Subsidies Reduce Idle Land

Sichuan officials have announced that their pilot program to link grain subsidies to actual planting of grain has induced farmers to stop leaving land unplanted. They describe this as a transformation of the subsidy's nature from a "big rice bowl" to a production incentive.

This appears to be more propaganda designed to send a signal to local officials nationwide that they should link subsidy payments to the amount of grain planted. A year ago, there was a general pronouncement that grain subsidies should be linked to production to give farmers stronger incentives. Last month (January 2014) China's Ministry of Finance urged local officials to link grain subsidies to production, effectively ending the "decoupled" nature of the subsidy.

The latest article reports results of a pilot program to couple subsidies to grain-planting in twelve Sichuan counties announced a year ago. A graphic accompanying the article explains that the pilot program gives subsidies to farmers who actually plant grain, in contrast to the existing method (in Sichuan) that gives subsidies to every family that contracts land from the village whether they plant anything or not.

The article offers the example of a 70-year-old farmer who not only planted his own 5 mu land holding (6 mu would be an acre) but also planted grain on his brother's 5 mu after hearing about the new subsidy. In the past, his brother would have gotten a subsidy for his land whether he planted anything or not. Many villagers left to work elsewhere, collected the subsidy and left their land idle. The township's statistics indicated that only 3 percent of the cropland was left idle this year, down 10 percent from before.

Officials claim that the new subsidy method lured some villagers to come back from city jobs to farm. One man named Xu said the subsidy of 1000 yuan for his family's 7 mu was enough to induce him to quit his job in the county town and resume farming. He estimates that he nets 7000 yuan from growing rice and corn on his 7 mu of land and the subsidy boosts his earnings to 8000 yuan. The 1000-yuan subsidy for 7 mu works out to the equivalent of $140 per acre and 14 percent of the gross value of the crops.

The article also mentions the subsidies create a lot of trouble for officials and farmers. Officials have to collect information on how much each farmer plants at each of two main planting times. No mention of how they will verify the information is true. The subsidy is just for planting the crop, not for harvesting it. A farmer could throw seeds on the ground, collect the subsidy and leave to work in town.

Has anyone really thought this through? You're paying subsidies to induce people to stay in their village and grow rice instead of working elsewhere where they could earn more money (at a job that presumably is not subsidized). The rice the Sichuan farmers are producing can probably be bought 10-percent cheaper from Vietnam, plus you're paying a 14-percent subsidy to grow it. How is "food security" achieved by paying an extra 25-percent for grain just because it's grown within your country's borders?

Graphic appearing in Sichuan Daily explains how the pilot subsidy program

differs from the standard subsidy method.