EXECUTIVE SUMMARY

　　This is the second annual report of the Sustainable Agriculture Working Group to the CCICED. It is our pleasure to report on follow-up to past Council decisions , to present new findings and recommendations to the Council and to describe our proposed work plan for 1999.

　　In 1997 the SAWG recommended the establishment of demonstration projects on both grasslands and cultivated lands in northeast China to facilitate transfer and t esting of available technologies for more efficient, profitable and environmenta lly sustainable agriculture. Further action was taken in 1998 on these recommend ations, and the SAWG is hopeful that appropriate demonstrations will be funded a nd implemented in 1999.

　　In keeping with the grasslands development theme approved by Council in 1997 the SAWG organized a workshop in 1998 on grassland management and livestock product ion with particular emphasis on South China. It was conducted in close collabora tion with the Ministry of Agriculture, Ministry of Science and Technology, State Environmental Protection Agency, Chinese Academy of Agricultural Sciences, Peki ng University and multi and bi-lateral development agencies active in China. The proceedings will be published shortly.

　　The principal activity of the SAWG in 1998 a field study tour to south China gra sslands to complement the tour to the northeast grassland in 1997. There was ext ensive involvement of provincial and local officials. These and the northeast gr asslands are considered the areas with the most development potential. Developme nt of other arid and high altitude grasslands may be desirable for environmental and social reasons, but ecoonomic potential is limited.

　　The toal area of grassland in south China is estimated at 5 million ha. About 70 % is considered available for future development. These grasslands are located p rimarily in mountainous terrain and include the 6 provinces related to the Yungu i Plateau and all provinces in the south China sub-tropic region. Over 80 % of t he total grassland area is considered to be undeveloped. The south China grassla nds are characterized by high rainfall, high altitude, long growing seasons, and significant native plant species diversity. Water supplies are generally very g ood. Research has demonstrated good productivity for well managed, improved gras slands.

　　The south China grasslands are faced with significant development constraints. I ndividual grassland areas tend to be relatively small and remote. Transportation and marketing infrastructure is Poor. The grasslands are located at the headwat ers of many streams, ths there are important environmental concerns to consider if and when livestock production potential, little has been done to assess other development options, such as eco-tourism and the production of high value, low weight or volume products like special wild mushrooms.

　　On average, the yield of natural grass in grasslands of the southwestern region is 2-3 times higher than that of northern region. The theoretical animal carryin g capacity is 3. 75 times higher than that of the North. Based on large scale ex periments, the productivity of improved grassland in this region can be very hig h; every 2 mu of grassland can raise one sheep, same as that of hilly grassland in New Zealand.

　　In the Southwest,it is estimated that about 30% have been used intensively, 30% extensively, and 40% insufficiently. Currently, improved grassland in this area (including Hunan and Hubei provinces) is only 425,000 ha. If 80 % of usable natu ral grassland are utilized and 30 % of them (about 12 million ha) can be improve d, then an additional 1.3 billion kg of meat can be produced each year. If produ ctivity of these improved and natural grasslands could be further increased, 1.9 billion kilograms of meat could be produced per year, and 9.5 billion kg of gra in can be substituted, thus greatly reducing possible feed grain imports. This 9 .5 billion kg of grainis equivalent to the output of 2.16 million ha of middle l evel cropland in the region, and there fore would greatly reduce the pressure on cropland resources.

　　The SAWG recommends

　　1. Detailed assessment of grassland resource inventories on a sub-regional basis to guide rational grassland development and to ensure environmental safeguards.

　　2. Increased investment in research to refine and adapt production systems to va riations in the physical attributes of the south China landscape. A wide range o f development options should be considered in the research program. Internationa l technology and experience with environmental impact assessment should be explo ited th the extent possible. Demonstration projects funded internationally would be useful to test various technology options and technology transfer mechanisms .

　　3. Detailed analysis of the infrastructure investment needed to service alternat ive development options-land development,transportation, input supplies, machine ry, education and health services, housing, livestock facilities, etc. Give the terriain and current development status, initial investment in infrastructure wi ll be large to establish viable communities with good living standards,to achiev e high productivity, and to ensure good environmental management.

　　4. Detailed assessment of market opportunities for meat,livestock products and o ther potential niche market commodities andservices. Ability to comete with othe r sources in a market economy, needs to be assessed before large scale developme t proceeds.

　　5. A case study should be undertaken for the rapidly industrializing costal regi on focusing on (a) the projected growth in demand for livestock products; (b) th e preset domestic and overseas sources and costs of these products; (c) the oten tia cost of producing and delivering these products from the S. Highlands; and ( d) the physical and economic constraints facing the S. Highlands in winning the coastal markets.

　　6. Evaluation of government regulations and policies pertaining to land tenure o r user rights, rural education and technology transfer services,and environmenta l manageement that could play a vital role in the grassland developemnt.

　　The main activities for the SAWG in 1999 will be implementation of demonstration projectsin northeast and south China grasslands,organization of an Internationa l Workshop on Land Use and Sustainable Development in Loess Plateau, Beijing, Ma y 17-18, 1999, and working group study tour and work session in the Loess Plate au area.

