Market is a crucial component of farmers’ pay

The necessity of implementing comprehensive measures to strengthen the basis of food security was underlined once more in the Government Work Report presented to the National People’s Congress on Tuesday during its annual session. However, the No. 1 Central Document for 2024 suggests looking into the creation of a horizontal interprovincial compensation system for the primary grain-producing and -marketing regions. By strengthening production capacity and offering more financial incentives, the idea seeks to increase production in the primary grain-growing regions. Additionally, by giving the major grain-producing provinces financial help, it encourages the major grain marketing regions to take a more proactive approach to guaranteeing food security. There are two reasons behind this policy.


First, China’s food security has benefited greatly from the major grain-producing regions. According to government data, the seven major grain marketing provinces contributed only 4% of the nation’s total grain production in 2023, with the 11 self-sufficient provinces making up the remaining 18%. The 13 major grain producing provinces accounted for 78% of this total. The primary grain-producing regions are more heavily burdened with financing connected to food due to their significant grain production; this raises opportunity costs associated with grain production and exacerbates financial strain. Furthermore, the primary grain producing regions’ economic development indicators are not as advanced as those of the primary grain marketing regions. Per capita GDP, per capita disposable income of farmers, and local financial revenue (particularly land revenue) are examples of metrics.


Therefore, the primary grain-producing regions are sometimes referred to as “large grain provinces, economically weak provinces, financially impoverished provinces”. Furthermore, protecting arable land in the primary grain-producing regions is a difficult undertaking that has an impact on local land finances, jeopardizes local governments’ financial interests, and undermines the purpose of land conservation initiatives. Currently, the primary grain-producing regions receive compensation for their grain output through vertical subsidies provided by the central government. Despite this, the opportunity costs associated with these subsidies are not mitigated. As a result, the primary grain-producing regions may get additional subsidies through the suggested interprovincial horizontal compensation scheme. However, the part that market mechanisms play in its conception and execution needs to be given more consideration.





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