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The co-operative law contains elements of agricultural policy to foster the agricultural and rural economy (Part VII, Part I sections 1, 8, and 9). Farmers co-operatives are legislated to be controlled by producers, service providers, and agribusiness operation users (Part I.1). This legislation omits the possibility for small farmers to empower themselves and control a co- operative for their mutual advantage.

It appears that legislators were not concerned that the heterogeneity of co-operative members would perpetuate imbalances of power and conflicts of interest that distribute the burdens and benefits of collective decisions unequally amongst members. This inequality can be evidenced by the differing effects that decisions have on members that occupy different stages of the supply chain.

Most of China’s national-level policies are devised by an educated and well-informed group of policy makers at the central level with exposure to international concepts such as farmer co-operatives and their role in agricultural production and marketing. And, as discussed earlier, many policies are rolled out in selective areas on a trial basis; if the policy is successful, it is then applied to the whole country.

In the case of the national co-operative law, the policy makers were very cautious about allowing farmers to organize themselves collectively. Heavy pressure to restrict collective action came from both central and local officials that were concerned that farmer groups may become a political force that could threaten their authority. Hence, only two provinces (Liaoning and Zhejiang) were asked to act as provincial pilot projects to test farmer co-operative legislation. Several drafts of the farmer co-operative law were prepared and circulated among governments at the national and sub-national levels. The China’s Farmers Professional Co-operative Law (FPCL) was passed in November of 2006 and was enacted in July of 2007.

When the new law on farmer professional co-operatives came into effect it provided a legal basis for much of the group action that farmers were already taking either informally or under various, often local, regulations. Most of these groups were in the habit of providing documen- tation and registering with various authorities according to local regulations. The agricultural

bureau, the Science and Technology Association, and the Civil Affairs Bureau all acted as regis- trar’s offices, and had their own regulations based on their interpretation of the distinct features of each co-operative organization. Legally, however, the formation of these earlier co-operatives occurred in a vacuum. The FPCL now designates the Industry and Commerce Bureau as the sole registrar’s office.

A history of policy pronouncements advocating support for farmer associations dates back to the early years of the economic reforms. A Central Committee document, entitled Several Ques- tions of the Current Rural Economic Policies from January 1983, proposed that various forms of co-operative economic organizations should be developed to meet the needs of agricultural production (Chen [1970]). This position was further elaborated in another Central Committee document of January 1984 that urged the supply and marketing co-operative system be reformed into co-operative entities owned by farmers.

The document, Deepening Rural Reform, issued by the Central Committee in January 1987, stated that supply and marketing co-operatives should organize with producers to establish pro- fessional production associations on the principle of voluntary participation and to set up special- ized co-operatives according to the principles of co-operative business (Chen [1970]). Finally, The Standing Committee of the 10th National People’s Congress (NPC) formally accepted the drafting of a “Law of Farmers Co-operative Economic Organizations” into the agenda for draft- ing legislation in December 2003. The law was under preparation since 2004 and was finally passed by the NPC in November of 2006.

Co-operative legislation provides the legal framework for collective action to occur. It is important for a number of reasons. First, a formal legal structure provides associations with the ability to enter into contracts and to borrow money. Second, by determining the basic organi- zational features of producer associations in legislation, the legal framework can ensure that agricultural producers are provided with ownership and control. Third, the presence of a legal framework also provides legitimacy to producer associations as bona fide organizations. Fourth, legislation sets out the fundamental elements of a co-operative association that distinguish it from a profit making company (Ish [2005]).

Chapter 5. Farmers Professional Co-operative Law The lack of a legislative framework before 2006 gave room for actors to behave oppor- tunistically, basing their actions on their interpretation of the farmer co-operative and their own interests. As Bardhan [1989] has suggested, the situation appears to be one where the bureau- cracy wanted a secure flow of rental income they formed a pressure group, with much narrower goals than the state elites, to get it. Generally, the bureaucracy is more concerned about their own authority, budget, and workforce and how they may be affected by a policy change. In China, where the government has formidable power in allocating resources, these concerns are particularly true.

At the central government level, various departments, such as the Ministry of Agriculture (MOA), Ministry of Civil Administration, State Administration for Industry and Commerce, Science and Technology Association, and the All China Federation of Supply and Marketing Co-operatives (ACFSMC) have all been involved in the administration and support of farmer organizations. It is a competition between departments for the allocation of regulating power and related resources from the central government. Organizations such as the Women’s Federation and Technical Association have taken initiatives to establish and support farmer organizations and to secure bilateral and multilateral donors. Farmer associations that are responsible for managing natural resources, some of which may also undertake economic activities, come under the jurisdiction of agencies such as the Water Resource Bureau and Forestry Bureau.

The two major departmental rivals competing for the opportunity to be the co-operative regulatory body are the ACFSMC and MOA. For ACFSMC, this assignment is crucial to its legitimacy and its survival.

In the 1950s, Supply and Marketing Co-operatives (SMCs) were formed to provide services to farmers, allowing farmers to make joint input purchases and better market their produce. The SMCs were owned and controlled by farmer members. However, the SMCs were overwhelmed by the collectivization drive of the late 1950s and were subsequently subsumed into the People’s communes. During the collectivization period, the status of SMCs as farmer-owned and -operated organizations was lost. They came to be considered simply as another branch of government in which decision making and provision of services was highly centralized and hierarchical. More recently, with market deregulation, many SMCs are vanishing.

It is common that organizations created by social movements persist longer than the move- ments themselves, and gradually grow to take on a life of their own. As the vision and praxis of the movement fades, the organization will continue and become increasingly concerned with organizational self-interest (Develtere [1992]). Such seems to be the fate of the SMCs.

To entrench its interests, between 1995 and 1997 the ACFSMC proposed drafting a “Law of Supply and Marketing Co-operatives,” but this attempt was abandoned when the ACFSMC system began a process of internal reforms. In 1999 the ACFSMC again submitted an application to the State Council requesting that legislation be drafted to cover supply and marketing co- operatives, and in 2002 the request was broadened to involve a more general “Law of Co-operative Economic Organizations.”

China’s MOA’s mission statement deems it the sole government body authorized by the State Council (i.e., central government) for governing rural and agricultural development. It was natural that MOA wanted to be the sole regulating body of farmer co-operatives. In particular it was MOA’s Department of Co-operative Economy Management and Guidance (DCEMG) that used to administer the Rural Economy Management Stations at the township level across the country. However, with the collapse of the extension system, including the township stations, the DCEMG was looking for new business to conduct under its umbrella.

The FPCL is the result of internal debates, negotiations and comprises made between min- istries and sub-national governments. The infighting between MOA and the ACFSMC penetrated the legislative process, and resulted in a prolonged process and with many resources distracted from their target. Departments skewed studies by recommending their own best samples of farmer co-operatives to be examined by the legislative teams. Furthermore, attempts were made by departments to influence legislative team members into writing clauses that would bolster their own interests.

When the law was eventually passed, the registrar for farmer professional co-operatives was located in the Industry and Commercial Bureau. As well, the State Council did not clarify which government body would be the regulating body for farmer co-operatives.

Chapter 5. Farmers Professional Co-operative Law