　　Finally, we wish to express our sorrow that Professor Li Bo passed away in May 1 998. As an invited group member, Professor Li, with his wide experitse on China' s grassland and exuberant enthusiasm for work, participated in the SAWG's worksh op and field trip. He threw all his energy into China's grassland development an d conservation cause and the group's work.. We will cherish deeply the memory of Professor Li.

　　I, Introduction

　　This is the second annual report of the SAWG to the CCICED. The first report out lined terms of reference, indentified priority topics for the workig group and r eported on the first field survey in north China in 1997 on the theme of grassla nd development. The second annual report continues on this theme with particular attention to south China grasslands development. These two regions had previous ly been identified by Chinese investigators as areas with significant potential for increased sustainable grassland livestock production.

　　1.1 China's agricultural development challengs

　　The conflict between increasing population and consumption level and decreasing cropland is getting serious. In addition, environmental deterioration caused by intensive agriculture together with unempolyment and stagnation of economy in ma ny rural areas are broadening the development dilemma.

　　Although China has made considerable progress in agriculture in recent years, pa rticularly in grain roduction, its future agricultural production faces major ch allenges as well as opportunities. Firstly, population is still growing so that at least 300-400 million people will be added in the next 30years. Consequently, the pressure on total demand for grain will continue for at least 30 years befo re the population attains its highest point, and that will be difficult to meet. Secondly, with increased incomes and transition to a market economy, the consum ption pattern will continue to change dramatically. While demand in quatity incr eases, demand for better quality wll also be increasig,characterized by rapid gr owth i demand for feed grains and brandname goods and new agricultural products. Thirdly, under the current agricultural practice and policy, agricultural growt h is accompanied by increasigly negative environmental side effects. Shortages o f cropland, water resources and environmental capacity are getting more severe. Finally, because of increasing global competition, major agricultural products, especially grain products in China re losing their comparative advantage, and ma y someday be iported in greater amounts.

　　Employment in rural areas and higher farmers' incomes are major issues for futur e agriculture development. To increase agricultural production and farmers' inco me, it is crucial to raise labor productivity as well as using more inputs, whic h, in turn, makes labor employment in rural area more difficult. In short, China 's agriculture is entering a new era and new problems arise beyond food self-suf ficiency. The task of sustainable agriculture development is extremely challengi ng. china's food suply and food security cannot depend only on the limited cropl and. We should pay more attention to grassland andlivestock production.

　　1.2 Status of grassland livestock production in China

　　Greaer emphasis on grass fed livestock productio could help overcome the four ch allenges to agricultural development given above. Grassland production in China can allveiate pressure on cropland enhance food security, increase famers' incom e, and reduce environmental degradation.

　　Since the reform policy in late 1970s, livestock production in China has been ac celerating. The output of livestock products increasted rapidly and successively from 1978 to 1996. Annual growth rate of meat, egg and milk exceeds 10%, which is much higher than that of cropland production growth. Consequently, livestock production per capita has increased rapidly. Meat and egg production per capita exceeds the world average level. In 1996, the value of livestock output accounte d for 31.4 percet of total value of agriculture. Livestock production has become a vital component of the rural economy.

　　At preset, meat production in China makes up 25% of that in the world, and 67% o f Asia. As total livestock production increased, the structure of production als o chaged. The proportion of pork in total meat production decreased from over 90 % in 1978 to 68% in 1996. However, livestock products are still dominated by gra in-based pork, and it is 28% higher than the world average of 41% (in 1995). The proporton of grass-fed beef and mutton is only 12% in 1995, 21% lower than the world average. The developmet of livestock production, especially of meat produc tion per capita and grssland livestock production, is far behind that of many de veloped countries.

　　The usalbe grassland area in China is twice that of cropland. Grassland livestoc k production has enormous potential and will play a more and more important role in agricultural development. There is significant potential to develop grasslan d and herbivorous livestock so as to ajust the structure of livestock production . Firstly, it is getting more difficult to increase food and feed grain producti on owing to limited cropland and low economic benefits of grain crops. Secondly, with the improvement of living standard, the consumption of livestock productsi s increasing, which currently leads to greater feed grain use. Thirdly, shortage s of feed grain could result in major imports grassland development, however, ca n produce more meat, wool and milk products, and consequently alleviate the pres sure on cropland. Moreover, grassland development can be cost-effective. If gra ssland is used sustainably, it can play an impotrant role in improving ecosystem quality ad increasing frarmers' income, as well as promoting sustainable develo pment of agriculture. However,grassland developmet alwo faces many challenges, s uch as grassland quality improvement, labor force eductation, market development , achieving appropriate econoies of scale, and raising investment and infrastruc ture construction. Without appropriate response to these challenges grassland de velopment is unlikely to succeed.

