27 May 2020 – Digital innovations are seen as one of the major drivers behind the growth of the food economy in the future. In his interview with the Leibniz Institute of Agricultural Development in Transition Economies (IAMO), Wenbin Wu – a Research Professor at the Chinese Academy of Agricultural Sciences (CAAS) – speaks of the role, benefits, and risks of digital transformation of the food value chain in China. The interview was originally published by IAMO.
New technologies play an important role in Chinese agriculture today. Which stages of food value chain do you think are the most digitized in China, and what are the effects from implementing technologies in these sectors?
Food value chain includes production, processing, transportation, and consumption, and involves many stakeholders. In terms of the current digital transformation of food value chain in China, I think the consumption link at the end of the chain has done the best, followed by the circulation and logistics link. The reason why these two links are ahead is that digital transformation is just needed and brings a lot of benefits.
Take the consumption link as an example. With the development of mobile Internet, China’s agricultural e-commerce has risen rapidly, providing many public and basic platforms. It is thus easy for farmers to directly sell their agricultural products online, avoiding many intermediate links, reducing the production costs and solving the problem of general complexity of sales of agricultural products. At the same time, the rapid popularization of mobile payments and convenient express services in China allow consumers to choose better agricultural products according to their personal preferences, to complete the purchase easily through the Internet at favorable price, and to get various agricultural products delivered home.
Moreover, in circulation, digital transformation brings many advantages. It can help to better understand the market situation based on big data, regulate the precision of agricultural product distribution, and improve operational efficiency. At the same time, it helps to monitor the quality of agricultural products and reduce the losses of agricultural products along the food chain.
China has been supporting the development of large-scale agriculture over the past years. Would you agree with the statement that digital innovations bring benefits mainly to large farms while the smaller ones experience much less positive effects from them?
Indeed, in recent years, China has been actively promoting moderate-scale operation of agriculture to improve land productivity, labor productivity and input use efficiency. But, overall, smallholder farming is still the dominant mode in China. Due to the obvious benefits of digital technology application, such as efficiency and product quality improvements, reduction of the cost of agricultural production and substitution of declining labor, larger types of farming such as family farms, enterprises and other emerging producers in China are highly motivated to implement digital technology.
At the same time, small-scale individual farmers also get benefits from the application of digital technology including access to market information and use of meteorological services in the production process. However, these benefits are less extensive than those of large-scale farmers while efficiency improvements from data technology application are still at the low level. Due to the small operation area, digital technology does not add much value. Furthermore, for many small farmers, agriculture is not the main source of income for their families, so they have little enthusiasm for using digital technology in farming.
These are exactly the challenges that China is now trying to address. We have to understand how to effectively connect small farmers with large markets, how to provide digital solutions that meet the specific needs of small farmers and how to reduce the cost of and remove barriers for use of digital technology. All this is progressing steadily and small farmers will increasingly benefit from digital transformation.
What do you think are the most important conditions for the successful digital transformation of the food value chain in China?
Digital transformation is a complex and system-changing process, which goes beyond technological innovation alone. It entails also innovations in policies, institutions, talent development, business models and other aspects that need to be considered to build an ecosystem of digital transformation, so as to enable successful digitalization of the agricultural sector. As far as the current digital transformation of agriculture in China is concerned, it is necessary to strengthen the platforms for support of digital transformation.
There are many common technologies, basic platforms and hardware and software provider environments. These infrastructures are the physical basis of digital transformation through applications and services. Furthermore, we have to address an agricultural producer as the weakest link in the digitalized food chain. On the one hand, technical innovation is needed to provide low-cost and simple solutions to meet the digital needs of smallholders. On the other hand, we need to raise the enthusiasm of smallholders to use digital technology, so that they can benefit from it.
Last but not least, we have to effectively combine the efforts of the government, industry, education and research. This is very important as we have to consider how to enable different actors to play their unique roles, especially in order to attract agriculture-related businesses to be the first to promote and participate in the digital transformation of agriculture aiming, among other things, to improve ecology and ensure sustainable development.
Can you name any risks of the digitalization of the Chinese agricultural sector?
Digital transformation is about establishing a virtual and digital agricultural industry. How to ensure information security is a key problem here. In addition, in the context of continuous accumulation of data and development of data platforms, there may be a situation that only a few service providers become absolute leaders on the market and this may cause the risk of exclusivity and unfair competition.