The Historical Evolution and Transformation Logic of the Agricultural Machinery Operation Service Market

The agricultural machinery operation service market, exemplified by cross-regional operations, has enabled China—particularly its plains regions—to achieve the widespread adoption of large agricultural machinery despite the predominance of small-scale farming. Since 2014, however, the service market has exhibited a shift from cross-regional operations toward localization and internalization. Drawing on macro-level data and survey data from the North China Plain, this study reviews the development of the agricultural machinery operation service market and examines the logic of its transformation from both demand and supply perspectives. The findings show that transaction costs associated with outsourcing, subsidies for agricultural machinery purchases, and competition in the agricultural machinery service market induce simultaneous adjustments in the demand and supply structures of agricultural machinery operation services, constituting the underlying logic driving market transformation. On the one hand, smallholders reduce outsourcing transaction costs by purchasing services from local acquaintances, whereas farmers who rent in land tend to purchase machinery for self-operation and move toward internalization under the combined push and pull of transaction costs and machinery purchase subsidies, while also providing localized services to others as a sideline. Consequently, the demand structure exhibits a shift toward localization and internalization. On the other hand, competition in the service market leads to a contraction of service radii and declines in serviced acreage and earnings. Under rigid constraints arising from the asset specificity of human capital and physical assets, agricultural machinery service providers shift from exclusively supplying services to renting land for self-operation and thereby move toward internalization, while also providing localized services to others as a sideline. Consequently, the supply structure likewise exhibits a shift toward localization and internalization. The resulting segmentation of the service market, contraction of the radius of specialization, and decline in market capacity, in turn, constrain the expansion of specialization. At the current stage, the government should focus on optimizing agricultural machinery purchase subsidies, reducing outsourcing transaction costs, and supporting the transformation of service providers to promote the integrated development of land-scale operations and service-scale operations.