　　1.3 SAWG activity

　　The SAWG mantains that livestock production and grassland management should be o ne of the highest priorities in realizing sustainable agriculture. To that end t he SAWG surveyed grassland development in North China and reported its findings to CCICED in 1997. In March 1998, SAWG held an "International Workshop on Grassl and Management and Livestock Production in China". Experts and officials from bo th China (Chinese Academy of sciences, chinese Academy of Agricultural Sciences, related ministries and commissions of the State and international organizations in Beijing) and abroad (Canada, Britain, USA, Australia, etc.) presented their valuable opinions and insights on grassland development and related issues. Proc eedings of that workshop will be published. Afterwards, a field survey was made to typical South China Grasland inculuding Nanshan Pasture located in Chengbu Co unty, Hunan Province and Hongchiba Pasture in Wuxi County, Chongqing Municipalit y. Apart from the field survey, SAWG exchanged views with local officials and ex perts. Local leaders paid great attention to the survey and provided logistics a nd information. The news of both the workshop and field survey were broadly rele ased by mass media.

　　The report is divided into five parts. The first part introduces challenges faci ng China's agriculture and the importance of grassland development. The second p art analyses potentials and problems in grassland development in South China. Th e third part outlies 1998 recommendations to the CCICED. The fourth part reports on the status of SAWG activity on a number of general issues related to sustain able agriculture. The fifth part describes SAWG"s work plan for 1999, Appendixes provide additional information including field trip report. group meeting minut es and workshop participants mailing list.

　　II. Development of grassland resources andlivestock production in South China

　　Recent debateson food security show that integrated measures are needed to ensur e food supply and tosustain agriculture development in China in the next century . Grasslands have significant potential for contributing to this development.

　　Among themajorgrasslands in China, those in thenorth and south are considered to have the most development potential. grassland development would provide livesto ck products, not onlytocontriute more to China's food supply, but also tothedeve lopment of local economies and maintenance ofecosystem quality.

　　The result of SAWG's fieldsurveyon Northern grassland in 1997 shows that some of the Northern grasslands are severelydegraded and need morecarefulmanagment and protection. In order to usegrassland sustainably, more investment isneeded in gr assland improvement where water and soil conditions are suitable. Transportation ,processiong, and marketing infrastructure need careful planning and greater inv estment. Eductationand technology transfer need to be imporved. The policies rel ated tolandmanagement and controlneed to be reformed.

　　SAWG's 1998 field surveyconcentrated on examiningthe potential of South China's grassland. The findings and conclusions are given below.

　　2.1 Importance of grassland development

　　The potential meat and wool output on grassland in South China is equivalent to that of New Zealand. Given the strategic importance of the Southern grassland to the local economy, the development of Southern grassland would help the local g overnment toaccelerate poverty alleviation inmountainousareas, andalleviatethepr essure on other grassland andcultivated agriculture.

　　2.1.1 Potentials for establishing a grasslandlivestock production base in South China

　　The Totalland area of the 13 provinces and regions in South China is 2.9 billion mu, ofwhichcroplandis511 millionmu(13.1%). Totalgrassland is 980 millionmu, ofw h ichsome 700 millionmuare suitable for livestock production (17.0% of the total l and area, and 1.4 times the cropland area). Much of the grassland area is fra gmental which makes it difficult todevelop economically.Those grasslands exceedi ng 10000 muin size make up about 20 percent of the usable area (See Table 1 in A ppendix A for more detail). At present, only a small portion ofgrassland nearvil lages and towns are used for livestock production, large scale grasslands in rem ote areas have yet to be developed. Due to ecological fragility and poor infrast ructure, some hillsand slopes are difficult to use. It is estimated that the rea l area of usable grassland in South China is about 400-500 million mu, and about 200 million mu of grassland could be developed easily in the medium term.

　　South China is located in a subtropical humid area and is characterized with ade quate supply of water and heat, long growth period, high productivity and infreq uent natural disasters. The precipitationranges between 1100-1800mm. Vegetation is green all year roud. According to investigation by the Ministryof Agriculture , natural grassland produces 500-800kg of hay per mu, with total production of50 0 billion kg annually, which is higher than that of Northern grassland. The pote nti alanimal carrying capacity of Southern grassland is equivalent to that of th e North. The yield of improved grassland is 3 times higher with good management than that of natural grassland. In addition, the risk of grassland production i n South China is lower than that in the North due to less frequentdisaters liked rought, snow and rodents.

　　Improvements in grassland productivity were critical factors behind New Zealand' s success as aproducer and exporter of lamb meat and wool. The productivity of i mproved grassland in South China is as high as that of New Zealand. Moreover, th e area of Southern grassland is five times that of New Zealand. The gap in yield and export of livestockproducts between Chinaand New Zealand relflects the pote ntial of grassland development in China. High-quality grass and good breeds of a nimalshave been introduced to South China. Ifmoreattention isgiven to grasslandd evelopmentin South China, with more investment and bettermanagement, it could be comethesecondlargest livestock production area in china.The area Couldbeestablis hed as ameatand wool production base withoutput levels similar to that of New Ze aland. It could bean important contributor to food security, wool supply, and po ssibly to export earnings.

　　2.1.2. Promoting local economic development and poverty alleviation inmountainou s areas

　　Southern grasslands aremainly located inmountaionous areas, where the localecono my is less developed with poor communication. Total poverty population is over 2 1 million, accounting for 26.5% of the national total.

