How rural economies can grow without sacrificing agricultural sustainability

Rural industrial integration, linking agriculture with secondary and tertiary industries, has become a central plank of China’s rural revitalization strategy. The approach encourages processing, logistics, tourism, and service sectors to develop alongside farming, theoretically creating value chains that increase rural incomes while modernizing production. But the environmental implications have been less clear, with concerns that industrial expansion might undermine ecological goals.

A new large-scale analysis of China’s rural economy has found that rural industrial integration is not only compatible with industrial expansion but also significantly improves agricultural eco-efficiency. The research provides rare empirical evidence that coordinated policy can simultaneously advance rural industrialization and agricultural sustainability.

Titled "Can Agricultural Sustainable Development and Rural Industrialization Be Achieved Simultaneously? The Practice of Rural Industrial Integration from China," draws on detailed data from 285 prefecture-level cities between 2008 and 2022. Using a combination of econometric models, spatial analysis, and mediation tests, the authors evaluate whether China’s push for rural industrial integration (RII) has translated into measurable environmental and efficiency gains in agriculture.

Why rural industrial integration matters for agricultural sustainability

Rural industrial integration, linking agriculture with secondary and tertiary industries, has become a central plank of China’s rural revitalization strategy. The approach encourages processing, logistics, tourism, and service sectors to develop alongside farming, theoretically creating value chains that increase rural incomes while modernizing production. But the environmental implications have been less clear, with concerns that industrial expansion might undermine ecological goals.

The study addresses this uncertainty by focusing on agricultural eco-efficiency (AEE), a measure that accounts for both desirable agricultural output and undesirable outputs such as carbon emissions. Using a super-efficiency slack-based measure (SBM) model, the authors calculate AEE for each city, factoring in inputs like labor, machinery power, irrigation, fertilizer, and pesticides, alongside the environmental cost of farming.

Results show that higher levels of rural industrial integration are strongly associated with improvements in AEE. The positive relationship remains statistically significant even after controlling for potential endogeneity and running multiple robustness checks. According to the authors, this suggests that well-designed integration policies can shift rural economies toward greener growth rather than locking them into resource-intensive development.

How rural industrial integration improves efficiency and cuts emissions

The research goes beyond measuring the link between RII and AEE by uncovering the mechanisms that drive this improvement. Three main channels emerge: rural labor transfer, agricultural technological innovation, and reduced agricultural carbon emissions.

First, integration helps move surplus rural labor into non-farm sectors, consolidating land and enabling more efficient agricultural production. This structural change not only boosts productivity but also frees up resources for higher-value activities. Second, industrial integration fosters agricultural innovation, as closer ties between farming and industry promote the diffusion of technology, mechanization, and modern management practices. Third, the process contributes to lowering carbon emissions by encouraging cleaner production methods, better resource use, and reduced reliance on environmentally harmful inputs.

The authors’ mediation analysis confirms that each of these channels significantly contributes to higher agricultural eco-efficiency. This finding supports the idea that integration is not a zero-sum trade-off between growth and sustainability, but a mutually reinforcing process when guided by the right policy frameworks.

Regional disparities and the “Siphon Effect” challenge

Despite the overall positive findings, the study also reveals complex regional dynamics. Spatial econometric models show that rural industrial integration has significant spatial spillover effects, but not always in ways that benefit neighboring regions. While cities with strong integration programs enjoy direct gains in eco-efficiency, these improvements can be accompanied by a negative spillover, described by the authors as a “siphon effect.”

This occurs when high-performing regions attract talent, capital, and resources away from nearby areas, inadvertently slowing agricultural eco-efficiency improvements in those locations. The impact varies by region: in the eastern provinces, spillover effects tend to be negative; in central and western regions, the patterns are more mixed. The authors argue that addressing these imbalances will require cross-regional coordination and targeted support for areas at risk of being left behind.

The analysis also distinguishes between different types of integration. Primary–tertiary integration, linking agriculture with services such as tourism and logistics, appears to have a more pronounced effect on eco-efficiency than primary–secondary integration with manufacturing. This insight could help policymakers prioritize investments and tailor strategies to local conditions.

The research provides a strong case for integrating environmental objectives into rural industrial policy design. The authors note that China’s 2016 pilot program for rural industrial integration not only boosted eco-efficiency in participating counties but also validated the policy’s scalability. However, they caution that successful implementation depends on balancing industrial growth with environmental safeguards, addressing spatial disparities, and ensuring that innovation and resource efficiency remain central to rural development strategies.