Study On Compensation Mechanism In The Main Grain Producing Areas

The development of the main grain producing areas in China plays an important role insafeguarding the national food security, promoting regional coordinated development, andincreasing peasants' income. The grain production in China possesses a significant positiveexternality. For the main grain sales areas in china and all members of society deriving muchbenefit but not giving appropriate compensations, and the interests from developing of the maingrain producing areas in China and peasants the areas included are partly violated, and they didn'tget appropriate compensations, it is essential to making an intensive study of compensationmechanism in the interests of the main grain producing areas.This paper develops its research with Henan Province as the main grain producing areaexample and Guangdong Province as the main grain sales area example, by comparing them ingrain output, fiscal revenues per peasant and net income per peasant,it concludes that the fiscalrevenues and net income per peasant of the main grain producing area are lagging far behind themain grain sales area. Then it analyses the differences between the producing and sales area in thefiscal revenues and net income per peasant by using the multi linear regression model, pointingout that the net income per peasant is significantly negative with grain output, and significantlypositive with labor productivity nationwide; the net income per peasant is significantly positivewith grain output, level of agricultural mechanization and agricultural fixed asset investment, butthe impact factors of grain output is lower than those of the other two index. Based on the above,the production of grain is the cause of low fiscal revenues in the grain producing areas, so, in orderto increase the income of peasants, it needs to give more regard to elevate the agriculturalinfrastructure and modern material standards.Based on theory of elasticity, this paper makes an analysis on supply curve and demand curveof grain, and concludes that on certain level there is a paradox between producing more grain andincreasing the income of peasants; After contrasting the utility curve of food security and theutility curve of peasants' income, it finds that after the phase of food shortage, the two curvesexhibit a reverse correlation. Those results show that, when the grain output reached a fairly highlevel, the objective of the interest compensation mechanism of the main grain producing areas isnot to increase the output, but to promote regional coordinated development of the producing areain the first place. By improving the level of social and economic development of these areas,motivating the overall production capacity of grain and the income of peasants.The subject of the interest compensation mechanism of the main grain producing areas is theone who benefits from the positive externality of the grain production, but not giving appropriatecompensations; the object of the mechanism is the one who burdens the cost of positiveexternality of the grain production, but didn't derive much benefit from it, or we can say thebenefit from the positive externality of the grain production is below the cost to get it. This paper makes an analysis on private revenue (cost) and social revenue (cost) of grain production, and itputs forward that central government institutes the obligation of safeguarding the food securitythat the main grain producing areas should fulfill, so the producing areas are the most efficientnationwide suppliers; The main grain sales areas benefit from the producing areas, but not burdenthe cost, the consumers benefit from the low price of grain, so, central government, the main grainsales areas and the consumers are the key subjects of the interest compensation. Now the limitusing of the farmland by government and the low price of grain policy violate the interests of thepeasants and the producing areas, so, the peasants and the producing areas are the key object.Strictly land policy limits the using of the farmland, farmlands are not allow to construct forother purpose, it restricts the main grain producing areas seeking higher returns, so, the balance ofthe generating benefit from farmland for other purpose and the actual generating benefit fromproducing grain is the amount of interest compensation mechanism of the main grain producingareas. It can be calculated in this way: the amount of interest compensation mechanism of themain grain producing areas equals to the product of compensate area and compensate amount perunit area. Compensate area is the balance of the real actual area of grain and the desired area ofgrain, the desired area grain is determined by local population, the per capital desired grainconsumption and yielding of the farmlands; compensate amount per unit area is the balance ofbenefits from using the farmlands for other purpose and the benefits from grain production,benefits from using the farmlands for other purpose includes the highest benefit from using urbanbuilding area and the lowest benefit from using the farmlands for other agricultural purpose. Thebenefit from using urban building area equals to the land grant fee divided the service life, and thebenefit from using the farmland for other purpose can be represented by vegetable net income; thebenefits from grain production is represented by the average benefits from the main grain in threeareas(including northeastern areas, Huang-huai and Yangtze River).By calculation, the highestamount of interest compensation mechanism of the main grain producing areas in2009is RMB5094.92billion, and the lowest amount in2009is RMB3215.702billion, and it tends to going upyearly.The development of interest compensation mechanism of the main grain producing areasundergoes its initial, flourishing and transitional stages, the mechanism which centering on interestcompensation fund is established in the past10years, the fund is raised by GDP growth bonus,land grant fee bonus, grain safety tax and fund from the society. The interest compensation fund isoperated independently by the fund management organ with the manner of general adoption of themarket principle. It guarantees or increases the value of the funds by treasury bond investment,mortgage loan investment and advantageous industries investment. On these bases, the interestcompensation fund should funnel primarily to infrastructure development, public service and anyother related industries.