　　In terms of geography, most of the rassland resources in south China are in the southwest provinces. In the meantime, grassland hills and slopes in the South ar e mainly scattered in the following area: Wulinshan, Qinbashan, Deliangshan, Nan lin, Hengduanshan, and part of Yungui Plateau, especially border areas of Yunnan , Guangxi, Sichuan, Hubei, and Hunan provinces, surrounding Guizhou Province. Th ere are more than 130 nationally recognized poor counties within this area.

　　The resources of silage and agriculturela procuts or by-products are rich in Sou thwest China because of the relatively developed crop production in the area.Mea nwhile, 30% of the grassland are inter-mingled with cropland and woodland which provides opportunity to combine livestock and grain production to complement res ource advantages. Southwest China has the biggest Karst plateau-hilly region in the world, limestone isspread widely, mountains are abundant with little soil co ver, croplands are dispersed, therefore the resources to develop rape-growing in dustry and forestry are limited.

　　More than 20 minorities such as Miao, Yi, Tujia, Buyi, Dong, and others reside i n the area. the population of minorities isdominant in the community. Soci-econo ic development in these areas lags behind the national rate. Rural development i salso poor in these areas. Problems related to topography, and resource endowmen ts present extreme difficulties for poverty alleviation. The Sate Development Pl anning Commission recognizes that poverty alleviation in these areas is far mor difficult that of Loess Plateau region.

　　Development of southern grassland could be an efficient way of reducing poverty in the poor mountainous areas. Grassland development could reduce intensive use of slope lands for crop cultivation and control soil erosion given sound animalh usbandry. After nearly 15-years of research,developmentand demonstration,,new gr ass species combinations and domestic animal species have been selectedin theare a. A model formanagement, service and technical support for the development of s outhern grassland has been developed.

　　2.1.3 Consrvation of ecosystem

　　More than 90% of the Southern grassland are scattered inmiddle and west parts of the south. This means that most of them are in the following regions: the upper andmiddlereaches of the Yangtze River, Zhujinang River, Hanshui Rivr, and some inalnd water systems,which are eclogically important protective zones. These reg ions mainly contain limestone and yellow-red soila nd have fragile ecosysstems. Increasing population with limitedland resources resulted in intensive use of sl ope lands,whichcaused serious degradation of forest and grassland,and eventually soil erosion.Furthermore, it isdifficult of regenerate vegetation after thesoil has been washed away.

　　The degradation of Southern grassland also threatens the ecosystem at the lower reaches. Soil erosion in upper reaches has led to siltation of lakes and riversinl ower reaches, such as the Xiangjiang River, Yangtze River, Dongtinglake, Zhujian g River etc. The Southern yellow-re soil area is the second most serious region of soil erosion next to Loess Plateau. Grassland development could help prevent further soil erosion and protect top soil. Such activity needs little investment and can be cost-effective in a short time. Such development can help to regenera te vegetation and conserve the ecosystem, but it could alsolead to further damag e of the ecosystem if not used rationally.

　　2.1.4 Research information in the Southwest

　　Commencing in 1980, concerned ministries of the Chinese Government established s everal demonstration areas in southwestern region for improving grassland and in troducting animals, optimizing amanagement model and studying integrated develop ment of grassland production. These have achieved much by providing scientific e vidence and experience on production potential.

　　On average, the yield of natural grass in grasslands of southwestern region is 2 -3 times higher than that of northern region. The theoretical animal carrying ca pacity is 3.75 times higher than that of the North. Based on large scale experim ents, the productivity of improved grassland in this region can be very high; ev very 2 mu of grassland can raise one sheep, the same as that of hilly grassland in New Zealand.

　　in the Southwest, it is estimated that about 30% have been used intensively, 30% extensively, and 40% insufficiently. Currently, improved grassland in this area (including Hunan and Hubei provinces) is 425 thousand ha. If 80% of usable natu ralgrassland is utilized and 30% of them (about 12 million ha.) can be imporved, then an additional 1.3 billion kg of meat can be produced each year. If product ivity of these iproved and natural grasslands could be further increased,1.9 bil lion kilograms of meat could be produced per year, and 9.5 billion kg of grain c an be substituted greatly limiting possilbe feed grain imports. This 9.5 billion kg of grain isequivalen to the output of 2.16 million ha. ofmiddle level cropla nd in the region, and therefore would greatly reduce the pressure on cropland re sources.

　　In conclusion, grassland development in South China especially the Southwest is important to the development of the local economy and to the protection of the e nvironment.

　　2.2 Constraints on grassland development

　　Low quality grass species in natural grassland, the small size of many grassland areas and fragile ecosystem are natural constraints forgrassland development. U nderdeveloped market, poor infrastructure, low investment, and inconsistent deve lopment policy and technology transfer system are economic constraints for grass land development in the Southwes.

　　2.2.1 Natrual constraints

　　(1) The quality of natural grassland in the Southwest is low though with high ou tput. The proportion of legumes is less than 1%, and most ofthe dominant species are coarse grasses with poor palatability. Consequently, the crude protein cont ent and diestibility is about half, lower than that of northern grassland. repla cement of natural grasses through better grazing management or re-seeding is the refore considered the main choice for grassland development in southwestern regi on.

