| This research studies grain production direct subsidies from the aspect of grain production. The research focuses on the following topics, all of which are insufficently supported by previous theories. 1. To define the content and essence of grain production direct subsidies and to analyze the system of grain production direct subsides; 2. To study and analyze the theory of grain production direct subsidies; 3. To study how the policies about grain production direct subsidies of other countries perform and to research the subsidy-related international experirence; 4. To study and analyze the special basis, the performance & the after-reaction which can go for the grain production direct subsidies of China and to research and improve the better measures to be taken in future in our country.Main Research Results1. Grain production subsidies are playing an increasingly important role in guaranteeing the country's food safety & benefits and in adapting to the rules of WTO. The fact is that the agricultural subsidy has focused on grain production subsidies. Grain production subsidies are guiding supports in service of certain goals for politics, economy & society. Grain production subsidies are compensations to grain producers and compensations to balance grain supply and demand and compensations to positive externality of grain production. The purposes of grain production subsidies are the following four. The first one is to promote the growth of grain production; the second is to maintain stability & safety of grain production; the third is to protect food industry in trade; the fourth is to satisfy the farmers' interests. Grain production subsidies are worldwide: not only large grain production countries have subsidies, but also smaller ones. The subsidies include long term subsidies and temporary ones. Four grain production subsidy types are formed according to different objects and purposes of grain production subsidies: supportive subsidies, serving subsidies, profitable subsidies & aid subsidies. The WTO allows grain production subsidies to be embodied in the "green box" policy and the "yellow box" policy, which have different requirements for members of grain production subsidies.2. Grain production subsidies are rational with 6 theoretical basis: 1). The grain industry is the foundation which meets the basic needs of people's life, guarantees food safely & labor reproduction, determines labor cost and provides support for healthy development of the national economy. 2). The grain production has various public functions, including economic function, social function, ecological & environmental function, cultural inheritance function, etc. 3). The grain production has positive externality, including economic externality and ecological & environmental externality. 4). Grain supply and demand is special, with higher price elasticity of supply and lower price elasticity of demand. Grain supply and demand cannot only rely on market regulation. 5). Grain production is closely related to the nation's food safety: food is the national basic strategic material; food affects social stability; food affects the nation's internal & external policy. 6). The rationality of grain production subsidies are determined by a service-oriented government and public finance. The government needs to support & regulate the development of food industry and increase its financial support, thus embodying the compensation of financial positive externality.3. Grain production subsidies are various. Every country has established grain production subsidies, the results of which are significant Their important enlightenments to us are as follows: Grain production subsidies greatly promote grain industrial development; Grain production subsidies regulate the balance between grain supply and demand: Grain production subsidies enhance grain industrial competitiveness; Grain production subsidies can maintain a reasonable level of grain producers' income.4. Grain production subsidies of China have its own necessities. 1). China shoulders great pressure of its own food sufficiency and the responsibility to maintain the stability of the world food market because of China's great demand for food, which the international surplus cannot satisfy. 2). China's grain production is restricted by its resources and environment: the arable land is not efficient and is not of high quality; the water resource is in short and is not well-distributed in time & space; great contradictions have arisen between grain production and environmental protection. 3). China's grain production is faced with huge risks, such as natural risk, market risk and social risk. 4). Interests of China's grain production are low compared with interests of other agricultural industries and non-agricultural industries. Interests of grain producers (farmers) are even lower. 5). China's grain production is in grim situation: the resources are flowed abroad; some farmers have given up producing grain; local government has not paid enough attention to grain production. 6). China has the ability to give subsidies. The central government and local government have efficient finance while the pressure to support industrial development has greatly lightened.5. China's grain production subsidies have experienced three stages. First, changes in purposes of subsidies; second, changes in ways of subsidies; third, the direct subsidies(profitable subsidies) from 2004 till now. The purpose of China's grain production subsidies is to improve the basic condition of grain production, the output of land and the productivity. China's grain production subsidies vary greatly in ranges, components, standards and subsidy modes. The central and local governments give financial support to the subsidies. China's grain production subsidy policy belongs to the "yellow box" policy.6. China's grain production subsidies performance are mainly embodied in three aspects. 1). The supporting subsidies have improved conditions of grain production, which, in turn, has improved the growth in grain production; 2). The serving subsidies have improved land outputs and the grain quality, thus improving the total amount of grain; 3) The direct subsidies have had positive effect on grain production: the grain sowing area has been increased; the output per hectare has been influenced; the total amount of grain is increasing every year; the cost has been reduced; the income of farmers has increased. Judging from the assessment, the direct subsidies had different effects on the grain sowing area, the output per hectare, as well as the total amount of grain production in different provinces. China's present subsidy affects the grain output, the elastic coefficient of which is 0.002262. Four factors affected the direct subsidies: the range of the direct subsidies; the overall level of the direct subsidies; the regional scale of grain production; the farmers' scale of grain production.7. China's grain production subsidies have five effects. 1). The grain production subsidies put great pressure on the finance of the central government: great amount of fund is needed to maintain the long-lasting direct subsidies; the standards of the subsidies can only be increased. 