June 21, 2006

 

China needs to provide more subsidies to grain growers

 

 

China's central government should again raise direct subsidies to grain growers to help in purchasing production equipment, said a government agriculture official on Tuesday (Jun 20).

 

Fan Xiaojian, Vice Minister of Agriculture, said the government should extend subsidies on high-quality seeds to more farmers and increase subsidies on farm machinery.

 

The government should convert indirect subsidies into direct subsidies to ensure farmers enjoyed immediate benefits, said Fan at the Third China-Europe Senior Forum on Government Management.

 

In the past, billions were offered in grain subsidies each year to the state-owned grain trading firms so they could purchase grain from farmers at state-set prices.

 

However, indirect subsidies brought little benefit to farmers due to the inefficiency and business costs of grain firms, Fan noted. The government started offering direct subsidies in 2004, after output fell for four consecutive years.

 

Growers were paid a total of RMB11.6 billion (US$1.45 billion) in direct subsidies in 2004 and the amount rose to RMB17.8 billion (US$2.23 billion) last year.

 

In April, China pledged an extra RMB12.5 billion (US$1.6 billion) in direct subsidies, increasing this year's total to RMB26.7 billion (US$3.3 billion).

 

The rise was meant to buttress farmers from higher prices for diesel oil, fertiliser and other production materials, but analysts said the sum was far from adequate.

 

Though China has seen much development in rural areas in recent years, there is still a yawning gap between the cities and its countryside, Fan said.

 

Meanwhile, Chinese farmers have to increase produce higher quality products to meet international standards, he said.

 

Policies on supporting agriculture and benefiting farmers should be the primary focus in the coming years, he said.