　　(2) Grassland areas larger than 10 thousand mu in size account for 45% of the to tal area in southwestern region. Areas larger than 50 thousand mu account for on ly 11% of the total. The intermediate grass lands between forests or farms cover s about 30% of the total. Small areas of grassland limit the prospect to establi sh large scale livestock farming, but could be suitable for sheep and dairying f or local markets.

　　(3) About 74% of grassland in the Southwest is located in mountains and plateaus with elevation over 800 meters. Abuout 31% is located in Karst region. Steep sl ope, complicated landform and poor soil texture are the main characteristics in this area. Taking Guizhou Province as an example, 50% of the grassland has slope s over 25, so conditions are more suitable for sheep than cattle because of th e risk of hoof induced soil erosion. Furthermore, 40% of the grassland has very shallow soils, and about 17% is on slopes which are almost naked.

　　These conditions of landform and vegetation can lead to degeneration of grasslan d and soil erosion if they are not used properly. It is reported that 20-30% of southwestern grassland have problems with soil erosion. Thus, the key to develop grassland is to use it carefully.

　　2.2.2 Economic and social constraints

　　(1) Market development is incomplete, and market potential has yet to be develop ed Market mechanisms are important factors in the development of the local econo my and improvement of farmers' livingstandards. Butmarket development in this ar ea is still at the primar stage. The gap between developed regions and the South west is large, though in recent years rural seasonal markets have developed very quickly in number and trading volume.

　　With the development of a market economy, marketing and pricing have a guilding effect on grassland development. Although grassland development in the Southwest has some favorable physical conditios, there is a need to develop a comprehensi vemarketing system. This will require initiatives from government and private in vestors at the national, pronvincial and local level.

　　Obtaining a greater market share is a challenge for grassland development is sou thern region. Themarket competitiveness of the products produced in this region is weak compared withits southeastern counterparts due to its less-favorable geo graphical and natural conditions. Products also faces the challenge of many famu s domestic and overseas alternatives.

　　In terms of its production and marketing, grassland developmentin southern regio n is at the primary stage. It is charaxterized by selling fresh and live product s. It is important to gradually establish a production base and to create its ow n famous brands. In the process of developing its own marketing system, it is al so important to expand the marketing to areaslike Hong Kong and Macao and southw estern Asia. For this pnrpose, competitive quality and price are essential.

　　(2) Policy and technical support systems and low investment limit development of grassland in Southwestern Region

　　The pace of grassland development in southwestern region has been slow because o f historical reasosn. Exploitinggrassland resources has not been a part of the b asic strategy in many areas of this region. Lack of consistent policy causes ser ious problems ongrassland development.

　　Lack of technical knowledge by individual farmers also poses difficulty in the d evelopment of grasslands. Local peasants have insufficient education and trainin g.Manay technical problems have yet to be solved, such as the selection and esta blishment of improved grassland, management of grassland, grass storage under hi gh temperatre and humidity etc., though good progress has been made for certa in localities.

　　(3) The grassland contracting system is not well implemented

　　The SAWG found that the contracting system has not been well implemented in the southern grasslands. Unclear land ownerhship/user rights of grasslands have beco merestricting factors for further grassland development in the south. In Houngch iba of Chongqing Municipality for example, peasants who were interviewed thought that they would invest more in the grassland if they could have longer user rig hts.

　　(4) The scale of grassland development is small

　　Grassland development in the south is still at the primary stage. Input use and productivity are low. It is difficult to increase the production scale of Nansha n Pasture of Hunan Province, though cleven counties have been appointed as the b ase for grassland development by the State Development Planning Commission and M inistry of Agriculture. Thirty-nine demonstration of integrated grassland develo pment have been conductes during the seventh and eighth "Five Year Plan". Good g rass species,livestock species and the extension of modern management technology for grassland are available. The model of household grazing and raising animals has not been changed much. Poor natural condition restricts the growth of produ ction scale. On the other hand, the traditional production model is the dominant type given that the state and collectives have little ability to input on the b ig scale.

　　(5) Infrastructure and communication

　　Generally speaking, the infrastructure for grassland development in South China is poorly developed, even though great improivements have been madein highway an d hydroelectric facilities construction following implementation of a policy cal led" alleviatepoverty through development "and" providing work instead of aid".

　　Communication is a major constraint for grassland development in South China. Pr ogress of railway and motorway construction is slowand the distance is long. It usually takes several days to travel from the production area to the nearest maj or cities. The transport situation within counties is also unsatisfactory. Conse quently, the successful development of grassaldns will require large investments in communciation and transportation infrastructure.

　　Insufficient energy supply leads to low quality production and poor living stand ard. Though hydrolelectric resources are abundant in the area, its regional econ omy is stillbackward because of its high elevation and ifficult access. Energy s upply for grassland development could meet the demand through several small scal e hydropower plants in the area. Drinking water is not readily accessible. Produ ction and living conditions are extremely poor in the large scale grasslands on mountain flat surface above 1200m.

