Editor's note: From October 30 to 31, 2023, the Central Financial Work Conference was held in Beijing. The meeting clearly put forward the goal of accelerating the construction of a financial power, emphasizing the promotion of high-quality financial development in the mainland, and providing strong support for comprehensively promoting the construction of a strong country and the great cause of national rejuvenation with Chinese-style modernization. The Central Financial Work Conference raised the banner and planned the layout, providing a fundamental follow and action guide for promoting high-quality financial development in the new era and new journey. In order to better unify thoughts and actions to the spirit of General Secretary Xi Jinping's important speech and the decision-making and deployment of the Party Central Committee, this journal specially organizes a special topic and invites relevant professionals to discuss and exchange ideas on how to study and implement the spirit of the Central Financial Work Conference in the field of wealth management.
Author: Liu Kang, China Development Bank Yunnan Branch
Synopsis:
- Building a high-quality and modern agricultural industrial chain is conducive to expanding the space for agricultural value-added and efficiency, enhancing the overall competitiveness of agriculture, and meeting the requirements of the "dual circulation" development strategy.
- Only through the overall construction and operation of the industrial chain can the overall value creation function of the agricultural industrial chain be realized.
The "Outline of the 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035" proposes to "develop the county economy, promote the integrated development of primary, secondary and tertiary industries in rural areas, extend the agricultural industrial chain, and develop modern rural industries with their own characteristics to enrich the people." "Improving the agricultural industry chain has become an important starting point for deepening the structural reform of the agricultural supply side, comprehensively promoting rural revitalization, and realizing the modernization of agriculture and rural areas.
In 2024, the No. 1 document of the Central Committee "Opinions on Learning and Using the Experience of the "Thousand Village Demonstration and Ten Thousand Village Renovation" Project to Effectively and Effectively Promote the Comprehensive Revitalization of Villages" clearly states: "Promote the integrated development of primary, secondary and tertiary industries in rural areas. Adhere to the industry, quality and green agriculture, accelerate the construction of a modern rural industrial system with the overall planning of grain, economy and feeding, the simultaneous development of agriculture, forestry, animal husbandry and fishery, the integration of production and marketing, and the integration of agriculture, culture and tourism, and build agriculture into a modern industry. ”
The 2024 "Government Work Report" also proposes that we must practice the "big agriculture concept" and "big food concept", and always hold the rice bowl firmly in our own hands. This is the first time that the "concept of big agriculture" has been written into the "Government Work Report". Only by developing agriculture from the perspective of "big agricultural concept", excavating the multiple functions of agriculture, and strengthening the agricultural industry chain can it be possible to lay a good foundation for the pattern of "big food concept".
The agricultural industry chain is not only a way to create the value of agricultural products, but also a process of integrated development of primary, secondary and tertiary industries and the formation of a scope economy through the coordinated operation of multiple formats. Building a high-quality and modern agricultural industrial chain is conducive to expanding the space for agricultural value-added and efficiency, enhancing the overall competitiveness of agriculture, and meeting the requirements of the "dual circulation" development strategy.
The agricultural industry chain is a complex system engineering
The agricultural industry chain is a multi-link link system with planting and breeding as the core, which is composed of upstream factor input, midstream planting and breeding and product processing, downstream product circulation and channel sales. The agricultural industry chain is the key to realizing the modernization of agricultural production and operation, giving full play to the role of value creation, product value-added, and meeting diversified and multi-level market demand, and forming different types of agricultural products through different factor inputs, planting and breeding links at the upstream production end, and then connecting product processing, downstream circulation, channel sales and brand building, and carrying out value-added activities. The construction of the agricultural industry chain mainly focuses on vertical extension and horizontal expansion, and actively integrates into the national market to realize the value of the agricultural industry chain.
In terms of vertical extension, through the input of different production factors such as capital, land, labor, science and technology at the upstream production end of the industrial chain, the core products produced enter the midstream processing link for different degrees and different types of processing, and then enter the downstream warehousing and logistics, market channels and brand building links, and form terminal finished products with high added value compared with the primary agricultural products at the production end. In this process, the upstream production end produces different kinds of agricultural products, the midstream processing link carries out different types and depths of product processing according to the market information fed back from the downstream, and the downstream transports the products to the terminal markets of different regions and different needs through the warehousing and logistics and cold chain distribution of the products, and forms a premium through brand building, so as to realize the value-added function of the industrial chain.
