【Research】China’s corn policy shifting into producer compensation system:from price support to direct payment

April 1st, 2017
Norinchukin Research Institute Co., Ltd.
RUAN Wei, Research Counselor


China embarked upon a full-fledged marketization of the economic system at the beginning of the 21st Century, in which Chinese authorities introduced a price support policy for farmers with income transfer being accompanied in order to realize a balanced growth of agriculture with non-agricultural sectors as well as to boost food production in the country. Increases in farmers’ income and food production were concurrently achieved by raising the support prices. At the same time, however, this has brought about a reversal of price difference between imported grains and domestically produced ones. In addition, lower tariff rates on imported grains, which China committed itself at its accession to the World Trade Organization (WTO), also caused a rapid inflow of imported cheap grains to the Chinese market. Domestically produced grains lost competiveness in the market, which has resulted in piling unsold grains as government’s reserves up to an unprecedented level. Since the year of 2014, China began to change its policy for soybean and corn producers from price support programs to direct payment programs such as a target price system (or deficiency payment) and a producer compensation system. Some effects, including price declines of domestically produced grains and curbed imports, have been already confirmed. Concurrently, however, these policy changes have caused decreases in producers’ profits and an amount of domestic production as well.

This paper will focus on China’s producer compensation system applied for corn producers. It will also make an analysis on relationship between the new corn policy and the existing domestic support ceilings under the Agreement on Agriculture of WTO, considering possible effects of the policy change not only on Chinese agriculture, but also on the world grain market.


China decided in 2014 to make a significant change in its food security strategy from “absolute food self-sufficiency” to “food security to be ensured by adding imports to its key components” (Ruan 2014). At the same time, Chinese authorities initiated a drastic reform of the “price support policy” that had been playing a key role as the basis for boosting food production.

Food production in China had remarkably increased with production incentives provided…Link reading

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