--- SEARCH ---
Learning Chinese
Learn to Cook Chinese Dishes
Exchange Rates

Hot Links
China Development Gateway
Chinese Embassies

Agriculture Insurance to Protect Farmers from Risks
Developing agricultural insurance in line with international practice is critical to the sound development of the country's agriculture.

Though most Chinese farmers basically have enough food and clothing, their average income growth remains rather slow as it is still depends on the climate.

Since the 1990s, more parts of the country have been affected by natural disasters. Every natural calamity or accident results in heavy losses of both life and property, seriously impeding the growth of the rural economy. But the country's current social relief system cannot compensate enough for such losses.

For instance, the country's biggest flood in a century in 1998 caused direct losses of 166.6 billion yuan (US$20 billion) to the rural economy, but the agricultural insurance compensation was less than 100 million yuan (US$12 million).

Restoration of agricultural production after natural calamities requires a new risk-sharing and compensation system similar to agricultural insurance.

However, due to the small operational size of domestic farms, effective demand for agricultural insurance can hardly come into being.

On the one hand, farmer's income growth was not stable. The growth rate of their net per capita income has slid from 9 per cent in 1996 to 2.1 percent in 2000, and rebounded to 4.2 percent in 2001.

On the other hand, the cost of agricultural production increased at a speed that farmers found difficult to afford.

Therefore, the economic base for the voluntary purchase of agricultural insurance remained small. Increasing risks of natural calamities and lack of effective demand inevitably led to narrow business scope and limited scale of agricultural insurance. And this, in turn, discouraged commercial insurance companies from providing agricultural insurance.

An inability to understand the importance of agricultural insurance among the government, enterprises and farmers was reflected by the fact that neither this insurance was included in the country's overall planning for agricultural development nor had any specific agricultural insurance law been drawn up.

Although some pilot agricultural insurance programs had been tried out since the country resumed the insurance business in 1982, those scattered insurance organizations without support of risk funds still cannot meet the soaring demand for such insurance.

The fundamental role of agriculture in the national economy and the nature of public welfare of agricultural products entail not only a supportive policy for the development of agricultural insurance but also a leading role of the government in this undertaking. But, at present, this insurance is only run as a sort of commercial insurance.

Besides, there are still legal contradictions like the one between "compulsory insurance" as a key means of agricultural insurance and the voluntary principle on participating insurance stipulated by the Agricultural Law.

And lack of professionals and increasing difficulties in identifying risks along the expansion of agricultural insurance business are also problems yet to be addressed.

Agricultural protection under the framework of the World Trade Organization (WTO), to a large extent, is limited to non-price protective measures among which agricultural insurance is one of the most important.

Hence, to promote agricultural insurance in accordance with WTO rules is a matter of urgency for China's agricultural development.

First, the State should take all necessary measures to increase farmers' income to transform their potential demand into effective demand for agricultural insurance.

Meanwhile, the government should also encourage concentration of farming activities to realize economy of scale and enhance farmers' dependence on agricultural insurance.

Second, the State should improve legislation to provide a sound legal environment for the development of this insurance.

In comparison with commercial insurances, agricultural insurance is so risky that the government should invest a lot in the initial phase of its development.

It is suggested that the State should lay down the laws and regulations on agricultural insurance as soon as possible to ensure constant government support for this undertaking.

Third, the government should make more efforts to raise farmer's insurance awareness and foster grassroots insurance professionals.

It takes time for hundreds of millions of farmers across the country to understand the nature, role and advantage of agricultural insurance. The government should try to organize farmers on a voluntary basis to participate in agricultural insurance.

Grassroots insurance professionals should master not only theories about agricultural insurance but also related knowledge about agricultural management, agro-technique and prevention of natural calamities. The government should make full use of advanced foreign experience to foster a group of qualified local insurance professionals.

Finally, the function of agricultural insurance institutions should be improved to reduce concerned insurance risks.

Because of the unique position of agricultural insurance institutions in risk management, they could and should provide services like consultation and supervision on policy holders' disaster prevention and reduction. This is particularly useful for small-sized farming economies.

In addition, establishment of agricultural insurance institutes in rural areas can be combined into that of a comprehensive agricultural service system to multiply functions and cut down operational cost.

A sound evaluation system is the prerequisite for making reasonable compensation. Since the country has not developed a unified index yet, agricultural insurance institutions can try to set up a relatively scientific evaluation system suited to local conditions to minimize insurance risks.

The author is with the Economic Department of Huazhong Agricultural University in Wuhan, Hubei Province.

(China Daily June 17, 2003)

Foreign Insurer Gains Agriculture Insurance Licence
Farmers Benefit from Rural Tax Reforms
National Aid for 11 Farm Products
Insurance Business for Agricultural Sector Brisk in Shanghai
Farmers Long for Agricultural Insurance
Farmers Feel Shocks of Int'l Competition
Protection of Farmers' Rights and Interests Stressed
Ministry of Agriculture
China Agricultural University
Print This Page
Email This Page
About Us SiteMap Feedback
Copyright © China Internet Information Center. All Rights Reserved
E-mail: webmaster@china.org.cn Tel: 86-10-68326688