Subsidies and distortions in China’s agriculture: evidence from producer‐level data*

Abstract

Concerned about national grain self-sufficiency and rural household incomes, in 2004 China announced that it was planning to reverse its longstanding policy of taxing farm households and instead began to provide them with subsidies. Over the past five years, annual announcements have trumpeted rises in subsidies. Surprisingly, despite the historic turnaround of policy and the likely implication of this subsidy policy to China's grain economy, there has been no household-level survey-based research that has sought to understand the effect of China's subsidy programme on household behaviour. Using data from a national survey of more than 1000 households, we examine in detail a number of different dimensions of the subsidy programme. According to the survey-based findings, we have shown that although agricultural subsidies per farm are low, on per unit of cultivated area basis or total amount of budget, the subsidies are high. Almost all producers are receiving them. Subsidies are mostly being given to the land contractor, not the tiller. Most importantly, the subsidies appear to be nondistorting. No matter if we look at descriptive statistics in tables, scatter plots or regression analyses, there is no evidence that grain subsidies are distorting producer decisions in terms of grain area or input use decisions.

Long-term reduction of nitrogen fertilizer use through knowledge training in rice production in China

“…Another contributor to the high rate of N-fertilizer use in China has been fertilizer subsidies. However, Huang et al (2011) show that those subsidies are nondistorting, because they are not coupled with farmers' purchases of fertilizer.…”

Agricultural subsidy with capacity constraints and demand elasticity

“…Then at the same year as the cotton subsidy has been implemented, the Chinese government drafted and announced its longstanding food security policy. As the largest developing country, China attracts more and more attention for its agricultural reform (Huang et al 2010;Yu and Jensen 2010;Du et al 2011;Anderson et al 2013;Tan et al 2013). Although agricultural subsidies have distortion effects, the evidence shows that subsidies stimulate the agricultural development, too Rizov et al (2013) issued that after the decoupling reform was implemented, the subsidies have a positive impact on the farm productivity in several EU countries.…”

“…Tan et al (2013) declared that subsidies have a negative effect on the total agricultural factor productivity. However, based on the Chinese national household's survey data, Huang et al (2010) indicated that there is no evidence shown that agricultural subsidies distort the producer decisions.…”

Exploring a Novel Agricultural Subsidy Model with Sustainable Development: A Chinese Agribusiness in Liaoning Province

“…Gale et al [21] found that subsidies are spread thinly over a substantial agricultural population and thus have had only a minor impact on rural incomes. Huang et al [24] and Huang et al [23] administered a household-level survey to explore the influence of China's subsidy program on household behavior and found that although agricultural subsidies per farm are low, the subsidies per unit of cultivated area and the total budget amount are high and that all producers received subsidies. Liu [25] conducted an empirical study of a direct food subsidy policy in Shandong Province to analyze the efficiency of policy implementation in different regions.…”