中文 | CONTACT US
You are here: Home Page >> Counsellors' News >> Text

Du Ying: An Improved Pricing Mechanism for Agricultural Products is a Pressing Priority

Source: Economic Daily Date: 2016-11-23

 
"Improving the pricing mechanism for agricultural products is a pressing priority in China’s rural reform,” said Du Ying, Counsellor of the State Council, Member of the CPPCC and Vice Chairman of its Ethnic and Religious Affairs Committee, at the forth China Summit on Food Security Strategy. “If we fail to do this, the market won’t be able to play its part. Farmers’ interests won’t be protected effectively. And the foundation will be weakened for China’s food security.”

China’s rural reform started 38 years ago. Since then, there have been about five major reforms to grain purchase and sale regimes. What changes will the ongoing reform bring to China’s regulation system for major agricultural products?

Du Ying, former NDRC Vice Chairman, offered his views and suggestions on this question. For many years, Du was engaged in research on rural reform and development and related policy making.

The regulation system for agricultural products must be reformed.

According to Du, China has put in place a new regulation system for agricultural products, under which protection price was scrapped, a minimum purchasing price was adopted, four agricultural taxes were abolished and four subsidies were granted. The system supported the steady and fast growth of the Chinese economy at the time.

On the other hand, problems with the implementation of the system have built up due to a changing domestic and international environment. Since 2008, the production cost of Chinese agricultural products has risen rapidly. By 2010, three Chinese grains had exceeded the international price. By 2013, they had been more expensive than imported grains. Such a price gap has since been widening, with mounting pressure on imports.

As such, a dilemma has occurred in the operation of the regulation system. Raising government purchase price will add to the pressure on imports. If not, farmers won’t be subsidized on the production cost and will therefore lose enthusiasm in food production. With a government purchase price, food merchants will have difficulty buying grains at the market price and be less motivated to make purchases. As a result, the inventory of agricultural products grows, with increasing risk of losses and fiscal pressure.

China started research on the pricing mechanism for agricultural products. The consensus is that the state considers grains as a way to protect farmers’ income. If the government purchase price is raised too fast, the scope of purchase widens and the amount of purchase increases, it will go against the objective of policy. The current system has failed to play its protection role. It has impeded the function of the market. And it is high time to reform the regulation system.

A system of price reform for major agricultural products must be established.

In 2014, the government launched pilot programs for cotton price reform in Xinjiang and soy bean price reforms in Northeast China and Inner Mongolia. Temporary government storage price was abolished. The purchase and storage is conducted by businesses. In 2015, the temporary storage price for rapeseeds was abolished in 2015 and the corn price reform started.

This year, the corn price reform has further deepened. The government is making minimum purchase policies for rice and wheat. Such a policy system is being improved. Overall, the price reforms in Xinjiang, Northeast China and Inner Mongolia have proceeded smoothly, with notable success in cotton price reform.

Though the price reform has been deepened, Du Ying believes that there should be differentiated policies for different agricultural products. Some products can be regulated by the market. Some priority products should be regulated by the state. The price reform for major products should start.

As Du said, ensuring food security is one of the fundamental goals of agricultural product regulation. But the key is not current output, but production capacity, access to international resources and storage capacity. Basic grain supply under the precondition of staple food security is highly necessary. Therefore, there should be more tolerance for price fluctuations on the food market. As long as the fluctuation is within a reasonable range, there should not be frequent and fast interventions.

Now, corn has the most price-purchase problems in China. There is a huge corn inventory, while the processing capacity is small and the industry is performing badly. Northeast China has cut the price below one yuan per 500 grams, marking the first step in reform. Rice and wheat have similar problems. But they are staple food in China and cannot be replaced. Therefore, there must be higher self-sufficiency for rice and wheat than other products. 

 The reforms on temporary corn purchase price and minimum price for rice and wheat are most urgently needed at the moment. Market price-based purchase must be restored. And farmers’ interests must be balanced. To this end, a combination of subsidies and policies must be used. Subsidies should not be the only solution, as they could only make up for the cost. Only prices can stabilize farmers’ expectations to ensure a certain area of cultivation.

Du Ying suggested that the income protection role of rice and wheat price should be separated. The purchase and subsidy mechanisms should be improved through price reform. Producers should be subsidized to protect farmers’ interests. At the same time, market should play its part in regulating prices. Only by securing supply can the regulation system be established on a market basis and developed in a sustainable way.