　　Livestock management in South China is different from that in the North. It is u sually based on fixed herding instead of nomadic pastoralism, and requires highe r producktion and living standards. Thus it may be difficult to attract farmers and technicians to live and work in the Southern highlands before the necessary production and living facilities are constructed. Thus, infrastructure construct ion construction should be the first priority in the development of grassland re sources in South China. The scale and speed of grassland development are very mu ch dependent on the improvement of infrastructure. This should be a long-term pr ogram for both the central and local governments.

　　2.3 Competitive advantage and main area of development

　　2.3.1 Searching for competitive advantage

　　While the physical production potential for grassland livestock is large and mar kets r growing, competitiveness of the sector is weak. Major changes areneeded i n the grassland livestock sector if it is to respond to the new market-oriented economy. New concepts and management models based on market response should be c reated. Diversifying the rural economic structure should also be an integral art of development.

　　Increases in per capita income induce changes in food consumption pattern. This also means that direct consumption of staple food (rice & wheat) will be replace d by increased direct consumption of meat and dairy products and indirect consum ption of feed grains. The need for meat or more protein products will be a graad ual trend. It seems inevitable that wider commodity choices arising from livesto ck production will be needed to meet diersified demand for food. However, as Chi na is to join the World Trade Organization, China's agriculture will be faced wi th world competition. It is important to note that given current management effi ciency and technical knowhow, Chinese agriculture will not show any competitive advantage despite its great market potential. It is importat to recognize this s ituation so that proper measures can be taken to increase the competitiveness of Chinese agriculture.

　　2.3.2 Main area for grassland development in South China

　　Southwestern region as well as Hunan and Hubei provinces can be regarded as the most important grassland development areas. Firstly, the usable grassland in the se areas makes up 87% of the total in the South, where water and heat conditions for herbage growth are superb and production potential is large. The theoretica l animal carrying capacity surpasses that of the north. Secondly, the area has i ts own potential markets for grassland products and others in the rapidly indust rializing coastal zone. Thirdly, the area has the basic technological knowledge required. Finally, from a poverty alleviation point of view, it is urgent to dev elop the area and to increase both food supply and households income. One other important factor is that such developmet can maintain a good ecological environm ent.

　　III. Recommendations

　　Although there are great production and market potentials in grassland areas in south China, there is currently no competitive advantage in both production and marketing. Grassland livestock production should therefore be regarded as an imp ortant economic activity in the development process. Favorable regional developm ent policies are needed for further progress. Market development is one key area of development. General guidance on medium- and long-term regional economic dev elopment needs to be formulated by regional and local government. Speeding up th e process of grassland improvement, strengthening infrastructure construction an d improving mechanization are all necessary components of development. Grassland development requires access to investment capital. Measures need to be taken to attract finacial and human capital resources.

　　3.1 Policy framework for southern grassland development

　　Regional and industrial policies that can facilitate the development of southern grassland livestck production are essential. Such policies need to clarify gras sland property rights and user rights. It is important to develop a credit servi ce system. Meanwhile, quality control and inspection systems should be re-enforc ed to ensure competiveness of the commodities and raise consumer demand. Marketi ng information and analysis will become extremely important in the whole process . Clarifying the responsibilities, rights and benefits between the central and l ocal governments, companies and participating households are necessary steps bef ore fullscale development projects are implemented. Involving individual househo lds in the policy-making process and management system will help to ensure smoot h grassland development.

　　3.2 Sustainability of grassland and specialized production zones

　　Unitary medium-and long-term development plans need to be formulated for the rat ional and efficient use of southern grassland resources. At the same time, atten tion should to be paid to environmental conservation. Large-scale livestock prod uction in the area needs to be distributed rationally. Systematic developments o f related industries, such as feed industry, processing industry, as well as the marketing chain are integral parts of development. Physical, social and economi c conditions and differences in living habits of domestic animal species should be considered in establishing special production scale and regional specialized markets should be the principles for grassland development.

　　The present situation indicates that development of grassland livestock producti on is very slow. To a large extent, it is based on natural grassland. In order t o acelerate the development process, it is important to improve natural grasslan ds

　　3.3 Infrastructure needs

　　Currently, the basic communication network in southwestern area has been establi shed which ensures information exchange between major cities and county towns. H owever, road access to major cities from mountain grassland is very poor. As thi s is critical to the development of southwestern grassland, it is important to i mprove road condition. Given the fact of ample water supply, it may be efficient to build small water and electricity plants in mountain areas to meet the energ y demand for grassland development. In addition, infrastructure including lodgin g, livestock shelter, feed storage, human and livestock water facility, etc. is needed.

　　3.4 Investment

　　Investment needs associated with grassland development are large. It is suggeste d that the increase in investment in the southern grassland should not only come from the central and local governments, but also from private companies and ind ividual household or international agencies.