2). The grain production subsidies put great pressure on the finance of the local government. The pressure and the income the large province of grain production & the smaller province of grain production are inverted. 3). The pressure brought up by the direct subsidies may result in lower standard of the direct subsidies in large grain production province while higher standard in smaller grain production provinces, which will prevent the growth in grain production and slow the development of grain production areas. 4). The grain production subsidies will stimulate the grain production, including the stimulation of farmers and the adoption of advanced technology. The grain production is improving both in scale and in specialization. However, the direct subsidies may rise continuously. 5). The grain production subsidies have influence on other agricultural products, including not only oil, cotton, sugar, but also fruit and vegetables. The influence on animal products and aquatic products is uncertain.Main Innovation Points1. The connotation, essence and system of the direct subsidies are systematically analyzed.The grain production subsidy is thought to be the government's support to guide the grain production for political, economic and social reasons. Grain production direct subsidies should include four aspects: the subsidies to support grain production; the subsidies for service of grain production; the subsidies to yield grain production, and the subsidies for emergency in grain production. The essence of the subsidy is to compensate the grain producers. It is also the compensation to adjust the balance of the grain supply and demand and compensations to positive externality of grain production.2. The theoretical basis of the direct subsidies is systematically analyzed.The direct subsidy is thought to be reasonable based on the basic agriculture theory, the agricultural multi-function theory, the economic externality theory and the public finance theory. There are mainly six basic basis. The publicity and necessity of grain production under the conditions of market economy is emphasized. Especially in the balanced condition between grain supply and demand, the labor for grain production as a social necessary labor stands out. Using public finance as direct subsidies to promote food safety is of great significance.3. The international pioneering experience of the direct subsidies is systematically investigated.The experience of international direct subsidies has been analyzed: the direct subsidy has played an important role in promoting grain production; the direct subsidy has adjusted the balance between grain supply and demand; the direct subsidy has significantly increased grain production; the direct subsidy has maintained a reasonable level of income for grain producers.4. The effect and influence of China's direct subsidies are analyzed as a whole.The special basis for China's grain production is analyzed combined with China's food safety & food production situation and China's financial status and level. The direct subsidy is evaluated as a whole. Based on Cobb-Douglas model, and combined with the relevant research and analysis framework and the basic assumptions, China's present grain production model is constructed. According to the provincial panel data of direct subsidies from 2004 to 2007, we estimate the elastic coefficient of grain production. The post-effect of the direct subsidy is evaluated based on researches in the whole country.Researches show the following: 1) In the existing system , direct grain subsidies have positive effect on the grain production but the effect is limited; 2) The elastic coefficience, which shows how the grain price affects the grain production, is 0.113253, which was gained by using the model to estimate it. And this number is larger than that of how direct grain subsidies affect grain production. We should be fully aware that when strengthening and perfecting direct subsidy policies, we should make full use of the market mechanism to increase grain prices to promote the basic role of food safety; 3) Having deeply investigated the policies of other countries, we conclude that the direct grain subsidies of the developed countries focus more on how to improve their grain status and competiveness in the world market. China's direct grain subsidy has its own particularity. While sticking to and perfecting China's direct grain policy, we should as well safeguard our grain production safety, which should also be the basic objective.Policy Suggested1. Build a perfect and coordinated system of the grain production direct subsidies. China's grain production direct subsidies should include four aspects: the subsidies to support grain production; the subsidies for service of grain production; the subsidies to yield grain production, and the subsidies for emergency in grain production. The various subsidies exert their functions which complement each other. More attention should be paid to improve the agricultural insurance subsidies. Judging from the future, China's present grain production subsidy is coordinated with the requirements of WTO. If guided by the successful experience abroad, our policy will be transferred to the "green box" policy. Special attention should be paid to improve the subsidy structure and increase the environmentally friendly subsidies.2. Increase the investment in building the agricultural infrastructures. The grain production direct subsidies exert leverage, which should lead related investors to invest more in transportation, communication, energy & network in the countryside , in irrigation works, in land renovation and in protection of ecological environment.3. Increase the investment in the development and promotion of grain production technology. The investments include the research investment, structure-optimized investment, the promotion investment and farmers' training investment.4. Expand the scopes and improve the standards of the direct subsidies. All types of grain and all grain producers should be included in the direct subsidies.5. Adjust ways of the grain production subsidies. Give different subsidies to different types of grain and grain producers. The subsidies must be based on the amount of grain production.6. Adjust the financial policy for the direct subsidies. Deal with the finance for grain in-allotment areas , grain out-allotment areas & grain self-sufficient areas in different ways.7. Establish a long-lasting direct subsidy system. The grain production subsidies should be guaranteed by law, under which the organization for the direct subsidies will be improved, the fund for grain production will be gathered, the tax for grain production will be levied and all the fun for grain production will be used to serve grain production. The national budget for grain production should be improved.8. Improve the informational service for grain production direct subsidies. Establish a special network for grain production subsidies to publish the relevant state subsidy information, to provide relevant information, and to listen to the farmers' opinions. Only by doing so will a feedback system for the grain production subsidies be improved and completed.
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