Separate agricultural subsidies from prices

"If we still deal with the current 'three rural' problems in the traditional agricultural way, there is no way out." Ke Bingsheng, member of the National Committee of the Chinese People's Political Consultative Conference and president of China Agricultural University, who has long studied agricultural economics, believes that China should give up subsidizing agriculture by means of price support. In addition to retaining subsidies for the purchase of agricultural machinery, all other subsidies should be adjusted and merged to subsidize according to land area.

All countries subsidize agriculture, and our country is no exception. Ke Bingsheng introduced that since 2003, China has established a policy system of four subsidies and price support for agricultural products. This policy system has protected farmers 'interests well in previous years, mobilized farmers' enthusiasm for production, and played an important role in ensuring China's grain production to obtain "eleven consecutive increases". However, with the passage of time, with the continuous increase of migrant workers 'income, the role of subsidies in mobilizing farmers' enthusiasm has weakened significantly; at the same time, the prices of major agricultural products in China are higher than those of imported products. "The immediate consequence is that it leads to a large number of imports, while domestic products are difficult to sell, and the national inventory has increased significantly, reaching an all-time high level." This, in turn, has led to a significant increase in state inventory subsidies, which are overwhelmed." he said.

In 2014, China began to reform the price subsidy mode again. In the soybean and cotton pilot target price system, the government no longer purchased directly, let the price follow the market, and then subsidized the difference to farmers. However, Ke Bingsheng's research found that it is impossible to try to get rid of the dilemma caused by market support acquisition through target price. The cost of state financial subsidy is huge, and the effect of solving the problem is not obvious, even counterproductive.

"Whether it is the market acquisition as the main body of the policy now, or the target price subsidy as the direction of reform, it is to change the price relationship through administrative means, making the allocation of resources unreasonable." Such a policy is in fact a reproduction of the planned economy and fails to realize the rational allocation of resources." Ke Bingsheng believes that in order to fundamentally resolve the current predicament, the key is to follow the reform requirements of the Third Plenary Session of the CPC Central Committee,"make the market play a decisive role in resource allocation","improve the price formation mechanism of agricultural products, and pay attention to giving play to the role of market price formation".

"This is bridge to bridge, road to road, let subsidies and prices separate." Ke Bingsheng specifically suggested that the subsidy for the purchase of agricultural machinery and tools should be retained, and all other subsidies should be combined to establish land area subsidies, that is, the subsidies received by each farmer household should only be linked to the area contracted for land management, but not to the products and prices planted. Such subsidy policies provide income support to farmers, do not distort markets, comply with WTO rules, and are extremely simple to operate.

Ke Bingsheng said that subsidies according to land area not only have high subsidy efficiency, but also allow market price signals to guide farmers, realize regional comparative advantages and international comparative advantages, and adjust the trade structure of agricultural products more scientifically and reasonably while reducing agricultural production costs. China is short of land area, and the reasonable agricultural product trade structure is to import land-intensive products, such as soybeans, rapeseed, cotton, etc., and produce other products with high yield per mu or high added value, such as corn, vegetables and fruits. "Under the action of market mechanism, such trade structure will automatically form." He optimistically expressed that using land subsidies to obtain existing market-distorting subsidies would better play the role of market allocation of land resources and maximize the use of limited agricultural land.