From taxing to subsidizing farmers in China post-1978

Abstract

Purpose The purpose of this paper is to document the pace and extent to which China’s policy regime has transitioned over the past four decades from explicitly and implicitly taxing to subsidizing its farmers relative to its producers of other tradable goods; to present projections of the world economy to 2030 that suggest China will continue to become more food import-dependent under current policies and productivity growth rates; and to explore alternative policy instruments for remaining food secure and ensuring that farmers are not losers from economic growth. Design/methodology/approach The data used to estimate the extent of distortions to producer incentives come from freely available World Bank and OECD sources that allow direct comparisons of China’s policy developments with those of more- and less-advanced economies. Findings The estimates of nominal and relative rates of assistance to farmers reveal that China has made the transition from negative to positive assistance to farmers far faster than an average developing country, and almost as fast as its Northeast Asian neighbors did in earlier decades at similar levels of real per capita incomes. That helped to ensure China remained food self-sufficient during the first two decades of reform; but self-sufficiency is now declining and is projected to continue to do so over the next decade under current policies. Research limitations/implications Preventing food self-sufficiency from declining further by increasing agricultural protection would be very costly, and is now unnecessary, thanks to the information and communication technology revolution that enables the government to directly support the well-being of poor farm households with conditional cash transfers. Originality/value This review of indicators of distortions to agricultural incentives in China is based on estimates of nominal and relative rates of assistance and consumer tax equivalents that are in the public domain. Its originality is in presenting the estimates for China in a comparative perspective, showing how they have evolved over time and as real per capita incomes have grown, and relating that to developments in China’s self-sufficiency in agricultural and food products. The paper also points to more-efficient ways of achieving societal objectives than using policy instruments that distort producer and consumer prices.

Price bubbles in agricultural commodity markets and contributing factors: evidence for corn and soybeans in China

“…China has a huge, rigid and lasting demand for agricultural commodities not only from its domestic market but also from global markets. Forecasts of the world economy to 2030 suggest China would continue to become more food import-dependent (Anderson, 2018). Its rising demand for food consumption has profound effects on the world food balance and trade patterns (Coxhead and Jayasuriya, 2010).…”

Exploring the drivers of agricultural wages growth in China: A comprehensive framework utilizing input-output and structural decomposition methods

“…Another contributing factor is that China significantly reduced tariffs on agricultural products (except for rice, wheat, and corn) after its accession to the WTO in 2001[ 11 ]. At the same time, domestic prices for major Chinese agricultural products tend to be higher than international prices, thereby stimulating more agricultural imports [ 11 , 13 ].…”

“…The existing literature suggests that agricultural support policies may introduce distortions in labor incentives and agricultural markets [ 13 , 42 , 72 ]. However, an examination of China’s agricultural support policies reveals that these policies, including tax and subsidy policies, minimum purchase price policies, and poverty alleviation programs, directly or indirectly contribute to growth in agricultural wages.…”

“…For an extended duration, scholars have dedicated their attention to the examination of supply [3][4][5], and demand [2,[6][7][8] as pivotal factors for comprehending the dynamics of agricultural wages. Notably, numerous researchers have conducted investigations into the influence of industrial linkages [8][9][10] and agricultural support policies [11][12][13][14] on agricultural wages.…”

Urban–rural disparities in healthcare financing: An analysis under China’s unified residents’ health insurance scheme

“…This study found that indirect taxes in urban areas were near proportional, whilst indirect taxes in rural areas were slightly progressive. One possible explanation might be that the Chinese government gave economic assistance to low income groups, especially to farmers who were directly granted subsidies [27,28]. Thus, the poor paid a smaller proportion relative to their ATP in the form of indirect taxes.…”