Is China's future co-operative?

Li Chunsheng is clearly aware of the opportunities offered by the UN International Year of Co-operatives. He talks of the chance to improve what he calls "the co-operative brand" by stressing co-operatives' values and social responsibilities. Private enterprises have invested enormously to influence young people, he says, and now is the time for co-operatives to respond: "We shall aim to transform our brand and image into attractive ones, and make co-operation a fashion among students," he maintains.

Li's views are probably worth noting. As both the vice president of the giant All-China Federation of Supply and Marketing Co-operatives (ACFSMC) and the representative from China on the board of the International Co-operative Alliance, he occupies a unique point of contact between China and the global co-operative movement. And China's co-operative sector can boast some clout.

Li's own federation, for example, is the apex body of a pyramid which ultimately represents about 22,000 primary supply and marketing co-operatives (SMCs), between them claiming 160 million members. According to one source, over three million people are employed by chinese SMCs. China also has a broadly dispersed credit union network of rural credit co-operatives, with 200 million households in membership. And to complete the picture, there are farmers' co-operatives (many very sizeable) and handicrafts co-operatives, the latter organised into the apex All-China Federation of Handicraft and Industrial Co-operatives.

Any story of the history of Chinese co-operatives falls naturally into three parts. Firstly, there was the period up to 1958, before the launch of Mao's economically catastrophic Great Leap Forward, a time which in hindsight can seem something of a golden period. Co-operatives began to develop in the late 1930s during the period of resistance to Japanese imperialism, helped by the newly established International Committee for the Promotion of Chinese Industrial Co-operatives which had been founded with help from western supporters, including US journalist Edgar Snow, author of Red Star over China. After the 1949 Revolution, co-operatives fitted well with communist objectives and the 1950 Co-operatives Law established a framework which, when combined with preferential tax and credit assistance, meant that co-ops spread quickly in rural areas. By 1957, approaching a third of the rural population were members of 19,000 supply and marketing co-operatives, which between them handled a quarter of total farm products. These SMCs were initially run with participation from the peasant-farmers and villagers who were their members.

After 1958, however, co-operatives in China were turned into state-run organisations. China's approach was not untypical of the time. Much the same process took place in many developing countries, where the idea of co-operatives as autonomous, member-led enterprises rapidly disappeared as the state took over.

The long, slow task of rebuilding a member-led co-operative sector began in China after December 1978, when the Third Plenum of the Eleventh Party Congress set China on the course of modernisation and broad-based economic development. It has clearly not always been easy. The SMCs, for example, have gone through a series of reforms, which have tried among other things to bring in member participation and modern management practices. Despite this, a Cornell university study in 2007 found that the majority of SMCs are still not effectively controlled by their farmer-members. The Cornell researchers argued for a deeper process of reform and improved governance structures.

SMCs occupy a vital role in Chinese rural life, where they both act as purchasers and distributors of agricultural produce to urban areas and suppliers of agricultural inputs such as fertiliser and machinery for farmers. However, the market reforms introduced after 1978 have brought in private sector competition, and SMC total market share has declined. Nevertheless, the All-China Federation last year turned 2.02 trillion yuan (USD 320 bn), and proudly announced that this was a 29% increase on the year before. Its strategic plan adopted last May plans among other things to make more use of information technology in distribution.

The introduction of new legislation, the Farmer Professional Co-operative Law, in 2007, helped to give a firm foundation to the numerous so-called farmers' specialised co-operatives, their specialisms ranging from water melon cultivation to banana growing. The law reflects recent efforts internationally, led by the UN's International Labour Organization, to encourage the reform of co-operative legislation and there is a strong emphasis in the Chinese law on core co-operative values. The third clause, for example, sets out five principles for farmers' co-operatives, establishing that "the key purpose is to serve members and act in the common interests of all members" and that "all members are equal and co-operatives are democratically controlled". The law also insists that farmers should play the dominant role in their co-ops.

Impetus for the new law came from, among others, the International Committee for the Promotion of Chinese Industrial Co-operatives (ICCIC), which having been effectively abolished by the state was re-formed in the early 1980s. The ICCIC – also known slightly curiously by its nickname Gung Ho – continues to have both Chinese and western input and operates as a type of non-governmental organisation. In recent years it has helped run co-operative development projects funded by, among others, Canadian and New Zealand co-operatives. The ICCIC is keen to foster genuinely democratic co-operatives, and for a time used to try to distinguish "real" co-ops from those which were co-operative in name only. Its approach now is more finessed, but it continues to try to promote co-operative enterprises which are properly accountable to their members.

The future role of co-operatives in China's economy remains to be written, but Li Chengyu, the President of ACFSMC, was keen to encourage the co-operative movement elsewhere to become better informed about developments in China when he spoke at the UN last October at the launch of the International Year of Co-operatives. He gave an upbeat assessment of the potential. "As a developing country, China does not have a co-operative sector as strong as that in developed countries, particularly in terms of economic prowess and operational expertise."

However, as China opens wider to the outside world in the modernisation drive, the co-operative movement starts to exhibit strong viability and vitality," he maintained.

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