China to Intensify Farm Subsidies in Grain Self-Sufficiency Drive

13 February 2013

China will "intensify" farm subsidy spending in the country's ongoing bid to promote self-sufficiency in grains, Beijing has announced in its flagship annual policy statement, known simply as ‘policy document no. 1'.

Farm support will figure amongst an arsenal of measures that the government will use to modernise farming and tackle a growing divide between urban and rural incomes, the document says.

The plans, which were released just under two weeks ago by the Central Committee of the Communist Party of China and the State Council, highlight rural issues for the tenth year running - a sign that the government wants to be seen as taking firm action on problems such as rural poverty and food insecurity.

The document, timed to coincide with the start of Chinese New Year celebrations last weekend, spells out how the government will address the "three nongs," or three rural issues - agriculture, farmers, and the countryside.

"Improved" agricultural support system

"A whole section (out of a total of seven) is devoted to improving and strengthening the agricultural support system," said Wusheng Yu, associate professor at the Institute of Food and Resource Economics of the University of Copenhagen in Denmark.

However, while agricultural support and protection figure prominently in the government's plans, they are not the only tools to do so.

"This time the document covers a wider scope of issues," said Andrzej Kwiecinski, senior agriculture policy analyst at the Organisation for Economic Co-operation and Development (OECD).

The proposals cover issues ranging from grain supply, migrant workers' rights, reforms to rural land expropriation, rural land registration, and the consolidation of small farms into larger ones, Kwiecinski noted in comments e-mailed to Bridges.

Last year's policy statement focused more narrowly on investment in agricultural science and technology, and the previous one on water conservation in farming. (See Bridges Weekly, 8 February 2012)

Farm support

The government will continue to raise minimum support prices for wheat and rice, according to the policy statement - a category of farm support that is classified as trade-distorting at the WTO. Beijing will also initiate temporary purchasing and storage of corn, soybeans, canola, cotton, and sugar, the document says.

Chinese farm spending has expanded dramatically in recent years - although it remains very low on a per capita basis, and is mostly reported as causing not more than minimal trade distortion. (See Bridges Weekly, 8 February 2012)

In particular, Beijing claims that payments linked to specific products are well below 8.5 percent of the value of production - the ceiling that China committed to respecting when it joined the global trade body in 2001.

Direct payments to grain farmers will continue, the new document says - although it does not give specific figures for these or other spending areas. Beijing also reports these subsidies as causing not more than minimal trade distortion.

Broad directions

"As usual, Document No. 1 gives broad directions and it remains to be seen how it is implemented," Kwiecinski said.

With China's latest domestic support notification to the WTO covering farm subsidy spending up to 2008, it still remains unclear how policy changes in the last few years have actually taken effect.

However, the new document does not appear to amount to a revolutionary new direction for Chinese farm policy, experts told Bridges.

"My overall impression is that the Chinese government will continue to apply active border policy measures where possible per its WTO commitments, and to continue the use of domestic subsidies for purposes of maintaining food security and improving peasants' income," explained Yu.

ICTSD reporting.

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