Agriculture Reference
In-Depth Information
grain production provinces, provinces with balanced grain production and
consumption, and net grain importing provinces. Major grain production
provnces have comparatve advantage n gran producton and are thus
encouraged to ncrease gran producton. Other provnces are allowed
to mport grans from other regons and overseas to meet the local
demand.
Associated with the grain self-sufficiency and availability policies
are gran marketng and prcng polces. The Chnese government has
ntervened n gran producton and markets usng procurement quotas
and contracts and dfferent types of prces through the network of state
owned grain bureaus and stations. Before the rural reforms began in 1979,
the goals of these polces were to produce ample and cheap food for
urban residents and to export farm products, to earn hard currency for
importing advanced technology and equipment, and to develop industries
n urban areas.
Since the economic reforms began, grain marketing and pricing policies
have been significantly changed.
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Polcy has been focused on mprovement
of farmers' incomes and long term food security and self-sufficiency
(Ke 1999). The government attempts to counter price volatility through
government procurement prces and sales prces: n a year of bumper crops
the procurement price sets a floor price so that farmers are not hurt by
falling market prices; while in a year of poor harvests, the government
sells reserves to cap the soarng market prce.
However, such price stabilisation practices send the wrong signal to
farmers and make the situation even worse, as evidenced by the 'grain
surplus crss' n recent years. In a bd to ncrease gran producton and
farmers' incomes, the government significantly raised the procurement
prices in 1994 and 1996—by 40 per cent each time; as a result, grain
production kept increasing. In 1998, the total grain output reached 504.5
million tons, well above the upper range of the target set for the year 2000.
Although the open market price started falling from the end of 1997, as
the higher government procurement price is 'guaranteed', output failed to
adjust. As a result, on the one hand some farmers faced difficulties in selling
their grains, resulting in political difficulties. On the other hand, the agency
implementing the price protection policy, the state owned grain sector,
