Governance transaction costs and the evolution of agricultural operation organization forms: analysis based on the rise and fall of pig farming in City J (1949–2015)

CHENG Qiuping1 XIONG Wansheng1

(1.Social and Public Administration School, East China University of Science and Technology)

【Abstract】The scale agricultural operations are developing very fast in China as the result of the intertwining influence of market competition and state governance. Taking the story of pig farming in City J as a case, this study takes up the conception of governance transaction costs to explain the governance factors underpinning the phenomenon. How to connect the farmers with the state is a structural dilemma faced by both the Chinese government and rural families. Instead of the integrative method adopted during the period of planned economy, a multiple comprehensive approach has been taken in the phase of market economy during the reform. Different levels of government and departments develop a variety of mechanisms in the process of governance. These mechanisms produce a gradual mode which promotes scale operation. This gradual mode can be radicalized under certain conditions, and lead to rapid changes in the forms of agricultural operation organizations under the campaign-style governance.

【Keywords】 state governance; governance transaction cost; agricultural operation organization form;


【Funds】 Key Project of the National Social Science Foundation of China (15ZDC028)

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    [1]. ① Data during 2005–2014 come from previous China Agricultural Development Reports (the Ministry of Agriculture of the People’s Republic of China, 2003–2015). Data in 2015 come from Wang et al., 2016. [^Back]

    [2]. ② Japanese operating area of arable lands per household was 0.8 hectares in 1950 and rose to 1.47 in 1995 (Mamoru and Zhang et al., 2004); in 2011, the area was 1.8 hectares (27 mu) (Chen, 2012) and after excluding the vast Hokkaido region, only 1.2 hectares (18 mu) left. Han Jun, the Vice Director of the Office of the Central Leading Group on Financial and Economic Affairs, said at the China International Agri-Business Forum on May 17, 2015 that, “such a transfer speed and proportion are almost the highest among developing countries” ( [^Back]

    [3]. ③ Data in 2005 come from Zhao et al., 2007; data in 2015 come from Wang, 2016. [^Back]

    [4]. ④ Data in 2005 and 2010 come from the 12th Five-Year Plan for National Animal Husbandry Development; data in 2015 come from Ma, 2016. [^Back]

    [5]. ① John Swinnen and Rozelle also pointed out that farmers can influence the formulation of agricultural policies to some extent regardless of the scale. This opinion has affirmed that agricultural operating entities in turn influence state governance. [^Back]

    [6]. ① A similar proposal was applied in the study of corporate governance, which argued that transaction costs not only affect the enterprise-market boundary, but are also a key determinant of internal corporate governance types (Williamson, 1981). Later, transaction costs were used in public management to understand coordination costs in different departments (Wu, 2015). The common interest shown by multiple disciplines illustrates the extensive applicability of this concept, and in terms of its intention, it is, of course, different from understanding how to connect the state and the farmers, so they are two academic branches. [^Back]

    [7]. ① Refer to the Notice of the People’s Government of City J on Issuing the Implementation Plan for Livestock and Poultry Pollution Treatment in City J (2008–2010) (People’s Government of City J, [2008] No. 71). [^Back]

    [8]. ① Refer to the Notice of Incorporating Pig Farming into Village Regulations and Agreements (Civil Affairs Bureau of City J, [2013] No. 92). [^Back]

    [9]. ① Refer to the Developing Scale Pig Farming and Promoting Pig Farming Industrialization of the People’s Government of Pinghu, 1996. [^Back]

    [10]. ① Refer to the Report on the Construction of Commercial Pig Bases of the Bureau of Commerce in City J, February 23, 1988. [^Back]

    [11]. ② Refer to the Report of the Bureau of Commerce in City J on the Construction of Commercial Pig Bases in archives of City J, February 23, 1988. [^Back]

    [12]. ③ Refer to the Notice of the Construction of Commercial Pig Bases (People’s Government of City J, [1987] No. 90). [^Back]

    [13]. ① According to the Notice of the Office of the Municipal Party Committee and the Office of the People’s Government in City J on Further Science Management of the Pig Farming released immediately after the dead pig incident, “there are many retail pig farmers, which causes management difficulty, and local high-density farming has brought pressure on the environmental bearing capacity, especially some farmers, with weak legal and environmental awareness, discarded pigs, which has not only seriously damaged the surrounding ecological environment, but also exerted a negative impact on social harmony and stability and the city image.” According to the Opinions of the Office of the Municipal Party Committee and the Office of the People’s Government in City J on Solidly Promoting the Transformation Development of Pig Farming released on April 2, 2013, “the excessive total pig farming, retail farmers and local density have obviously exceeded the environmental carrying capacity and seriously affected the ecological environment in City J.” [^Back]

