June 3, 2004

China To Continue Market Reforms In Grains Sector
 
In a continuing effort to boost grains output after years of decline, Chinese Premier Wen Jiabao reiterated the importance of liberalizing the country's largely state-owned grains trading, the official Xinhua News reported late Tuesday.
 
In a meeting Tuesday with numerous provincial officials and two Vice Premiers, Wen said it is time for China to liberalize grains trade in major grain-producing areas to achieve prices that are market-driven. This and efforts to improve farmers' income by providing subsidies are some of the top priorities for the Chinese government this year, he added.
 
Earlier this year, the Chinese government said licensed grain-trading companies might purchase new crops at market prices no lower than government-set floor prices.
 
Wen said China needs to set up a unified, national, open and competitive grains market to improve its grains pricing mechanism, Xinhua reported.
 
Wen made a similar call in a cabinet meeting May 20, which confirms he favors a more market-driven grains sector, analysts said.
 
However, many market participants remain skeptical as the road toward a market-driven grains sector has yet to be mapped out.
 
A draft regulation of grain circulation management was passed by the cabinet May 20. Details of that draft are not yet available.
 
Meanwhile, the call for market reforms itself seems inadequate to improve the incomes of 800 million farmers, as most of the gains from the rise in grain prices in the past year went to the distributors' coffers. Rising prices of farm inputs, including seeds and fertilizers, meant that farmers could barely make ends meet.
 
Wen stressed the government will introduce a nation-wide system to provide subsidies directly to farmers who grow grains in leading grain-producing areas. Previously, the earmarked subsidies were often embezzled by officials or used by cash-stripped provinces and townships for other purposes.
 
In the May 20 cabinet meeting, Wen said that within five years, the government will abolish agricultural taxes levied on farmers.
 
Food security also remains a sensitive topic in a country where many who are 50 years of age or older still have memories of nation-wide famines.
 
The Chinese premier said China will further improve its capability to regulate the grains market through protecting and increasing its grain production capability. It will also improve the role of the national and provincial grain reserve systems, so as to ensure food security, Xinhua reported.
 
He urged the money-losing and ill-managed state-owned grain companies - which have monopolized China's grains purchasing and trading for over 50 years and still employ more than 1 million people - to improve their competitiveness.
 
Wen said China will establish a mechanism to ensure basic balance between grain supply and demand in the medium and long-term, adding that an early-warning system will be implemented. The details of the system are not yet available.
 
The government will also encourage a long-term and stable cooperative relationship between the country's leading grain-producing areas and consuming areas, Wen said.
 
China's production of rice, corn and wheat dropped to about 401 million tons in 2003, down 18% from the record 486 million tons produced in 1998, according to statistics from the U.S. Department of Agriculture.