Plan and Market in China's Agricultural Commerce

Understanding China's grain procurement policy from a perspective of optimization

“…If the P , Q combination is chosen appropriately, the procurement plan can be enforced enabling the government to redistribute income without compromising allocative efficiency. This result is consistent with those in Sicular (1988) and Lau et al (2000). In particular, the system redistributes income from the grain sector to the industrial sector when the procurement price is set below the equilibrium market price.…”

“…The present paper does not address the efficiency issue as the grain procurement system per se need not distort resource allocation as long as the state plan is enforced (Sicular, 1988;Lau et al, 2000). Hence we assume that the enforcement of procurement plan will achieve the same resource allocation as in the free market producing the same quantity of grain as given by the intersection of the demand and supply curves in Fig.…”

“…Sicular (1988) and Lau et al (2000) focus on its efficiency and distributional effects. Assuming legal resale of goods between the plan track and the market track, they arrive at the same conclusion that efficient resource allocation can be achieved under the dual-track system.…”

“…Following the results of Sicular (1988) and Lau et al (2000), we assume that the dualtrack procurement system does not distort resource allocation when the state plan can be enforced. We hypothesize that Chinese policymakers are rational decision makers who formulate grain policies in such a way as to maximize their political preference function subject to certain constraints.…”

China's Accession to WTO and Shifts in the Agriculture Policy

“…Tables 3 and 4 show recent estimates based on quota and negotiated procurement prices and on wholesale market prices since 1985 for selected agricultural commodities. The requirement that farmers submit a mandatory delivery quota at below market prices has represented a lump-sum tax on farmers and lump sum subsidy to the urban consumers who were able to get access to sales at below-market value (Sicular 1988). Between 1990 and 1997 the average price farmers received for compulsorily delivered grains and soybean was between one-eighth and one-third below the border price.…”