According to the Report of the Development of the National Market Entities in February 2014, there are over 1 million professional farmers’ cooperatives in the whole nation with a total contributive capital of 2.04 trillion yuan. A closer look shows that farmers are now involved in a wide variety of occupation types including planting, animal husbandry, producing agricultural machinery, forestry, plant protection, the technical and information industry, making handicrafts, weaving, running rural family restaurants and operating methane plants, etc. However, they were predominantly involved in agriculture and animal husbandry. Therefore, it is obvious that in a market dominated by middlemen, the sellers of agricultural products had to organize themselves into professional cooperatives to get more collective bargaining power and to create more added values by processing the products.

The legal and regulatory system for the development of farmer’s cooperatives has already been established. In recent years, a wide-range of laws including the Laws on Farmer’ Professional Cooperative, Administrative Regulations on Farmers’ Professional Cooperative Registration, as well as Modelling Articles and Financial and Accounting Rules have been successfully implemented, while local-level legislations are also being revamped.

Poverty alleviation policies related to the cooperative farming system have been established. The supportive policies and measures for the fiscal arrangement, tax collection, financing, agriculture-related projects and industry support have been put in place. Almost all the local governments have completed the documents to facilitate the development of cooperatives. Especially some governmental departments and provincial governments have given substantial support to the farmers’ professional cooperatives and provided financial support for the exploration of comprehensive agricultural projects (e.g. The establishment of standard plantation and standard poultry farming areas) and the construction of infrastructure for agricultural products distribution (e.g. building refrigerated storage spaces for vegetables and fruit and vehicles to transport products)

The formation of talented teams in the cooperative sector has been encouraged. The cultivation of the talent in cooperatives has been incorporated into the 2010-2020 National Middle-Long Term Talents Development Plan. the Ministry of Agriculture has initiated “Sunny Project-Training for Cooperatives Operation and Management” and “Modern Agricultural Talents Supportive Plan–Training for Cooperative Leaders”, it has also issued guidelines such as the Cooperative Counselor’s Working Regulations and Measures for Cooperative Talent Cultivation and Practical Base Regulation in order to better manage the training resources in different areas, optimize the training environment, enrich content, update training methods and accelerate the talent cultivation process. From 2006 to 2010, the total number of trainees in all kinds of cooperatives reached one million.

The following are the credit cooperative models adopted by farmers’ professional cooperatives in rural China:

Model of “productive cooperation + financial cooperation” inside farmers’ professional cooperatives 

Guhe Pig Products Cooperative in Funing County, Jiangsu Province is a comprehensive farmers’ professional cooperative combining Guhe livestock market, feed salesroom and fine-breed sows farming cooperative. Guhe livestock market takes up a land area of nearly 30 mu where all the livestock in the county are sold off at a rational price. With a sales network covering more than 600 counties and cities in 15 provinces, it provides the dealing place for more than 150,000 piglets from nearby areas. The feed salesroom was built up by absorbing 200,000 yuan of share capital and sells the feed at a factory price in order to minimize the feed costs of members. The fine-breed sows farming cooperative was established in 2004 by 25 members with an investment of 590,000 yuan and was constructed on the boar base of the association. To solve the problem of lack of funds for buying the boars, in July 2007, Guhe Pig Products Cooperative developed the mutual capital cooperation between members and established the Service Department for Mutual Capital Support which raised 1,400,000 yuan of mutual funds from more than 200 members. With the principle of exclusive membership, absorbing stock shares but not new money, sharing the profits but not interests, voluntary participation and mutual service, the service department gathers the idle and decentralized money of the members who have been incorporated as the shareholders, and gives loans to the cooperative members with a shortage of capital at a lower interest rate than the local banks for pig production; for cooperatives member with larger demands of funds, the cooperative is willing to provide credit guarantee for loan application from the local financial institutions. In 2012 Guhe live pig trading market project carried out by Guhe Pig Products Cooperative, the annual trading volume reached 200,000. Soon after the project was carried out, the membership was extended to many other counties and areas around. The cooperative provide services of seedling cultivation and immunization for members to develop the scaled farming of ecological pigs in Funing County, providing a good and reliable platform for live pig trading. 

The Guhe Live-Pig Specialized Cooperative in Funing County

Model of “productive cooperation + guarantee cooperation” 

Sanligang Town, Suizhou City, Hubei Province is the largest mushroom distributing center in China where 60% of mushrooms and fungi in China are traded. The Yuguo Farmers' Professional Cooperatives in Suixian County was established in October 2009 and is located in Jixiangsi Village in Sanligang Town. It was co-funded by Yuguo Mushroom Cooperation and the Jixiangsi Village with sub-organization of professional cooperatives responsible for mushroom cultivation, providing mutual loan support and guarantees, transportation and logistic companies, tourism companies and joint cooperatives. The cooperative has a registered fund of 4.15 million yuan and a membership of 2,369.

