Economic Effect Of China's Grain Price Regulation Policy

As the most basic necessities of life, the importance of food is beyond all doubt. Internationalcommunity and every government have attached great importance to food security, due to the socialimpact of food shortages. Economists explain that the main food security long-term food supplyproblem. However, this does not mean that short-term food price is not important. Even though notconsidering the importance of relative stability of food prices to guarantee food security from thehousehold level, to remain food prices at profitable levels for food producers is also the foundation toensure grain production capacity in the long-term. Since the 21st century, grain price has fluctuatedradically in the international market. As per, avoiding excessive volatility in food prices is the commontask for the international community, especially those countries with higher levels of food insecurity.This paper took China's grain price control policy as the object of study, concentrated on the impact offour policy tools on the food prices, and further explored the effectiveness of regulation policies, as wellas the existing problems.Firstly, the author briefly reviews the evolution process of China's food price policy, especially thepolicy changes after the founding of the PRC, and approximately determines the effectiveness of foodprice policies through analysis of the performance of China's grain market in the global food crisis. Inthe following four parts, the paper investigates four issues: the effect of minimum purchase price policyon lifting market price; the effect of food auction policy on controlling food prices, the food regulationthrough food trade policies, as well as the effect of fuel ethanol development policy on food priceregulation. Research results show that these policies could all play the role to regulate food prices tosome extent, but the effect is different: the minimum purchase price policy presents lifting the marketprice effect in most grain types, but the effect on grease soybean industry was not obvious; Theinfluence of auction of wheat market price is obvious, but not on indica type rice. The grain import tariffquotas policies don't play the policy effect, but the influence of export restrictions on the of domesticfood prices is obvious; although it was difficult to carry on empirical study, analysis shows that fuelethanol industry has the function of regulating food prices through mathematical and optimizationmodel. As per discussion above, this paper discusses the social welfare losses and fiscal costs arisingfrom the regulatory policies of food prices. Although it will cost to implement the policy, to abolish thispolicy is not feasible in China. The only solution is to optimize the policy system based on the existingpolicies, and to make policy exert protective effects in ensuring domestic grain production capacity atan affordable cost.In the research methods, this paper bases on the qualitative research, and took advantage ofmethods of measurement and statistical methods to make quantitative analysis of the relationshipsbetween different variables when necessary. In the methods of measurement and statistical methods, theauthor adopted Difference-In-Difference(DID)Model,Granger Causality Analysis and Panel DataMode frequently, and also Co-integration Analysis,Error Correction Model,VAR Model and Impulse Response Analysis. In these methods, there was some innovation in the application of DID, and theauthor introduced other mature methods to the analysis of these new issues.