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Reform of China's Grain Price Policy: Approaches and Policy Options (No 175, 2015)


By Cheng Guoqiang, Department of International Cooperation of DRC

Research Report No 175, 2015 (Total 4860)


Increasingly serious problems such as large stocks of grain and soaring import volume have underlined the urgency of reform of grain price policy regarding temporary grain reserves. At present, the strong demand for adjustment of China's grain price policy has brought about relevant conditions and opportunities for reform. Bringing down the price of temporary grain reserves this year is merely a transitional adjustment. Although it is conducive to protecting the interests of grain farmers, such a move could not help relieve the current problem of large stocks of corn as it is a far cry from requirement. On the other hand, if no supporting measures are taken in time, the stocks of corn this year would continue to increase and result in more grave issues. Related policy options to address the said issues are as follows: take targeted and comprehensive measures to separate grain pricing from subsidy and make innovative regulation; replace grain price support with subsidizing grain income; make innovations on grain regulation system; adjust grain price in two to three years to establish a market-based grain pricing mechanism as well as a protection mechanism for farmers' interests through direct subsidy. In the meantime, stocks of temporary grain reserves should be coped with by making prompt decisions, including classified grain treatment and progressive reduction, plus selling grain at reduced prices.

Key words: reform of grain price policy, subsidy for grain production, grain price support, direct subsidy, minimum purchasing prices