Promoting the Integration of Trade and Poverty Reduction Through Processing with Supplied Materials
- poverty reduction approaches
- endogenous poverty alleviation
- vulnerable groups
- targeted poverty alleviation components
- supporting policies
Promoting the Integration of Trade and Poverty Reduction Through Processing with Supplied Materials
Title : Promoting the Integration of Trade and Poverty Reduction Through Processing with Supplied Materials
Commencement Date : Thu Jan 01 2004--Sat May 20 2017
Implementing Agencies : Lishui government, Suichang County Government
Support Organizations : Lishui City Women’s Federation
Actuator : government officials
Members of The : Lishui City Women’s Federation
CASE PROVIDER :
Sources of Funds :
Catalogue and Index :
Abstract Summary :
Over the three decades since the reform and opening up, China's economic take-off has changed the fate of many Chinese people, but China is still a developing county, so poverty reduction will be a long-term and difficult task. Under the new economic situation, many new models for poverty reduction are emerging and achieved good results. On the whole, the poverty alleviation work shows the trend of increasing efforts, increasing poverty standards and growing effects. In this context, based on the actual situation of local area, Zhejiang Province strived to implement the central government’s spirit of "increasing efforts, raising the level and enhancing the standards", and carried out a series of anti-poverty work based on local situation. The processing with supplied materials in Lishui City is one of the highlights.
Since 2004, Lishui City has witnessed rapid economic development and GDP growth – Its GDP increased from 21.82 billion yuan in 2004 to 98.31 billion yuan in 2013, with an average annual growth of 15%.
In 2005, Lishui city government organized the field survey on poor villages and households to make clear the poverty situation of the city and discovered that 75095 rural households and 181392 people of the city lived below the poverty line of 1500 yuan, accounting for 8.7% of the total agricultural population, and 31907 households and 62864 people lived below the poverty line of 1000 yuan. Seen from the survey results, the low-income rural residents of Lishui City mainly fall into four groups. First, the farmers living in rural areas with harsh production and living conditions. Due to the long distance, inconvenient traffic and information occlusion, 85% of the source of income of the majority of local households came from primary industry, and only 23% of the poor labors went out to work in non-local areas. Second, the farmers of low quality without the ability to work (including those with disabilities). The families with no labor force or with members who lost the ability to work accounted for 51.1% of the total poor households, illiterate and semi-illiterate population accounted for 37.4% and farmers with primary school education level accounted for 38.8%. Third, the farmers returning to poverty due to illness. This phenomenon is prominent in the regions prone to geological disasters and the large and middle-sized reservoir areas. 13800 households fell into poverty due to illness, accounting for 18.3% of the total, and those falling into poverty due to illness or disabilities accounted for 29.73%. Fourth, the farmers who can hardly shake off poverty due to development fund shortage. Such farmers accounted for 11.8% of the total poor in Lishui City. Without development funds, even if the farmers have good opportunities for getting rich, they cannot seize the opportunities.
1 Uneven development of brokers; the overall level needs to be improved
The increasingly severe market competition is a great challenge for the brokers’ processing business and self-development ability. Although there are nearly 1000 brokers in Lishui City, they usually have a small business scale and weak ability to undertake business. According to statistics, only 3% of the brokers have an annual processing capacity of more than one million yuan and most of them have a weak economic foundation, inadequate funds and weak ability to resist risks. Most of the brokers have weak market consciousness and simple cooperation ways with the enterprises or merchants, with non-standard operations. The brokers seldom cooperate with one another and some of them strive to force down the prices for cutthroat competition, so it is difficult to form joint force for competition.
2 Uncompetitive products without unique characteristics
Through guidance and development, Lishui City has initially formed its processing characteristics – processing of pearl embroidery in Jinyun, Qingyuan and Longquan, crochet hook in Jinyuan and bead processing in Suichang and Songyang, and has strong market competitiveness in Yiwu, etc. However, the products for processing are of many types, the sewing, knitting and welding technologies are not mature, the processing zones are not large and do not have local characteristics or competition advantages, directly reducing their opportunity to cooperate with customers.
3 Incomplete infrastructure; difficulty in business financing
Lishui is in the southwest mountain area of Zhejiang Province. Most of the counties (cities, districts) are far away from Yiwu, Ningbo, Hangzhou and other regions with many products for processing, and the transportation expenses of underdeveloped towns are relatively high. It is estimated that the average transport cost of processing businesses of Lishui City accounts for about 5% of the processing fee income, doubled the figure of Jinhua, Quzhou, etc. Especially for the brokers in the towns and villages, goods consignment is inconvenient, directly restricting the development of processing industry in remote rural areas.
Centralized processing requires simple workshops and scattered processing also needs purchase points and warehouses. Currently, most of the workshops in Lishui City are small family households or the houses rented from neighbors, affecting the environment of the workers and restricting the expansion and upgrading of processing business.
