Organic Agriculture In China:An Analysis On Institutional Environment And Factors Affecting Its Competitiveness

The fast development of Chinese agriculture came at a cost of highly polluted environmental resources and decreasing soil fertility.At the same time,the income disparity between poor and rich is still a problem of the Chinese rural areas.Organic production is suggested to be one of the best agricultural practices because of its impacts on environmental mitigation and benefits to rural development.However,to fully utilize the organic production is only possible with a well-functioning developed sector.The Chinese organic food sector actually has a considerable size,but the competitiveness of the sector compared to its well-developed global counterparts is not yet secured.Thus,the Chinese government attached great importance to strengthen the sector through formulating and enforcing promotion policies and development of an updated organic standard.However,the healthy development of the sector and production are depending on the overall performance and efficiency of the whole organic food production value chain from input suppliers to consumers.In this context identifying and assessing relevant factors and challenges and limitations related to the sector’s overall competitiveness based on a value-chain approach will help to formulate feasible strategies for the healthy and long term development of the Chinese organic food sector.The purpose of this research is to analyze the factors and challenges that constrain the performance and competitiveness of the Chinese organic food sector within the global market.Semi-structured stakeholder interviews and case studies have been used for collecting qualitative data and evidence related to challenges and constraints.The qualitative findings were then further clustered and structured in a triangulated problem tree based on value chain sequence and Porter’s theory of competition,i.e.the Diamond Model.Major interviewed stakeholders include governmental officials,researchers,extension workers,organic farmers,participants at IFOAM Shanghai/Nurnberg organic expos and stakeholders involved in an INBAR organic bamboo development project.This research reveals that:(i)the lack of an effective supporting institutional environment is impacting the overall performance of the whole value chain and further limiting the competitiveness of the sector within the global market;(ii)the institutional roles and responsibilities are overlapping and duplicating in the organic value chain;(iii)the current organic farming structures are not allowing equitable benefit sharing of organic production to farmers;The current institutional environment is not providing a favorable business environment to small farmers;(iv)limitations in terms of farmers’ knowledge,attitude and practices are affecting the whole value chain and the product quality.Knowledge,capacities and other resources for organic production are lacking;Extension services for promoting organic production are insufficient.Their limited services and their involvement in commercial activities can be regarded as government failure;(v)the lack of trust between the stakeholders throughout the value chain creates an unpleasant business environment for organic production.Without individual trust and ethics,neither a competitive sector can be created,nor can achieve equitable benefit sharing mechanism among stakeholders in the sector.(vi)finally the local organic market is immature and Chinese producers are not competitive in the international organic food markets because of multi-certification requirements.All of these factors limit the competitiveness of the sector within the global market and,thus,do not allow the organic sector to create adequate positive externalities in the global market.The findings allow other researchers and policy makers to further develop solutions and policies to address these challenges.Recommendations of this research include the need to streamline institutions in order to create a clear division of responsibilities along the organic value chain.The organic farming skills need to be improved in order to increase the competitiveness of the sector within the global market-this should include specialized extension services as well as research and development for organic agriculture in Chinese conditions.The trust of consumers and other value chain actors needs to be built,e.g.through measures to increase transparency.An effective value chain based quality quarantine system,including the traceability system,should be established and operational in order to re-build consumer trust and sector reputation.