Research On The Optimization Of Agricultural Subsidies System

China’s total GDP in 2010 surpassed Japan for the first time as to become the second largest economy in the world. However, during the remarkable, sustained and rapid development of the national economy, there appear gradually many deep-rooted contradictions, especially agricultural development mismatches serious with its fundamental position in the national economy. And they have become the bottleneck of sustainable development in China’s economy. First of all, the distorted income distribution pattern between the urban and rural residents has not been fundamentally reversed. And the urban-rural income gap is likely to expand further. Second, the increasingly tight relationship between the world’s grain supply and demand makes food safety issues escalated to unprecedented extent. Because China is a developing agricultural country and a populous country, we just cannot over-exaggerate the importance of food safety issues in China. Third, agricultural inputs elements, such as chemical fertilizers and pesticides, are excessively used during the procedure of agricultural producing, and China’s agro-ecological environment is severely damaged and there does not exist an effective system, which can relieve and contain the trend. Finally, because WTO member countries’ right to speak in global agricultural policies game and rules set is different, China’s government is faced with serious, complex and unfair international competition circumstances related to agricultural subsidies.The so-called agricultural subsidies means that nature-oriented financial transfer expenditure provided by all-level-government to agricultural production, circulation, trade or agriculture producers, in order to achieve policy objectives to ensure food security, to enhance the income level of farmers and to achieve agricultural sustainable development. Agricultural subsidy is an irreplaceable fiscal policy instrument and an effective means of supporting and protecting agricultural development, which is widely used around the world. To improve further the agricultural subsidies system is of significance to increase grain production, to enhance the income level of farmers, and to promote soundly and rapidly the development of agriculture and rural economy. In the WTO framework of agricultural subsidies rules, the problems of the agricultural subsidies system and the crux are deeply analyzed, the policy effects and efficiency of agricultural subsidies are assessed and measured comprehensively and accurately, the successful practice and the advanced experiences of foreign agricultural subsidies are compared and learned from. The direction and specific recommendations for optimization of agricultural subsidies system in China is put forward, as well as the agricultural subsidies system is formed with a clear goal, to benefit directly, to be diverse, simple, efficient, and to be consistent with WTO rules. It rationally becomes a challenging and important issue to be tackled with China government. In the context, we make a study on the optimization of China’s agriculture subsidies system.Firstly, the definition of agricultural subsidies is defined on the basis of sorting the definition of financial subsidies domestic and abroad. The basic characteristics of agricultural subsidies are illustrated. Several terms, such as agricultural subsidies, agricultural protection and agricultural support, are distinguished from two aspects in connotation and extension. From multi-dimensional perspective toward the theory of public finance, welfare economics, institutional economics and agricultural multi-functional, the theoretical basis of implementation agricultural subsidies is probed into. The welfare impact of implementation agricultural subsidies on their own country and other countries is analyzed in an open economy. Several main indicators, measuring the level of agricultural subsidies, are showed. The special nature of China’s implementing agricultural subsidies and the serious, complex and unfair international competition circumstances related to agricultural subsidies that China’s government faced with are researched.Then, the institutional change process in agricultural subsidies has been combed since the foundation of new China. China’s current agricultural subsidies system is analyzed comprehensively. The implementation of the specific policy in agricultural subsidies is discussed. The main features of agricultural subsidies in China are illustrated. China’s current size and the structure of agricultural subsidies are analyzed respectively. The problems in the agricultural subsidies system in China are investigated overall and analyzed in detail. The root causes behind the problems are mined from the aspects in international rules, laws, economy, institution, and so on.On the basis of qualitative analysis above, we examine empirically the yield and income effect of overall agricultural subsidies policy and every specific agricultural subsidies policy term from the national level by using grey relational analysis. The result shows that the two kinds of effect of China’s overall policy of agricultural subsidies are more significant, and the yield effect is slightly higher than the income effect. The sort of two kinds of effect of every specific policy term in agriculture subsidies is consistent. Besides the yield effect in seed subsidy is less than the income effect, the yield effect of the other three policy terms in agricultural subsidies are all higher than the income effect. However, compared with the individual significance of policy effect of agricultural input comprehensive subsidy, seed subsidy and subsidy to purchase agricultural machineries, the overall policy effect of China’s agricultural subsidies is not significant enough. The yield effect of overall agricultural subsidy policies is studied respectively in the main grain producing area, the basic grain balance area between production and selling and the main grain selling area by employing China’s inter-provincial panel data model. The yield effect of subsidy to purchase agricultural machineries is also analyzed by using China’s inter-provincial panel data model.We argue that the significance of policy effects of