Study On Production Risk And Policy Agricultural Insurance In Chinese Cropping Sector

With China's entry into WTO, Chinese economy has to be confronted with the much more drastic international competition, and agriculture will have to be put into a new framework as well. China is certain to benefit from trade liberalization with domestic reform deepening. However, traditional policies supporting agriculture and farm income must be changed under WTO. So, there have been increasing concerns with farm policies in seeking economically sound approach to protect farm income. Agricultural insurance has been suggested as such an instrument. This paper addresses production risks that reduce incomes and policy agricultural insurance that averts risks in Chinese cropping sector simultaneously, with a focus on macro level.Agricultural insurance program is not only one of the important security systems against agricultural risks, but also a non-price tool to protect farm income. There are around 40 countries in carrying or trying out this policy all over the world. In March 2004, Chinese government also brought forward to expediting the process to develop the policy agricultural insurance program in some areas. Largely, this traditional market-based instrument for managing natural disaster risk is underdeveloped and unavailable in China.This paper focuses on what and how the crop insurance mechanism for managing crop yield fluctuation in the face for natural disaster. The overall objective is to formulate and/or improve political implication and/or efficiency in this area using an empirical analysis.Econometric models and statistical methods are applied to estimate the social losses of major agricultural products, including grain, rice, wheat, maize, soybean, sorghum, millet, cotton, rapeseed, sesame, peanut, hemp, sugarcane crops, sugar beet, orange, apple, tea and tobacco leaf. The impacts on rural income and state finance were also simulated with a province-level data.This paper focuses on risks that are related to weather events that have a severe impact on crop yield. There are 4 main parts in this thesis, shown as the followings:Parti: to evaluate the production risk in Chinese cropping sector and divide risk zones on province-level.A number of studies are recognizing that risk zoning is essential to providing crop insurance scheme and adjusting production structure in Chinese agricultural. Four risk indices, indicating regional characteristics, and a cluster analysis method, allowing individual differences for provinces, are applied to divide risk zones. In addition, we discuss using research results to arrange insurance-areas. This is a potentially important innovation since such methodology that is described in chapter 3 is one step further in similar researches. The results indicate that the leading production areas are inclined to suffer higher losses than other regions, the primary grain production areas are apt to be hit by natural disaster, and cash crops yield fluctuation is much more severe than grains.Part 2: to calculate the social losses, i.e. pure premium, of each and every crop using the province-level data set.The difficulty that existed in making premium for each and every arable plot in practice requires consistent rate in identical risk-area. Not only could such category of risk-areas be involved to estimate insurance premium, but also percentage of farming income, households with higher farm income being particularly vulnerable to risks, and yield covariate risk, measuring whether risks can be shared within an insurance range, should be crafted to allow improvised governments aids to develop policy crop insurance system. We assume that crop insurance subsidy does not spur unsustainable new economic activity in areas that are more risky or vulnerable to natural disaster risk. Of course, this aid should be provided in an objective fashion with ex ante rules for when and how much assistance to provide.Part 3: to analyze the feasibility of policy agricultural insurance system in Chinese cropping sector.We argue that the goal of government intervention in supplying crop ins...