In terms of horizontal expansion, relying on a sound and perfect agricultural industry chain, we will promote the integrated development of primary, secondary and tertiary industries, and enhance the value of the agricultural industry chain through multi-format operations such as rural leisure tourism, pastoral health preservation, research and popularization, homestay health care, agricultural experience, leisure fishing, etc., so as to meet diversified market demand, attract consumers in external markets, and form a benign pattern of coordinated development with the agricultural industry chain.
Build a diversified financial support system
The construction of the agricultural industry chain includes the construction of farmland farms, ecological protection and protection projects, agricultural and rural infrastructure, agricultural industrial parks and other processing links at the production end, various types of infrastructure and service systems such as warehousing and logistics facilities and farmers' markets, as well as the production and operation activities of the industrial chain composed of different entities such as agricultural subjects, productive service entities, multi-format business entities, logistics, e-commerce platforms, terminal wholesale and retail, etc.
This inevitably involves large-scale investment in capital, land, technology and other factors, of which land is mainly provided by the government, farmers and village collectives, while technology is invested by various subjects, but it is difficult for financial and social capital to meet the demand for capital. As the blood of the modern economy, finance should play an important role in promoting the high-quality development of the agricultural industry chain by playing the role of financial integration, resource allocation and risk control. Different types of finance can meet the financing needs of different types of projects and entities according to their own functional positioning, so as to build a diversified financial support system.
The construction of the financial support system faces four major challenges
At present, the construction of financial support for the agricultural industry chain system is more based on the perspective of a single project and a single subject, so it lacks a holistic approach, which makes it difficult to achieve a balance between target income and funds. The main challenges are as follows: first, the huge differences in different regions and resources, second, the lack of systematic planning of the industrial chain, third, the constraints of the industrial chain project itself, and fourth, the constraints of the main body of the project.
●There are huge differences in local support policies and resource endowments
The policies of local governments in terms of subsidy standards, farmland occupation and compensation balance, taxation, project approval process, financial support, "two rights" mortgage and other aspects are quite different, and the working mechanisms and responsibilities of agriculture, finance, water conservancy, natural resources and other government departments in promoting agricultural industry chain projects are different, and it is difficult to form a common industrial chain development model.
The construction of the agricultural industry chain needs to be supported by local governments through special bonds, public budgets, special agricultural subsidies, etc., but the support for agriculture in different regions is also different due to differences in financial capacity and economic and social development priorities. The climatic environment, soil characteristics, topography and other environments in different regions are quite different, and different climatic environments have different impacts on agricultural production. In some areas, the soil is fertile, the land is flat, the construction conditions are good, the average investment per mu is low, and the return on investment is high, which is conducive to the construction of the production end and the construction of the middle and lower reaches of the industrial chain; In some areas, saline-alkali land and "four wastelands" are the majority, with large investment in land consolidation, high farmland operation and maintenance costs, and difficulties in capital balance. coastal areas suitable for aquaculture; Plains, basins and other terrain environments are suitable for large-scale cultivation, while hilly, mountainous areas and other terrains are not conducive to large-scale planting. The construction of the middle and lower reaches of the industrial chain is inseparable from the production end, and the different primary agricultural products lead to differences in the composition of the industrial chain.
●Lack of systematic planning and insufficient infrastructure support
The agricultural industry chain is a complex system engineering, which needs to be reasonably planned according to local conditions, reduce the cost of each link, and improve the overall quality and efficiency. At the local level, there is a lack of overall planning and layout of the industrial chain, each link is relatively independent, the connection is low, the upstream is the agricultural production end, and the middle and downstream links such as processing, warehousing and sorting, cold chain logistics, market terminals, and brand building are not closely connected, and the cost of primary agricultural products from the production end to the next link is high, and it is difficult for each link of the industrial chain to form an efficient and close connection, which affects the overall quality and efficiency of the industrial chain. In terms of horizontal expansion, the maturity of multi-format operations such as rural cultural tourism and ecological health care is low, and more of them are mainly operated independently by small farmers, which cannot effectively combine the endowment of agricultural resources, are difficult to attract external consumers, create limited economic value, and are difficult to form a supporting role for the industrial chain. In the context of imperfect overall planning, the industrial chain lacks sustainable value creation function, and the willingness to invest in various factors is reduced.