Processing industry requires a relatively large cash flow but has few fixed assets or any collaterals needed by the bank, mainly relying on private lending and underground banks for financing, restricting its healthy development. In addition, it is difficult for processing enterprises to get bank loans, resulting in their difficulties in cash flow.
4 Policy incentives imbalance is still a serious problem
The counties (cities, districts), towns and the relevant departments attach different importance to the processing industry and provide different degrees of support for the work. In particular, some leaders do not attach great importance to processing business and have not implemented any effective support policies and measures. In addition, Lishui is an underdeveloped region and can hardly afford the rewards and financial aid for processing brokers and the high transportation costs, reducing the market competitiveness of brokers. Meanwhile, processing training needs to be strengthened, processing workers are not so skilled and have low income, and it is difficult to get bank loans, resulting in difficulty in capital turnover.
1 Main practices of Lishui City government
By summarizing the overall development situation of processing with supplied materials in the city, Lishui City government has got a good understanding of the processing mode. How were the pro-poor policies successfully implemented with government support? Lishui City government departments mainly did the following work:
Improve the environment, adhering policy first
At inception, processing business developed rapidly in Lishui City. Compared to the coastal regions, Lishui has cheaper labor force to sharpen the competitiveness of processing industry of local area. With the rising labor cost and the severe market competition, coupled with the 2008-2009 international financial crisis, facing the complex external environment, Lishui City continued to issue preferential policies and provide greater support to create a favorable external environment for the development of processing industry.
Specifically, the practices include three aspects. First, guarantee for the work. Continue to attach importance to processing with supplied materials. On the basis of further implementation of the “Opinions on the Development of Processing with Supplied Materials in Lishui City”, the city government kept a close eye on the development situation of processing industry, the city party secretary and mayor listened to the work reports many times, visited the processing sites and gave a lot of guidance on the work, providing a solid foundation for the development of processing industry. Second, policy support. The development of processing with supplied materials has been regarded as one of the top ten events of the city. The city actively set up the assessment system and further cultivated professional processing villages and civilized village industries, etc. Third, further financial guarantee. In recent years, processing development funds have been covered by the special annual budgets of the government. In 2009, for example, the city and county governments respectively issued 1.25 million yuan and 2.35 million yuan of special funds for processing, and applied for 5 million yuan of special funds for replacing subsidy with rewards for processing business, contributing to the long-term development of processing with supplied materials.
Fan out from point to area, adhering to key problem tackling
Processing businesses mainly develop in township and administrative villages, widespread with different levels of development. Based on the actual situation, thus, in the process of development of processing industry, Lishui City government always adheres to the guideline of “fanning out from point to area and highlighting key points”.
Generally speaking, the key work mainly covers two aspects. First, from the perspective of regions, it attached importance to the development of the villages concentrated with low-income rural households, resettlement areas, post-disaster reconstruction areas and mountain areas for poverty reduction. It first provided strong policy support for these areas, then provided personnel and financial support and, with these areas as the center, constantly improved their influence, gradually creating the pattern of fanning out from point to area. In 2010, for example, a total of 950 villages concentrated with low-income households became the processing centers, and the total processing fee earned by the villages amounted to 230 million yuan. Secondly, from the perspective of objects, the processing industry in Lishui City has been expanded towards low-income rural households, migrants in reservoir areas, people with disabilities and women, and created the new mode of scattered processing by families on the basis of factory’s centralized processing, creating good conditions for the participation of various groups. After several years of strong support, processing industry achieved significant results in developing key targets. In 2010, for example, the processing industry absorbed 21,000 low-income rural households, 11,000 migrants of reservoir areas and 12,000 farmers relocated from mountain areas, making a great contribution to farmers’ income growth, the transfer of surplus labors and social stability and harmony. Strong support for the key targets had, in a certain period of time, also a significant radiation effect, gradually showing an obvious scale effect.
Develop the market, adhering to transformation and upgrading
Primary processing industry: With raw materials provided by the market, local area is usually only responsible for processing to earn the processing fee. It is a simple business mode and has rather weak ability to resist market risks. Thus, market development for industry upgrading is of great practical significance to the long-term development of processing industry. Through years of exploration, Lishui City gradually began to attach importance to the position and functions of the market and got a series of its own market development methods and strategies.
Specifically, the work covers two aspects. First, continue to tap its potential, gradually achieve upgrading based on capital accumulation and create featured brands. Its practices include "convening a forum of key customers, visiting merchants for good communication, making brochures and feature programs", etc. Relying on the Internet, at the same time, it strengthened publicity to further enhance its reputation and finally created the brand of Lishui Women Processing Base. Second, continue to promote market diversification to provide a broader space for product sales, strengthen key market development in Wenzhou and Taizhou on the basis of consolidating Yiwu Market. Specifically, in the form of “market consultation” and “project promotion conference”, it strived to develop multi-market for processing industry.