　　Slow economic rogress in couthwestern China has limited local government financi al support to grass land development. However, if governments recognize the stra tegic importance of grassland development to the whole economy, it is important for them to create favorable environment for outside investors. Attracting outsi de fundw to develop roads and basic infrastructure should be integrated into a u nitary agricultural development plan. Grassland development will also help the l ocal governmets rovide services. At the same time. more job opportunities will b e created and higher income can be anticipated. This will help the government to alleviate poverty.

　　Suitable organizational models need to be developed which can involve not only c ompanies, but also households into the investment and management systems. To bri dge the gap between scattered small individual household production and big mode rn market, integrated models like"company + households" or "company + production bases + households" are practical for grassland development.

　　Regional disparity between the east and west is characterized by fast economic g rowth in the east and much slower economic progress in the west. It will be very uuseful to encourage collaboration between the eastr and the west. By so doing, the west could provide east with cheap raw materials and commodities. At the sa me time, both financial and human cpital could be complemented.

　　Credit service plays an important role in the development process, Experience in some areas show that access to capital is one of the most serious constraints t o economic progress. Apart from government formal credit shemes provided by fina ncial institutions, there is need to meet various kinds of financial demand.

　　3.5 "Promoting Livestock Production with S & T"

　　The strategy of "promoting livestock production with science and technology" sho uld be implemented. Science and technology are the driving froce for future econ omic development in southwestern grassland areas. In order to increase the marke t competitiveness of grassland livestock products, increasing resource use effic iency will be important. Furthermore, future development of the grassland livest ock industry will require new and advanced technologies both to raise productivi ty and lower and negative environmental impacts. Current production also faces u nsolved technical problems. All these depend on greater progress in science and technology.

　　Implementing demostration projects, conducting experiments on grass and animal i mprovement are essetial steps of grassland development. Technical training of lo cal leaders and farmers, and improvements in environmental education are also im portant.

　　IV. General Issues in Sustainable Agriculture

　　In developing its work plan and defining its priorities the SAWG chose a two-pr onged approach. One relates to annual international workshops and study tours on specific issues or development opportunities and the other to general issues wh ich the SAWG wishes to address over the life of the working group.

　　Proceedings of the 1997 workshopp have been published by China Environment Scien ce press under the title "Challenges and Opportunities for Sustainable Agricultu re in China". This workshop assisted the SAWG in developing priorities for its o wn activities. Proceedings of the "1998 Intenational Workshop on Grassland Manag ement and liveestock Production in China", will be published in the near future.

　　Findings and recommendations arising from the workshops and study tours are cont ained in the 1997 and this annual report. The focus on grassland livestock produ ction reflects the SAWG's views that this sector has not received adequate atten tion in China and that there is enormous potential for sustainable increases in food and fiber output from this source.

　　4.1 Land resource invenfories

　　A recent UNDP publication entitled, China Agriculture and Food Secrity Resource Book: A Compendium of Donor Activities (1994-1997) describes a current FAO proje ct fundedn by Italy related to the Chinese Agricultural Census (p. 78). At compl etion in 1999 it is expected that "China will have the first definitive picture of the structture of China' s agricultural production sector and have the necess ary data and tools for planning and policy decisions in this sector of the econo my". As information becomes available from this project, the SAWG will assess it s adequacty with respect to land resource management and sustainability issues, such as estimates of cultivated and grassland areas for major agroecological zon es and loss of land to urban and industrial uses. The work plan for 1999 will ad dress land management issues directly as the SAWG conducts a workshop and field tour to address sustainability and development options in the Loess Plateau regi on

　　4.2 Livestock industry development

　　The SAWG has focused its efforts in 1997 and 1998 on the potential for sustainab le increased livestock production from grasslands. Growing food demand, changing food preferences, rising consumer incomes and imminent changes in trading relat ionships all point to a need and opportunity for substantial future growth in me at and livestock product output. The SAWG has given particular attention to dev elopment potential in north and south China grasslands and has made appropriate recommendations to the CCICED to assist this industry growth. Recommendations ha ve been made for specific demonstration projects, but, to date, funding agencies have not been confirmed.

　　4.3 Integration of information

　　A large number of international organizations, country development agencies, fou ndations and internal Chinese institutions are involved in some aspects of agric ultural development-rural education, proverty alleviation, research and demonstr ation projects, joint venture livestock projects. The SAWG developed a bibliogra phy of these projects to aid its work on policy advice and demonstration project proposals. The UNDP compendium complements this work and will facilitate contin uing efforts by the SAWG to exploit Chinese and international sources of informa tion in support of sustainable agriculture development in China.

　　4.4 Technology transfer

　　Several studies of agricultural extension and rural education in China have conc luded that these services are inadequate to properly serve a dynamic industry th at is responsive to market signals and environmetal imperatives. One suc study a uthored by Liu Yonggong of CAU is entitled "Institutional and Policy Reform of t China's Rural Extension in the Transition Towards Maarket Economy. "Professor Li u describes and extension system in the planned economy with:

　　-top-down approach

　　-complex multi-level network-national, provincial, prefecture and county

　　-focus on grain production

　　-administrativ approach to technology delivery

　　According to Prof. Liu, transformation of the extension system in a market-orien ted economy faces numerous challenges, including:

　　-limited knowledge and decision making skills of farmers

　　-lack of market information

　　-integration and coordination of services of national and regional institutions

　　-qualiications of extension staff for effective service in a market economy

　　-decentralization of planning procedures to include participation of target bene ficiaries

　　-continuation of administrative intervention

　　-private sector funding and delivery of some technology transfer services.