Agriculture and rural infrastructure have limited support for the industrial chain. The construction of agricultural infrastructure is lagging behind, lacking field roads, water conservancy, energy, information and other infrastructure to support the production end, and the construction of infrastructure in the middle and downstream of the industrial chain such as modern agricultural industrial parks, agricultural modernization demonstration parks, production and processing bases, and warehousing and logistics centers is not in place. The rural infrastructure is not perfect, the living environment needs to be improved, and the rural supporting infrastructure such as municipal infrastructure is backward, making it difficult to create a livable and workable rural environment.
●It is difficult to construct the industrial chain as a whole, and there are great differences between different types of projects
The contradiction between the integrity of the construction of the agricultural industry chain and the relative independence of individual projects cannot be reconciled. The agricultural industry chain is a systematic project that is closely connected and mutually supported by each link, covering scientific breeding, planting and breeding, infrastructure, modern agricultural technology application, farmland management and ecological protection, primary processing, deep processing, warehousing and logistics, brand terminals and other projects. Only through the overall construction and operation of the industrial chain can the overall value creation function of the agricultural industrial chain be realized. However, financial support is more based on the perspective of individual projects, and in the absence of systematic planning and overall support, the impact of individual projects is limited.
Different types of projects have different natures, return on investment, and development and construction timelines. Transportation, water conservancy, energy, information and other agricultural infrastructure, farmland management and ecological protection, comprehensive land consolidation and other projects are the foundation of the agricultural industry chain, should give priority to development and construction, provide hardware support for various production and business activities and maintain the long-term and stable operation of the industrial chain, with the characteristics of large investment scale and low direct returns, mainly relying on fiscal and policy financial support, and low willingness to support commercial finance and social capital. Deep processing, warehousing and logistics and other projects have large value-added space, high return on investment, and strong willingness to support various funds, but it is difficult to promote in the absence of agricultural and rural infrastructure.
●The main body is weak and the financing cost is high
Most of the main body of the industrial chain is local agricultural enterprises, village and town collective economic organizations, family farms, etc., lacking the ability to adapt to the scale and specialization of modern agricultural technology, the corporate governance structure is not perfect, the profitability and operational stability are limited, and it is difficult to reach the threshold of banks and other financial institutions under the conditions of lack of agricultural guarantee and external credit upgrading, and it is difficult to establish direct financing channels, and more rely on their own funds and shareholders' investment to meet financing needs. The cultivated land and farmland at the production end are non-effective collateral, the mortgage rate of self-owned agricultural machinery and equipment is low, the right to income and the right to operate are unstable, and the equity cannot be fairly valued, making it difficult to become an effective pledge. In terms of horizontal expansion, most of the businesses such as homestays and rural tourism are operated by small and micro enterprises and farmers, with insufficient operating capacity and a lack of unified and standardized standards, resulting in poor overall consumer experience and public opinion risks.
Research on the path of financial support system construction
●Establish a good and stable "government-bank-enterprise" cooperative relationship
The government, financial institutions and agricultural operators are the main sources of financing for the agricultural industry chain, and financial institutions should actively connect with the government and business entities to establish long-term and stable cooperative relations. Establish a project coordination mechanism with government departments such as agriculture and rural affairs, natural resources, water conservancy, and the National Development and Reform Commission, include major agricultural infrastructure projects in the list of local key projects, strive for the support of financial tools such as local special bonds and agriculture-related subsidies, make good use of agricultural support policies, preferential tax policies, etc., and establish long-term and stable project docking and promotion mechanisms around comprehensive transportation, agricultural infrastructure, comprehensive land consolidation, production and processing integration clusters, modern agricultural industrial parks, logistics hubs and other projects.
Support the production and operation activities of agricultural business entities, deepen cooperation with various productive service entities, agricultural leading enterprises, agricultural enterprises in subdivided fields, family farms, village collectives, etc., participate in the design of project financing structures and fund balance schemes, optimize the cost-benefit and financing term structure, provide medium and long-term project loans, working capital loans, special funds for spring plowing and other credit products, and make full use of structural monetary policy tools such as re-lending to support agriculture and small enterprises, reduce the financing costs of business entities, and optimize the financing structure.
