There is a propaganda barrage on this year's "Number 1 document" in Chinese news media this week. Most of the new initiatives are continuations of trends that have been reported here, but there are a few new details.
The February 4 Peoples Daily offers a collection of readings to hammer home the importance of the document's policies, including one article, "Agricultural Subsidies Will No Longer Be Sprinkled Like Sesame Seeds and Salt" which asserts that subsidies will now be linked to actual area planted in crops and focused on major production areas and large-scale farms. It also reiterates the importance of subsidizing governments in agricultural production regions.
After China joined the WTO in 2001 officials implemented a system of subsidies that sprinkled subsidies like salt over the countryside. Anyone who had a land holding could get a 10-yuan subsidy for each mu of land he held. In most places the land-holder got the subsidy regardless of what he planted. That was a relatively easy way to distribute subsidies since almost every village had records of land-holdings that were the basis for assessing taxes on farmers. It also made the subsidy "decoupled" since it wasn't linked to actual production, which meant that it didn't count toward the cap on subsidies imposed by WTO rules.
This subsidy method provoked a lot of rumbling in the countryside. Many farmers got subsidies for "grain" land that was abandoned, turned into fish ponds or had a house built on it. The subsidies were derided as "land subsidies" rather than "grain subsidies." Farmers who rented land from others and actually planted crops got nothing. In some places farmers collected subsidies but left their land uncultivated.
The Peoples Daily article points out that the key to "keeping the rice bowl of over 1 billion people firmly in their own grasp" is to protect and mobilize farmers to plant grain, generate local [officials'] enthusiasm for grain, and give those who plant something to look forward to. In other words, the "decoupled" approach to subsidies is out the window now.
The call for increasing the "strength" of subsidies and "tilting" new increases in subsidies toward major production regions, large-scale farms, farmer cooperatives and "new-style business operators" is not new. What is new is the intent to transform the "sprinkling like sesame seeds and salt" subsidy approach. The new approach is to give subsidies based on actual, verified area planted and to give subsidies to those able and willing to plant crops.
This is how these words may be interpreted:
"actual"=based on the area planted, not a historical base.
"verified"=some official will have to verify that the area reported is true.
"willing"=subsidies will be paid to farmers who are inclined to actually grow crops.
"able"=subsidies will be steered away from elderly and infirm landholders to active farmers.
This sounds simple on paper, but it will be a monumental task to implement. There are some 240 million landholdings, each with an average of say 5-to-6 plots. That's over 1 million plots of land to keep track of and verify what's planted on each one. Provincial and local finance officials report that basing subsidies on actual planted area would be impossible to administer and verify. While Chinese government hackers are busily harvesting vast amounts of data from overseas computer servers, the government has no accurate records on what crops their own farmers are planting.
A more important aspect of farm subsidies is the subsidization of local government officials. The Peoples Daily emphasizes an important new goal of improving the financial ability of county governments in farm production areas to reach the national or provincial average. Toward that end, the government will keep implementing and improve "awards" to major grain, oilseed, and hog producing counties, an ecological compensation system, and a land protection mechanism. Peoples Daily reports the intent to set up a mechanism for supplementing local financial revenue to address fiscal shortfalls.
Traditionally, most agricultural programs and infrastructure investment in China was the financial responsibility of local governments. However, the fiscal capacity of rural governments has fallen far behind that of cities, leading to an erosion of agricultural investment and lackadaisical implementation of agricultural programs.
Finally, the Peoples Daily praises the system of minimum prices and "temporary reserve" measures that "straighten" prices. These policies are credited for engineering a steady rise in prices each year that prevents big harvests from depressing prices and impoverishing farmers. The principle is a type of "cost-plus" pricing for farmers in which a "reasonable" profit is tacked on to production costs. The temporary reserves are to be expanded and the timeliness and efficiency of market interventions is to be improved. Low-income city residents are to get subsidies to compensate them for increased food prices.
China is quickly getting entangled in a web of subsidies. North America and Europe had a hard time untangling their subsidy webs in the 1980s and 90s and China is reinventing the same entanglement.