Build a platform, adhering to development through joint force
In recent years, in addition to policy support, environment improvement and market development, Lishui City has been striving to promote the development of processing industry, continued to give play to the role of the long-term mechanism, made overall deployments to promote the scientific development and adhered to the guideline of sustainable development. In conclusion, relying on the resources and giving full play to the strengths of various departments, Lishui mobilized all circles of society for the processing work, and established the work mechanism characterized by “women’s federation leadership and department cooperation” to provide a full range of services for brokers and processors. The development of processing industry was supported by many departments. First, the cadres of the City Women’s Federation continued to build work teams in rural areas and vigorously developed the market to steadily promote the effective implementation of processing work in grassroots areas. Second, the City Finance Bureau promptly developed the special fund and optimized fund transfer program to provide financial guarantee for the development of processing industry. Third, the City Poverty Alleviation Office and Immigration Office actively promoted the work in the immigrants’ resettlement areas, post-disaster resettlement zones and the rural areas concentrated with low-income households, focusing on the development in key areas. Finally, the Municipal Environmental Protection Bureau, the City Economic and Trade Commission, Bureau of Foreign Trade and Credit Union also provided strong support for the development of processing industry. In short, Lishui City actively mobilized all sectors to play their respective roles and work with each other to build platform for development and create new economic growth points for Lishui City.
2 Main practices of Suichang County
On the whole, Suichang County adopted the following measures to promote the development of processing industry.
Supported by a strong organization, build a three-dimensional work system
A strong organization is the basic guarantee for unity of thinking and policy implementation. Suichang County attaches great importance to organization building in processing development, promoting the social stability and development of the underdeveloped areas. When it began to develop processing industry, Suichang County focused on creating the work pattern for internal and external communication and the linkage and coordination between departments, firmly implemented the guidelines of LGOP and the provincial poverty alleviation office, constantly strengthened organization building, and gradually established the three-dimensional work system under the leadership of the county government, with overall responsibility undertaken by the county women’s federation and with support from the county agricultural office, poverty alleviation office and township governments.
Suichang County always attaches importance in organization building in the whole process of promoting the development of processing industry. Taking the personnel adjustment in 2010 as an example, we can see from the “Notice on the Adjustment of Suichang County Leading Group for the Development of Processing Industry” the basic structure of the Processing Work Leading Group: With Subprefect as the head to take charge of the work, with relevant leaders of the county government office and the county women’s federation as the deputy heads, who are responsible for making overall deployments, with members from the county party committee’s propaganda department, economic and trade bureau, financial bureau and industrial and commercial bureau, as well as the township governments, the leading group gave full play to the role of its scientific organizational structure.
Guaranteed by a strict system, establish the incentive system characterized by the combination of rewards and punishments
In addition to a sound organizational structure, Suichang County government has set up a series of assessment systems in practice to provide institutional guarantee for the quality of processing work, and its incentive effect played an invaluable role in promoting the development of processing industry.
Specific practices cover the following aspects:
First, award the collectives and individuals with outstanding performance in processing work. Set up subsidy for professional processing villages and give subsidy of 30,000 yuan to each of the villages that newly grew into professional processing villages. Specific measures were implemented to encourage brokers. According to the "Notice on the Issuance of Policies to Promote the Development of Agricultural Industrialization in Suichang County" issued in 2009, the brokers who issue more than 200,000 yuan of annual processing fee and have more than 100 processing workers shall be awarded 2000 yuan; the brokers who issue more than 500,000 yuan of annual processing fee and have more than 300 processing workers shall be awarded 5,000 yuan; and the brokers who issue more than one million yuan of annual processing fee and have more than 500 processing workers shall be awarded 10,000 yuan. The special incentive policy of “one strategy for one event” is implemented for the project with processing fee of more than two million yuan. For the brokers engaged in machinery processing who issue processing fee of more than 500,000 yuan per year and have more than 40 processing workers, the government issues reward of 2000 yuan; those who issue processing fee of more than one million yuan per year and have more than 80 processing workers are awarded 5000 yuan; those who issue processing fee of more than 1.5 million yuan per year and have more than 120 processing workers are awarded 10,000 yuan; and those who issue processing fee of more than 3 million yuan per year also enjoy the policy of “one strategy for one event”.
Second, provide the appropriate interest payments on loans and issue preferential policies on freight subsidies and admission subsidies. Provide interest payment of 5‰ monthly for loans of 20,000 – 100,000 yuan of the brokers and processing enterprises with an annual processing fee of more than 200,000 yuan; provide 1% of additional processing fee as freight subsidies of processing enterprises; issue 3000 yuan of one-time subsidy for each processing enterprise supporting industrial agglomeration and relocated to the county industrial park or township industrial zones; issue 5000 yuan of one-time subsidy for each relocated processing enterprise with processing fee of more than 2 million yuan; and award the Top Three professional villages in the county with the best processing indexes every year 10,000 yuan, 5000 yuan and 3000 yuan respectively.