●Build a diversified and multi-level financial support system
Give full play to the role of different types of finance in the construction and operation of the agricultural industrial chain, and build a financing system supported by policy-based development and commercial finance. Policy-based development finance is based on functional positioning and gives full play to the advantages of "financing, financing, and intelligent financing".
In terms of financing, the use of long-term, low-cost, large-scale policy credit funds, focusing on supporting agricultural infrastructure, farmland management and protection, ecological protection, comprehensive land consolidation and other public welfare projects, do a good job in the daily production and operation of the project subject of credit support and guarantee, play a leading role, through the formation of syndicated loans and other ways to strengthen the cooperation with commercial finance industry, promote the extension and horizontal expansion of the industrial chain in the middle and lower reaches, with high value-added industrial chain links to balance the financing of infrastructure, land consolidation and other projects. In terms of financial intelligence, it actively participates in the overall planning of the industrial chain, participates in project planning, construction timing and factor integration, etc., designs credit structures and financing plans, and makes suggestions and suggestions for the development of local agricultural industries. In terms of financing, we optimized the internal project approval process, actively sought agricultural support policies, and provided differentiated support policies in credit evaluation indicators such as financing costs, debt repayment coverage ratios, collateral scope and pledge rate, loan term, and access threshold, and set up special agricultural support loans.
Commercial finance and policy finance work closely together to complement each other, focusing on supporting commercial projects such as agricultural processing, warehousing and logistics, cold chain distribution, brand building, and channel expansion, and issuing short- and medium-term working capital loans and operating loans to business entities to support normal production and business activities. Provide financing for the horizontal expansion of the industrial chain, support multi-format operations such as rural cultural tourism, ecological health care, agricultural experience, tourism real estate, homestays, and industry-university-research, expand revenue channels, and provide diversified sources of income for the industrial chain. Give full play to the role of agriculture-related insurance and guarantee institutions in the credit enhancement of agricultural entities, provide protection for different links of the agricultural industry chain through policy-based agricultural insurance, and use agriculture-related guarantees to enhance the credit of agricultural entities to meet the threshold of banks and other financial institutions.
Eventually, a financial system at different levels such as policy banks, development financial institutions, national commercial banks, regional banks, and rural small and medium-sized financial institutions will be formed, and financial services will be provided through re-lending and other forms to strengthen the positioning of rural small and medium-sized financial institutions in supporting agriculture and small enterprises, improve the penetration rate of digital finance in mobile terminals, and provide convenient, professional and accessible financial services.
●Innovate diversified and comprehensive financing models
On the premise of not adding new local hidden debt risks, adhere to the principle of marketization and innovate financing models. From the perspective of the overall industrial chain, we will promote the adoption of the "packaging and bundling" model, and incorporate horizontal expansion operations, terminal channels and brand building into the project collection to expand the overall source of income. Innovate the sources of income of each link of the industrial chain, the balance of cultivated land occupation and compensation index transactions generated by the comprehensive land consolidation at the production end, the premium of high-standard farmland completion and sublease, etc., the middle and downstream links, and the horizontal expansion of agricultural experience bases, production, education and research and other business formats.
Study the project financing plan, balance the relationship between the investment scale, the project period, the income and volatility, and the company's free cash flow, and build a financing plan with a clear and reasonable credit structure, sufficient repayment sources, appropriate cost period, and controllable risks. Explore ways to use local government special bonds and policy-based development financial instruments to supplement project capital, and provide supporting credit funds to reduce the pressure on agricultural entities' own funds.
Service entities expand financing channels and support agricultural entities to obtain medium and long-term funds through the issuance of corporate bonds, perpetual bonds, etc., as well as equity financing such as ordinary shares and preferred shares. Explore the establishment of an investment-loan linkage model, encourage direct financing institutions to carry out project investment in the form of equity, special funds, etc., and make up the funding gap by credit funds, special bonds, etc.
(This article is the author's personal opinion and has nothing to do with his organization)
(Editor in charge: Lv Jingjing)