Shiitake mushroom

To solve the capital shortage of mushroom production and transportation, the cooperative cooperated with Agricultural Bank of China and established the Farmers’ Cooperative for Mutual Loan Support and Guarantee. The main operation method is that members with capital problems voluntarily form into groups (with around 10 members in each group) and each member is required to pay a guarantee fund of 5,000 yuan; the Agricultural Bank of China offers a ceiling loan of 50,000 yuan to each member, that is 10 times of the guarantee fund. The major income of the guarantee cooperative comes from the guarantee fee and stake interest. Each member pays a guarantee fee of less than 1% of the loan when he applied for the loan; the guarantee cooperative saves 40% of the income in compensating for the overdue loan of the member. The guarantee cooperative sets up a guarantee fund account, the subscribing share of each member is saved into the special account for guarantee fund which is mainly used as temporary substitute repayment for the loan when the member is not able to repay the loan in time. The other 60% income is used for establishing the special account for the administration fee of the guarantee cooperative.

Mode of farmers’ professional cooperatives integrated into the financing

Qianshan County in Anhui Province, one of the key counties at the forefront of China’s poverty alleviation work, is located in the southeast of the Dabie Mountain. With a vast mountainous area, complex geographic and geomorphic conditions, difficult natural conditions and a fragile foundation, farmers are struggling due to a slow growth in income. Large swaths of land in the region are allocated as nature reserves, which generate little income. Paddy is the major crop grown in the area, while other commercial crops like tea, silkworms and Chinese chestnut arc only grown on a small scale. Besides, there are also other problems such as the low level of industrialization, dependence on the market and the lack of unique products to provide a stable income for the locals.

Penghe Village in Qianshan County is located in the sub-tropical climate zone which is both humid and receives monsoonal rains. Located at an average altitude of 900 meters above sea level with an average temperature of 16.3 ℃, and a relative air humidity of over 85%, the village is full of lush green picturesque scenery. The light, temperature, humidity and soil are all very suitable for tea-leaf plantation. The tea produced here has been regarded as important tribute to the royal family ever since the Tang Dynasty. Since the village is located among the mountains, the tea industry here employs a traditional extensive operation approach, namely to sell via villagers or wholesales around the nation. The products are mainly sold by bulks without a brand. The tea leaves are roughly processed as common drinking materials for local people.

Jiang Chengsheng, the Model Worker in Anhui Province is the National Youth Wealth Leader in rural areas and the leader of Penghe Tea Professional Cooperative. He clearly remembered the scene when he made his first deal with the tea farmers: “I felt very sad when I saw the tea trees being cut down.” One autumn day in 2004, when Jiang was about to go to the farmland, he saw an old man digging the tea tree, so he asked: “Why are you digging the tea tree?” “What’s the use of it? I can never feed the family with it, I’d rather plant some wheat”, said the old man. Jiang felt sad at such a scene, so he said: “Please keep the tree and I will buy the tea leaves at the time of harvest.” “What if you cheat me?” “We can sign a contract then”, and that was how Jiang happened to make his first deal and started a new model.

In 2008, led by the Happy Tea Factory in Penghe, Qianshan County, 18 basic-processing tea factories in Tafan Township, including Bingfeng, Guamin Cave, Guangxi Yard, etc., along with 1,058 tea farmers formed the Tealeaf Professional Economy Cooperative Organization. The organization attaches great importance to faith construction, risk and profit sharing, and promotes the trinity of “professional cooperative + flagship enterprise + professional leading household”; it employs the order agricultural approach to sign contract with tea farmers and gives second rebates to the farmers in order to stimulate the activeness of them. Up to now, the cooperative has a membership of 1,200 households with a per capita income of 4,000 yuan; the cooperative has been applying for the provincial flagship enterprise.

In order to promote tea production, Qianshan County government arranges 1.2 million yuan special funds for the development of tea production, of which 600,000 yuan is used to construct tea base, 300,000 yuan for the cultivation of flagship enterprises, and 100,000 yuan for providing tea technical training and guidance to the newly developed tea yard as an award. The award ignited the enthusiasm of the tea farmers. In 2012, the total land area under tea cultivation in Qianshan County reached 100,600 mu and the clone tea land area reached 30,800 mu; 130 tea gardens have increased their production capacity. There are 22 tea companies and factories that have reached QS; the quality of the tea has increased gradually by deploying unified purchasing standards and processing technology.

The Penghe Happiness Plantation in Qianshan County

When the specialization in agricultural production has been developed up to a certain scale, agricultural extension services are established to provide services before, during and after the production, to being the farmers to the market and to share certain risk with the farmers. The modern development of agriculture depends on the provision of capital, technology, talent and information; agricultural extension services are able to fulfill all these conditions in order to create a bridge between agricultural producers and the market. In the context of a market economy, a single household is not strong enough to build connections with the market or to face the risks involved. The major reforms and the innovations in specialized agricultural production are the reforms related to the organization model–i.e. to organized farmers into agricultural production units on a proper scale. The agricultural cooperative organization provides a platform for farmers to scale-up operations and create a bridge between the farmers and the markets.