A new study on agriculture insurance in China and its impact on the country's economy has revealed that agricultural insurance has a positive impact on the development of agricultural economy, with every one-unit increase in the contribution level of agricultural insurance leading to an 8.99% enhancement in the level of Chinese agricultural economy.
China’s agriculture industry is one of the largest in the world and through a massive amount of government intervention, also one of the most insured. According to an industry estimate the insurance penetration rate goes as high as 99%, depending on the crop type and province, while livestock sees about 70% to 80% penetration.
The research paper Can agricultural insurance play a protective role. Evidence from China’s agriculture published in a July issue of the scientific journal Nature found that agricultural insurance plays a critical role in promoting the agricultural economy. However, the precise influence of agricultural insurance on diverse facets of agricultural economy development remains under explored.
The study led by a team of professor Wensheng Wang and Yehong Zhong of School of Economics, Hangzhou Dianzi University, Hangzhou, China empirically analysed the effects of agricultural insurance on agricultural economy development by applying the two-way fixed effects model, the heterogeneity test model, and the mediation effect model using China’s provincial-level agricultural economic data from 2004 to 2021.
The results show that agricultural insurance can better protect and promote the agricultural economy in the eastern regions, non-major grain-producing areas, and during periods of low natural disaster impact.
The analysis reveals the mediating effects of agricultural production inputs, agricultural production and operation scale, and mechanisation in promoting agricultural economic development through agricultural insurance.
The findings of the present study are significant for improving agricultural insurance system, promoting rural revitalisation, and protecting the development of the agricultural economy.
The Chinese government has increasingly emphasised the development of agricultural insurance in recent years, through a variety of documents and policy measures to develop and standardise the agricultural insurance market. It has also used various means to disseminate knowledge about agricultural insurance products to farmers, enhancing their awareness of risk management.
The functions of agricultural insurance in “benefiting farmers, protecting farmers, and profiting farmers” are better reflected.