    [14]. ① According to the Opinions of the People’s Government in City J on Accelerating the Construction of the New Livestock Industry System to Promote the Development of Modern Urban Ecological Animal Husbandry (People’s Government of City J, [2012] No. 74), “all levels of government should refine and improve the plan for farming-prohibited areas and farming-restricted areas, control the total amount of livestock and poultry as per the standard of each new pig unit having no less than an acre of arable land, and fulfill the task of quantity reduction and quality improvement.” [^Back]

    [15]. ① According to this document, “all scale farms, except farming-prohibited areas, that meet the ecological environment functional area planning and environmental protection requirements should be allowed to develop. All places shall, in accordance with the requirements for promoting the comprehensive utilization of livestock and poultry wastes in the Guiding Opinions on the Comprehensive Utilization of Resources during the 12th Five-Year Plan, give priority to the construction lands for harmless treatment facilities for animals died of illness and animal manure, thereby advancing the comprehensive utilization of livestock and poultry wastes.” [^Back]

    [16]. ② Refer to the Opinions of the People’s Government in City J on Solidly Promoting the Transformation Development of Pig Farming (City J municipal party committee, [2013] No. 17). [^Back]

    [17]. ① For instance, in 2012, the subsidiaries for the reproductive sow, the sow insurance, the sow fertilization, the disease prevention and control and the harmless treatment pools were CNY 27.172 million, 6.8652 million, 7.6875 million, 24.5167 million and 13.12 million, respectively. In addition, the safety supervision of animal products also required subsidies. [^Back]

    [18]. ① According to the Reducing the Quantity and Improving the Quality of Pig Farming to Construct the Green Ecological Field (City J Online, January 15, 2014), “first of all, in the suburb of Xinfeng Town, in 2012, the total pig farming income was CNY 60 million, while the pollution treatment cost was CNY 38.8 million and in 2013 the total pig farming income was CNY 50 million, while all levels of financial investment reached CNY 123.46 million; secondly, the census data of pollution sources suggest that, the COD and ammonia nitrogen discharged by the livestock and poultry industry in City J respectively accounted for 40.9% and 30.6% of the total municipal pollutant discharge, and in key farming areas and villages with the main pollution source of livestock and poultry industry, the agricultural pollution has become an important factor in water pollution, posing a heavy burden on the water environment in City J.” [^Back]

    [19]. ② Three transformations and one demolition refer to the transformation of old residential areas, old factories and urban villages and the demolition of illegal buildings. [^Back]

    [20]. ① After the provincial 811 Project was launched, City J developed its 811 action plan to execute centralized pig farming and pollution treatment pilots. Later, Zhejiang released the Notice of the People’s Government of Zhejiang Province on Issuing the New 811 Environmental Protection Three-Year Action Implementation Plan (People’s Government of Zhejiang, [2008] No. 70) and City J released the Implementation Plan for Pollution Treatment in the Livestock and Poultry Industry (2008–2010) (People’s Government of City J, [2008] No. 71); Zhejiang Provincial Party Committee released the Action Plan to Promote the 811 Ecological Civilization Construction (Zhejiang Provincial Party Committee, [2011] No. 42); City J released the Measures for Pollution Prevention and Control Management of Livestock and Poultry Farming (People’s Government of City J, [2001] No. 65); in 2013, Zhejiang released the Notice of the People’s Government of Zhejiang Province of the Three-Year Action Plan for Three Major Transformations and One Demolition (People’s Government of Zhejiang, [2013] No. 12) and in April, City J developed its implementation plan. [^Back]

    [21]. ② Five water categories include wastewater treatment, flood prevention, water logging drain, water supply protection and water conversation. [^Back]

    [22]. ③ Cleaning up three river categories means the key rectification of black rivers, smelly rivers and waste rivers; two coverage categories refer to by 2016 or 2017 at the latest, the interception and pipe collection of pollution sources in urban and wastewater treatment in rural areas and centralized treatment of household refuse would be basically realized; two transformations are industrial transformation and agricultural transformation. [^Back]

    [23]. ① Refer to the Notice of Carrying out the Action to Promote the Pig Farming in City J (City J Bureau of Agricultural Economics, [2013] No. 112). [^Back]


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This Article


CN: 11-1100/C

Vol 31, No. 06, Pages 143-168+244

November 2016


Article Outline


  • 1 Research question and case study
  • 2 Analytical framework: model for the state to reduce governance transaction costs and its shift
  • 3 Development of pig farming in City J as a governance phenomenon
  • 4 Intertwining evolution of supply-chain governance and systematic governance
  • 5 Increasingly important reduction governance in the new century
  • 6 Government model to promote scale development: abrupt shift from gradual to radical
  • 7 Discussion: how should small farmers be connected with the state?
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