promote rural revitalization.
The author is a professor of economics at the Party School of the Central Committee of the Communist Party of China.
Opinions are not necessarily those of China Daily.