| Sustainable agricultural development is a difficult problem facing the world. Quite a lot of theoretical and practical problems need to be studied. So how to promote the sustainable agricultural development through agriculture subsidy has become a hot issue. The research of this in our country is still in the early stage, with many theoretical and practical problems needing to be studied. This paper has explained the connected mechanism of important elements of economic ecosystem for sustainable development, with its focus on the connotation of agricultural subsidy, the effect of subsidy for agriculture, the economic and social source of agricultural subsidy as well as the tendency of variation on agricultural subsidies in developed and developing countries. At the same time, by analyzing the major problem of agricultural subsidy policy in China, some reform recommendations on subsidy policy for China's sustainable agriculture development are suggested.The main contents of this research are as follows:1. Sustainable agriculture development requests good production and resources reserve and achieving the balance in supply and demand and sound cycle of ecosystem to feed the increasing population. So it is necessary to strengthen the macroscopic regulation, especially to coordinate the relationship between population and resources, to set up sound environmental economy and technique system in agriculture, and to correct market failure. As an important macroscopic instrument, agricultural subsidy is also claimed to be a "double blade sword".2. Our subsidy definition comprises all measures by government to achieve the adjustment of the difference between market price and marginal privacy cost or social cost by giving financial support directly or indirectly to producers or consumers. The level of a subsidy can be obtained from three layers: the narrow level being financial budget, the broad level being non-internalization of externalities, and the integrated layer being the difference between private cost or price and market cost or price. Several models and indicators of government assistance for agriculture have been developed, such as NRP, NRA, ERP, ERA, PSE and AMS. The PSE-concept is a suitable and practical alternative.3. The results of analysis by partial equilibrium model show that agricultural subsidy will victimize social welfare. Various subsidy theories did explain the cause of subsidy from market failure and the government's efforts to correct it, without taking into account the property right arrangement. Furthermore, they didn't realize the government failure.4. The developed countries tend to subsidize their agricultural production when the capacity of it is insufficient, or to support income of farmers, to control the output of agriculture, and to protect the balance of ecosystem when there is self-sufficiency. In the case of ag-excess, agriculture subsidy is conducted mainly on price support and income-support, ecosystem values compensation, and public goods supplying. Because the price and income support may be harmful in economy, ecosystem and the society, developed countries tend to reform the ways of their agriculture subsidy. Thebasic tendency is "greening the subsidies"--step by step to increase the proportionof ecosystem compensation.5. The characteristics of subsidy policies in developing countries are that the policy targets being conflicting, and the policy instruments being very complex. They tend to tax their agriculture sector overall but subsidize agricultural inputs. The output of agricultural and economic growth is suppressed. Some subsidies of agriculturalinputs have promoted the increase of yield, but intensified the financial pressure, unfair distribution, environmental pollution, and natural resources destroying. Lately, they tend to transfer their ways to subsidize agriculture by sound environmental items.6. Up to 1997, PSE of agriculture was negative in China. The subsidy level of China is lower than developed countries and ma...
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