Chinais the largest producer and consumer of agricultural products in theworld. It ranks # 1 in theproduction of paddy rice, cotton, wheat, pork, vegetables, rapeseed, groundnutsand apples. It is the worldÕslargest consumer of wheat, rice, corn, cotton, pork, oilseeds, and vegetableoils. China is also a majorexporter and importer of agricultural products, accounting for more than $60billion in 2004.
Historically,China has pursued food security and grain self-sufficiency objectives. The government of China has oftenresisted the implementation of policies that could discourage production ofstrategic foods. Currently,Chinese food security policy is primarily focused on maintainingself-sufficiency in wheat, rice, and corn. Soybeans and cotton are no longerpart of this group.
Chinaprovides agricultural support at both the central and local governmentlevels. The central governmentwill provide $43.44 billion to support agricultural and rural development in2007, mainly as subsidies for seed, fertilizer, machinery, and other inputs andtechnical training. Localgovernments will provide additional support to local farmers. In 2004, the government reduced theagricultural tax on farmland and introduced a system of direct income paymentsto farmers.
Chinadoes not directly provide export subsidies for corn, rice, and wheat, butoffers other programs intended to boost exports. These include subsidies of sales from government heldreserves, waivers for transportation taxes, subsidies for port fees, andrebates of the value added tax for corn, rice, and wheat exports.
Corn and Sorghum
á Both central andprovincial governments subsidize the fuel-ethanol sector. The government provided $225/MT($5.72/bu) of corn for corn-based ethanol in 2005, reducing it by $37.5/MT($0.95/bu) in 2006, thereby indicating intention to curb the expansion of fuelethanol plants based on grain production.
á ChinaÕs TRQ in corn hada quota of 7.2 MMT (283 million bu) in 2004. It requires 60% to be traded by state-owned companies.
á Corn imports require abio-safety certificate and quarantine permits. To import new commodities, a pest risk assessment isrequired.
á Sorghum is notconsidered an important feed grain and has no crop production assistance.
á TheAgriculture Development Bank of China (ADBC) provides loans with favorableterms to cotton purchasers; ADBC allocated $5.15 billion for this program in2005.
á China is changing itscotton classification system to be more consistent with international standardsand appropriated $9.76 million to subsidize gins to upgrade equipment in 2005.
á The government isestablishing production bases and seed projects in Xinjiang province and ChinaÕs Agricultural Bank is providing $4 billion in loansto the Shanxi province for agricultural product development, with $25 millionfor provincial sales of cotton and to develop several local spot markets.
á China uses a TariffRate Quota (TRQ) system, with tariffs rates ranging from 5% to 40% on cottonimports above the current quota amount of 894,000 MT (about 4 million bales),which maintains the domestic cotton price higher than cotton in theinternational market.
á The governmentguarantees farmers a minimum price for rice. If prices drop below that floor, the government purchasesand stores it, which may be sold at auction. Floor prices for early indica (unmilled) and japonica(unmilled) are $173/MT ($7.85/cwt) and $186/MT ($8.44/cwt).
á There is a seed subsidyprogram for rice, but the amount of subsidy is not available (the combinedvalue of the seed subsidy for wheat, rice, corn, and soybean was $480 millionin 2005).
á China uses a TRQ forrice, with 50% traded by state owned companies. The quota was 2,660,000 MT (59million cwt) in 2004.
á The government of Chinapays $20 to $25/ha ($8-$10/ac) in seed and agricultural machinery subsidies tosoybean farmers, particularly in the Northeast provinces.
á China allows theimportation of genetically modified soybeans but its farmers cannot legallyplant them.
á The importduty on yellow soybeans is 3%.
á At the beginning ofeach marketing year, provincial governments in the southern sugar caneproduction region announce a pre-set purchase price on cane. If the sugar price increases during themarketing year, the sugar mills may pay contracted cane farmers a bonus.
á The TRQ quota forCY2006 is 1.95 MMT (43 million cwt) with a within-quota-tariff of 15% andout-of-quota rate of 50%. About 30% of the quota (585,000 MT or 13 million cwt)is reserved for non-state trading enterprises and 70% is assigned to statetrading enterprises.
á The government sets anunofficial target price ($178/MT or $4.52/bu in 2005) below which it willpurchase wheat to support the market price.
á China has a seedsubsidy program for wheat with funding through the Ministry of Agriculture andimplementation at the provincial level. In some provinces, seed companies are provided funding, and, in turn,make seed available at discounted prices. In other provinces, farmers are provided funding to purchase seed, butwithout monitoring purchases, so the subsidy is more consistent with directincome support.
á China has a TRQ inwheat, with a total quota of 9.6MMT (350 million bu) in 2004. It requires 90%to be traded by a state-owned company.