Subsidies and distortions in China's agriculture: evidence from producer-level data

• Published in: The Australian journal of agricultural and resource economics Vol. 55; no. 1; pp. 53 - 71
• Main Authors: Huang, Jikun, Wang, Xiaobing, Zhi, Huayong, Huang, Zhurong, Rozelle, Scott
• Format: Journal Article
• Language: English
• Published: Oxford, UK Blackwell Publishing Ltd 2011; Blackwell Publ. Asia
• Subjects: 2003-2008; Agricultural economics; Agricultural investment; Agricultural policy; Agricultural price policy; Agricultural production; Agricultural subsidies; Agriculture; China; China: Industries and resources; distortions; Economic theory; Farm finance; Farms; Grain; Households; national surveys; planning; Polls & surveys; regression analysis; Rural communities; Self sufficiency; Self-sufficiency goals; Studies; Subsidies; China
• ISSN: 1364-985X; 1467-8489
• DOI: 10.1111/j.1467-8489.2010.00527.x

Concerned about national grain self-sufficiency and rural household incomes, in 2004 China announced that it was planning to reverse its longstanding policy of taxing farm households and instead began to provide them with subsidies. Over the past five years, annual announcements have trumpeted rises in subsidies. Surprisingly, despite the historic turnaround of policy and the likely implication of this subsidy policy to China's grain economy, there has been no household-level survey-based research that has sought to understand the effect of China's subsidy programme on household behaviour. Using data from a national survey of more than 1000 households, we examine in detail a number of different dimensions of the subsidy programme. According to the survey-based findings, we have shown that although agricultural subsidies per farm are low, on per unit of cultivated area basis or total amount of budget, the subsidies are high. Almost all producers are receiving them. Subsidies are mostly being given to the land contractor, not the tiller. Most importantly, the subsidies appear to be nondistorting. No matter if we look at descriptive statistics in tables, scatter plots or regression analyses, there is no evidence that grain subsidies are distorting producer decisions in terms of grain area or input use decisions.