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In many of the developing (transition) countries, government is promoting the use of cooperatives as organizations that can help enhance the development of farmers and other communities. Agricultural cooperatives are believed to function as a tool for the government in promoting the economic and social development, in particular by creating employment, generating income, eradicating poverty and strengthen farmers’ (market) power within the modern value chain. As for most transitional countries, Chinese government played a primary important role in agricultural cooperatives development. The government attempted to restructure the agro-food system to a modernized and industrialized one by supporting farmer cooperatives and producer organizations. Since the first “Law of Farmer Professional Cooperatives” (FPCs) was enacted in 2007, FPCs could enter into complex contracts and the development of cooperatives entered a new era. In 2003, there were more than 100 thousand producer associations and cooperatives in China (World Bank, 2003). Shen et al (2005) estimated that 2.91 percent of the farmers and about 10 percent of villages in China were members of FPCs in 2003. In June 2010, the number of FPCs was more than 310 thousands, which provided services to about 26 million farm households (covering almost 10 percent of farm households)1 . According to the insiders, at least one third of those FPCs only exist on the “paper”, another one third does not strongly meet the “cooperatives principles”, and only last one third of FPCs are functioning properly


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