agricultural subsidies is ensured at the same time, and it is also important to improve the efficiency of using agricultural subsidies funds. The basic theory and research method of measuring the efficiency of agricultural subsidies are outlined. The efficiency and super-efficiency of agricultural subsidies in every province are measured and compared by using DEA method. The result shows that all provinces in main grain producing area and in major selling area are in high-efficiency area and mid-efficiency area. In main grain producing area, four provinces as Liaoning, Hebei, Henan and Jiangsu are in high-efficiency area, and the other nine provinces are in mid-efficiency area. And in main grain selling area, the six provinces as Shanghai, Beijing, Tianjin, Zhejiang, Fujian and Hainan are in high-efficiency area and only Guangdong is in mid-efficiency area. In the basic grain balance area between production and selling, only Tibet is in high-efficiency area, and four provinces as Xinjiang, Qinghai, Guangxi and Chongqing are in mid-efficiency area, the other six provinces are in low-efficiency area. Through the comparison of main grain producing area, the basic grain balance area between production and selling and major grain selling area, the conclusion is that all provinces in major grain selling area are in high-efficiency area, the main grain producing area are in mid-efficiency area, and the basic grain balance area between production and selling is in low-efficiency area. The result of measured super-efficiency shows that there are eight provinces which average super-efficiency is more than 1. According to the average score of super-efficiency, the order is Shanghai, Beijing, Hainan, Fujian, Tianjin, Tibet, Henan and Liaoning. According to the division of the three grain producing areas, we identify the most efficient province in agricultural subsidies in every grain producing area as a reference. In the main grain selling area, Shanghai is the most efficient city and then Beijing, Hainan, Fujian, Tianjin. In main grain producing area, Henan is the most efficient province and then Liaoning. In the basic grain balance between production and selling, Tibet is the most efficient zone. In order to enhance the efficiency of agricultural subsidies, we suggest that we should make different guidance in the three kinds of grain producing area and consider the most efficient province of agricultural subsidies in the three grain producing areas as their model and benchmarking for the reform during the optimization of agricultural subsidies system. The efficiency of direct grain subsidies is also measured and compared in 13 provinces of major grain producing area by using DEA-Malmquist model. The result shows that the major reason that leads to the low efficiency of grain direct subsidy is technology inefficiency. And the annual average increase of grain direct subsidy Malmquist TFP index is 3.6%, which comes from technical progress and the increasing scale efficiency instead of pure technical efficiency improvement.As practice of agricultural subsidies in developed countries and several developing countries has a longer history, there are lots of advanced experiences which are worth learning from and some lessons which is deserved to be drawn for China. We compare and summarize the advanced experiences about agricultural subsidies system in developed countries such as European Union, U.S.A and Japan, and in developing countries as India, Brazil and Egypt. And the article argues that it is very beneficial for the innovation and improvement in China’s agricultural subsidies system to learn these advanced experiences.On the basis of analyzing the problems in China’s agricultural subsidies system, quantitative analysis in the policy effects of agricultural subsidies in China, measuring the efficiency of agricultural subsidies in China and comparison and summary of agricultural subsidies in some typical countries, we analyze a series of economic factors impacting the level of agricultural protection from the perspective in theoretical analysis and empirical research. Combined with China’s specific national conditions, we define the goal of China’s agricultural subsidies system and provide guidelines, general idea and basic framework of optimizing China’s agricultural subsidies system. In the basic framework above, following the guidelines and general idea of optimization of agricultural subsidies system, the basic focus on improving agricultural subsidies system is defined in the legal system, the level of agricultural subsidies, policy instruments, the structure of agricultural subsidies, the procedure for releasing and supervision and management of subsidies funds. Specific and supporting measures of optimizing China’s agricultural subsidies system are put forward.There are following aspects of innovation in the paper. First, the yield and income effect of the overall policy and every policy term of agricultural subsidies are examined from the perspective in empirical study by using grey relational analysis method, and the national-level data from 2006 to 2010. Second, after analyzing the conduction mechanism of subsidy to purchase agricultural machineries and other public expenditure on agriculture theoretically and improving the Cobb-Douglas production function, the article makes an empirical research on the effectiveness of conduction mechanism of subsidy to purchase agricultural machineries and other public expenditure on agriculture in the main grain producing area and the other area employing China’s inter-provincial panel data model. The result shows that the conduction mechanisms of subsidy to purchase agricultural machineries and other public expenditure on agriculture are both efficient in two kind of area. Third, the efficiency and super-efficiency of agricultural subsidies in every province are measured and compared by using DEA method. Finally, the conduction mechanism of grain direct subsidy is analyzed theoretically. Then the effectiveness of the conduction mechanism is tested on the whole based on regression analysis of inter-provincial panel data. And the efficiency of the direct grain subsidy in 13 provinces in main grain producing area from 2004 to 2008 is evaluated by using DEA-Malmquist model.