Executive Summary
􀂃 China has had enormous success in developing its economy over the past three decades. Market-oriented reform,
globalization, industrialization, and urbanization are the four key secular drivers of China's rapid economic growth.
􀂃 The importance of agriculture, farmers, and countryside in the economy has waned as the economy takes off, but they
have made very important contributions. However, they have failed to benefit fully from the working of these four growth
drivers, in the form of unfavorable terms of trade against agricultural products (due to price controls), cheap migrant labor
(partly reflecting the residence registration, or the Hu Kou system), supply of low-cost land (partly as a result of land
ownership policy) and so on.
􀂃 Indeed, China's successful development strategy has delivered rapid economic growth but at the expense of rising ruralurban
disparity, which threatens the former's sustainability in the long run.
􀂃 Investing for sustainability has become a key part of the Chinese authorities' next generation development strategy. To
this end, high policy priority has been given to addressing the three key rural issues (San Nong Wenti) — agriculture,
farmers, and countryside, with the objective of: a) building a new socialist countryside; b) increasing urbanization; and c)
preventing an increase in urban-rural inequality in incomes, living standards, and public services.
􀂃 With the existing policy controls being deregulated, new financial incentives rewarded, fiscal support provided, it creates
investment opportunities for private investors who would like to position themselves to benefit from China's commitment
to addressing the three key rural issues.
􀂃 In this note, we present and discuss the important and evolving roles of agriculture, farmers, and countryside in China's
economic development, as well as the key issues and challenges to be addressed, with a view to providing a context for
drawing market and investment implications in the future. In particular, we underscore the challenges and opportunities
for financial institutions (e.g. commercial banks) in helping China meet these commitments.

Table of Contents
1. Part I: The Evolving Role of Agriculture, Farmers, and Countryside 4-12
2. Party II: Challenging Issues Concerning Agriculture, Farmers, and Countryside 13-21
3. Part III: Diagnosis and Solution from A Historical and Development Perspective 22-35
4. Part IV: Modest Progress 36-41
5. Part V: Investing For Sustainability: Strategy and Targets 42-49
6. Part VI: Investment Implications 50-54
7. Appendix: Central Government Agencies Overseeing China’s Agriculture Sector 55