Third, establish the self-inspection system for processing business. It distributed the "self-inspection form of processing enterprises" to promote the development of processing industry and issued the “Assessment Indicators for Processing Work of Suichang County in 2011”. The township governments all developed relevant assessment systems and standards based on the actual situation of local area, represented by Longyang Town’s “Notice on the Issuance of Incentive Measures for Processing Work of Longyang Town in 2011” and Jiaotan Town’s “Notice on the Issuance of Processing Work Assessment Indicators in 2011”, etc.
Encouraged by these systems, the processing industry of Suichang County developed rapidly.
With a solid foundation of training, build a strong work team that can shoulder major responsibilities
In the processing work, brokers play an important role. They have their own processing plants and are responsible for contacting non-local manufacturers and the government and organizing villagers’ processing work. In order to promote the development of processing business, Suichang County organized the broke training courses, aiming at cultivating a high-quality broker team with strong organization ability.
In view of the above requirements, Suichang County Leading Group for Processing Business issued the “Notice on Convening Processing Brokers Training Courses in Suichang” and held a five-day professional training on the new processing brokers, covering basic policy and theoretical knowledge training, field visit to the processing bases and non-local field survey, significantly improving the basic quality of the new brokers and laying a solid foundation for the construction of a strong broker team.
3 Practices of Jianming Garment Factory and Women’s Clothing Factory
Obtain orders of processing with supplied materials from the market
Jianming Garment Factory and Women’s Clothing Factory’s production organization process is a typical processing mode. Specifically, brokers obtain orders from the market and then organize workers to produce in the processing centers. The orders usually come from Jinhua, Yiwu and Wenzhou of Zhejiang Province. To further reduce the risks, the brokers mainly get the orders from relatives and friends or from the old customers with a long-term cooperative relationship with them. Thus, like other processing businesses, upon completion of the order, probably it does not require the partner to pick up the way ahead, but mostly first delivery and then get fees, Jianming Garment Factory and Women’s Clothing Factory usually do not require the clients to collect the goods in advance, but take the processing fee after goods delivery.
Get workforce in nearby villages for centralized production
The workers of Jianming Garment Factory and Women’s Clothing Factor mainly come from nearby villages (mainly women) and get paid based on how much work they’ve done. In the assembly line work, different procedures have various degrees of difficulty and different length of time consuming. Usually the price of each procedure is determined by the team head based on the length of time consuming. The workers get paid based on the procedure types and number of products, mostly 150 yuan a day. The wages are issued once a month rather than soon after order completion, reducing the pressure of cash flow on the businesses to some extent.
Establish flexible staff management mechanism
The workers are, on the one hand, employed by the factory and can accompany their children after work (some even are allowed to take their children to the workplace). On the other hand, they also engage in agricultural production in busy season. In picking season, for example, the villagers would ask for a leave to pick tea-leaves, which is, to some extent, not in line with the strict schedule requirements of the factory. As clothing enterprises implement assembly line work system, requiring close cooperation of the workers, the garment factory has a strict schedule for the staff – the workers must starts work at 7:30 every day and are allowed to rest for one hour at noon and one hour of dinner break in the evening. When needed, they are required to work overtime. Many workers, however, cannot strictly comply with the schedule because they have to take care of their children. "We can’t go to work on time when something takes place to our families. We have no other choice and don’t think our wages should be deducted for it." As the workers were introduced by relatives or friends, the enterprises would not punish these people. "We are all locals and we cannot deduct their wages". By setting up an attendance bonus of 200 yuan, the factory encourages the workers to work on time. It should be said that the processing enterprises represented by Jianming Garment Factory has established a flexible people-oriented management system, attracting the local labors to the largest extent. Conversely, if it implements a very strict hierarchical management method like modern businesses, it will fail to attract local labors. Of course, this will also bring about some problems. In busy season, for example, many workers will not come to work and the factories will then support one another. The enterprises with fewer orders will support those with a large number of orders to help them deliver goods on time.
Established the network of acquaintances to form a fixed labor relation between businesses and workers
The workers are all farmers from nearby villages and know about each other very well, so there is actually a relatively stable relationship between the enterprises and the workers. The enterprises usually do not dismiss the workers or sign labor contracts with the workers as contracts are not binding for the workers. Some workers of Jianming Garment Factory and Women’s Clothing Factory will sometimes turn to other enterprises from which they’ll be paid more. On the whole, however, most workers will not suddenly leave the enterprises and will usually support the businesses to complete the order as scheduled.