The February 4 Peoples Daily offers a collection of readings to hammer home the importance of the document's policies, including one article, "Agricultural Subsidies Will No Longer Be Sprinkled Like Sesame Seeds and Salt" which asserts that subsidies will now be linked to actual area planted in crops and focused on major production areas and large-scale farms. It also reiterates the importance of subsidizing governments in agricultural production regions.
After China joined the WTO in 2001 officials implemented a system of subsidies that sprinkled subsidies like salt over the countryside. Anyone who had a land holding could get a 10-yuan subsidy for each mu of land he held. In most places the land-holder got the subsidy regardless of what he planted. That was a relatively easy way to distribute subsidies since almost every village had records of land-holdings that were the basis for assessing taxes on farmers. It also made the subsidy "decoupled" since it wasn't linked to actual production, which meant that it didn't count toward the cap on subsidies imposed by WTO rules.
This subsidy method provoked a lot of rumbling in the countryside. Many farmers got subsidies for "grain" land that was abandoned, turned into fish ponds or had a house built on it. The subsidies were derided as "land subsidies" rather than "grain subsidies." Farmers who rented land from others and actually planted crops got nothing. In some places farmers collected subsidies but left their land uncultivated.
The Peoples Daily article points out that the key to "keeping the rice bowl of over 1 billion people firmly in their own grasp" is to protect and mobilize farmers to plant grain, generate local [officials'] enthusiasm for grain, and give those who plant something to look forward to. In other words, the "decoupled" approach to subsidies is out the window now.
The call for increasing the "strength" of subsidies and "tilting" new increases in subsidies toward major production regions, large-scale farms, farmer cooperatives and "new-style business operators" is not new. What is new is the intent to transform the "sprinkling like sesame seeds and salt" subsidy approach. The new approach is to give subsidies based on actual, verified area planted and to give subsidies to those able and willing to plant crops.
This is how these words may be interpreted:
"actual"=based on the area planted, not a historical base.
"verified"=some official will have to verify that the area reported is true.
"willing"=subsidies will be paid to farmers who are inclined to actually grow crops.
"able"=subsidies will be steered away from elderly and infirm landholders to active farmers.
This sounds simple on paper, but it will be a monumental task to implement. There are some 240 million landholdings, each with an average of say 5-to-6 plots. That's over 1 million plots of land to keep track of and verify what's planted on each one. Provincial and local finance officials report that basing subsidies on actual planted area would be impossible to administer and verify. While Chinese government hackers are busily harvesting vast amounts of data from overseas computer servers, the government has no accurate records on what crops their own farmers are planting.
A more important aspect of farm subsidies is the subsidization of local government officials. The Peoples Daily emphasizes an important new goal of improving the financial ability of county governments in farm production areas to reach the national or provincial average. Toward that end, the government will keep implementing and improve "awards" to major grain, oilseed, and hog producing counties, an ecological compensation system, and a land protection mechanism. Peoples Daily reports the intent to set up a mechanism for supplementing local financial revenue to address fiscal shortfalls.
Traditionally, most agricultural programs and infrastructure investment in China was the financial responsibility of local governments. However, the fiscal capacity of rural governments has fallen far behind that of cities, leading to an erosion of agricultural investment and lackadaisical implementation of agricultural programs.
Finally, the Peoples Daily praises the system of minimum prices and "temporary reserve" measures that "straighten" prices. These policies are credited for engineering a steady rise in prices each year that prevents big harvests from depressing prices and impoverishing farmers. The principle is a type of "cost-plus" pricing for farmers in which a "reasonable" profit is tacked on to production costs. The temporary reserves are to be expanded and the timeliness and efficiency of market interventions is to be improved. Low-income city residents are to get subsidies to compensate them for increased food prices.
China is quickly getting entangled in a web of subsidies. North America and Europe had a hard time untangling their subsidy webs in the 1980s and 90s and China is reinventing the same entanglement.
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