　　A recent analysis by the China-EU Center for Agricultural Technology contained s imilar observations.

　　The World Bank is currently funding a large project on Agricultural Support Serv ices to:

　　(1) strengthen agriculture, animal husbandry, animal and plant quarantine manage ment capability;

　　(2) reorganize crop and livestock extension system from national to county level ;

　　(3) improve extension services;

　　(4) reorganize seed centers to separate their production from certification and regulation roles and promote seed commercialization;

　　(5) strengthen veterinary and preventive animal health service, establish a well coordinated national breed improvement program and strengrthen pharmaceutical a nd feed quality control; and

　　(6) promote cost recovery for services.

　　The proect is scheduled for completion in 1999. This project indicates Chinese g overnment concerns about the need for improvements in agricult1 ural extension a nd technology transfer services. There is no apparent need for further activity by the SAWG on this tocip at this time.

　　V. Work Plan for 1999

　　The main elements of the SAWG work plan for 1999 are as follows:

　　5.1 Implemetation of demonstration projects

　　(1) Land management practices in northeast China

　　Dryland cereal and oilseed cropping practices in this area are not sustainable. After only 40 years of cultivation soils have alredy lst ft least 30% of their o rganic matter and associated benefits to soil quality and productivity, through inappropriate ploughing techniques.

　　Based on observations of the soil and landscape conditions in estern Inner Mongo lia there appears to be an opportunity to increase crop productivity by 50 to 10 0percent by using more efficient and intensive cropping systems and sustaiable l and management praactices. Experience and scientific evidence from the Canadian prairies and the northern great plains of the United States with very similar cl imate and soil conditions have documented the serious soil degradation implicati ons and productivity losses associated with poor land management practices. Good technology is available to address productivity and sustainability concerns.

　　The SAWG will implement field scale demonstrations of land management pratices a nd appropriate machinery that have proven successful in addressing productivity and sustainability problems in physically similar situations elsewhere in the wo rld.

　　(2) Grassland management in northeast China

　　Thenortheast China grasslands are considered one of the grassland ecological zon es with singificant potential for increased sustainable livestock production. De mand for meat and livestock products is increasing due to contiinued population growth and rising consumer incomes. But, land degradation is serious, grassland productivity is low, biological diversity is deteriorating, production levels an d quality of meat and livestock products are low and marketing infrastructure is weak. Research and extension support for grassland management is limited and ed ucation levels of rural residents is low. Government policies pertaining to land user rights and property transfer are not conductive to long term investment in sustainable land management practices.

　　Research in China, North America, Australia and elswehere has proven that output levels higher and more sustainable than those currently obtained are achievable . Experience in similar environments in market-oriented economies has demonstrated economic viability and environmental sustainability of good grassland management practices.

　　The SAWG expects to implement demonstrations of sustainable grassland management technologies in northeast China. These will include water harvesting, land cont rol, grazing management, testing of grassland improvement technologies and winter management of animal herds/flocks. Technologies appropriate to local natural conditions and traditions/culture will be assessed.

　　A conmpanion analysis of marketing infratructur eneeds to enabl livestock produc ers in nort China to service distant meat and livestock product markets may be undertaken.

　　(3) Grassland Development in South China

　　South China grassland development opportunities and constraints are describedein Section III and Annex A of this report. Demonstration/applied research/trainin g projects will be proposed and, hopefully, funded and implemented to assis in e valuation and testing of various techology options related to grassland manageme nt, livestock productiona nd other development opportunities.

　　5.2 International workshop

　　The SAWG will organize and International Workshop on Land Use and sustainable De velopment in Loess Plateau. The workshiop will be held in Beijing, May 17-18, 19 9. The State Council has recently approved the National Ecological Construction Project (NECP) proposed by the State Development Planning Committee. The Government of China intends' "to rehabilitate the Northwest with clean rivers and green mountains". The SAWG will examine the environmental impact of current agricultural practices and policies and propsed large projects like the NECP and make re commendations pertaining to sustainable agricultural development in the Loess Plateau. The workshop will bring significant Chinese and international expertise a nd advice to bear on economic, environmental and social issues.

　　5.3 SAWG field tour of loess plateau region, May 19-29, 1999

　　Information and advice received at the international workshop will be supplement ed by a working group field tour and subsequent work session. The SAWG will be supplemented by appropriate invited experts and local officials. The expected out put from this activity is policy and demonstration project recommendations for submission to the 1999 CCICED annual meeting.

　　5.4 General issues in sustainable agriculture

　　The SAWG will continue to address issues in agricultural sustainability as they pertain to the working groups sepecific focus in 1999, i.e., the Loess Plateau, and as they apply generally to agricultural development in China. These issues include land and water resorce management, livestock production, education and te chology transfer, marketing and agricultural systems.