January 5, 2005

China Sichuan Province Scraps Tax On Grain Output

The local government of western China's Sichuan province abolished the tax on grain production as of Jan. 1, in a measure to further boost grain output and farmers' incomes, the official Xinhua News Agency reported Monday.

In 2004, grain acreage in the province rose 3% to 6.27 million hectares and grain output 4.5% to 33.25 million metric tons, spurred by government measures such as agriculture tax cuts and direct subsidies for grain planting, according to earlier media reports.

The move follows similar decisions recently by several other provinces, including Henan, Anhui, Guizhou, Jiangsu, Shanxi, Guangdong, Zhejiang, Ningxia and Inner Mongolia.

The local governments of Jilin, Heilongjiang, Beijing, Shanghai and Tianjin abolished the grain tax in 2004.

China has taken unprecedented steps in the past year to support the agriculture sector due to concerns over food supplyand widening income gaps between city workers and farmers.

The country's grain production has been insufficient to meet its needs for the past fouryears, and farmers' incomes have been growing slowly or even stagnating for many years despite China's industrial boom.

Premier Wen Jiabao vowed last March to scrap the tax on grain production within five years.

Economists and analysts say the move could be at an advanced stage, as tax revenue from the agriculture sector comprises only a small portion of government income.