Institutional Innovations and Adaption to Marketization in Rural China: Economic Analysis of Cooperative Organization and the Collective Ownership System
IDE Research Bulletin
Since the 1990s, two remarkable institutional innovations have emerged in rural China. The first is the quick development of a new type of intermediate agricultural organization called the "Famer's Professional Cooperative" (FPC hereafter). Since farmers in rural China tended to be inferior to agribusiness enterprises in terms of bargaining power on pricing and contract enforcement, they began to establish effective agricultural cooperatives to overcome the disadvantages of small-scale farm management. FPCs are expected to be intermediate between the agribusiness enterprises and farmers in terms of diffusion of agricultural technologies, monitoring of farm cultivation, procurement of farm products, and redistribution of the profits produced by the differentiated products.