Structural Reform On The Supply-Side Of China's Grain Industry

Food security has always been on the top of the Chinese government's agenda.In the early stage of China's industrial development,investment on agricultural scientific research,rural labor force development and rural infrastructure was far from been enough,leaving the labor productivity at a lower rate than that in other countries.The absence of investment in technology,labor and rural infrastructure has contributed to heavy use of fertilization and pesticides in grain production,pushing the producing cost high and harm the quality of grains.With decreasing return and rising producing cost,farmers are not attentive to grain production.Therefore,the Chinese government has been introducing a series of polices to support of grain production.With the abandonment of agricultural tax and the introduction of government purchasing policy,grain production kept increasing for twelve years since the year of 2004.The consistent government-supported increase in grain production has caused new problem:overstock and huge government budget spending.On the other hand,the lack of industry and overuse of fertilizer and pesticide caused a dent in China's grain products.As a result,a structural disequilibrium caused by high stock,high cost,high budget expense and low farmer income and low grain quality is the new challenge for the Chinese agriculture industry and the government.According Shultz,if no technology advancement is applied to the traditional agriculture,the production cost will gradually be too high for the industry to expand,and the traditional agriculture will lose its competiveness and shrink.Yujiro Hayami points out that at the early stage of industrialization food price will intentionally kept low to make them affordable to low-wage-workers in the industrial sector.Will the deepening of industrialization,the share of agriculture in national GDP will be smaller and smaller,and farmers will fall into poverty because of the shrinking of the industry.If no support is given to the agriculture industry,the more competitive farmers will leave agriculture and only the weaker labor force would stay,which will endanger national food safety.For the sake of national food security and as a compensation for the sacrifice of farmers in the early stage of industrialization,the government should support agriculture to safeguard the security of farmers and the agriculture industry.The governments need to decide what supporting policies to adopt,given the differences in their natural resources.Chinese president Xi Jinping first proposed the concept of structural reform on the supply-side of China's economy at the 11th session of the financial and economic panel of the CPC central committee,of which he was the leader,and further studied the concept at the 12nd secession of the panel.The major tasks of structural reform on the supply-side is to eliminate excessive capacity,lower stock level,leverage level and cost,and make up in weak area in Chinese economy.President Xi asked to carry out structural reform on the supply-side at full scale in the 19th committee of the CPC party.The structural reform on the supply-side for China's grain industry is to modify production structure,lower cost and make up in its weak area.Empirical study is used in this paper to examine the competitiveness of China's grain industry.Study on the production capacity shows that chemical fertilizer used in China's grain industry per unit is far above international level;labor force production in China is far below international level;China only leads in production per unit hectare.In terms of international market competitiveness,empirical study shows that China ranks bottom at almost the three aspect:international market share,trade competitiveness and revealed comparative advantage.Regressive study show that China's grain capacity is heavily dependent on land and labor force,while price support has no significant impact.As one of the main grain-producing area,Chongzhou of Sichuan province suffered the typical symptoms of the supply-side problems.Chongzhou local government encouraged farmers to adopt a collective model to reform the grain-producing model.Farmers give the land-managing right to the communicative and get dividends according to his land share.The communicative employs professional agricultural manager to take care of the farming process.Chongzhou developed a one-stop service supermarket model to support the communicative model.Through these measures,the grain industry of Chongzhou achieved great success.Some major west grain-producing countries accumulated various expericence in their agriculture-modernization process.The United States used a market-based approach to offer agriculture service,including the financing system,insurance,storage and futures market.Germany develops a great education system for farmers through legal and fiscal support.France has an advanced agriculture service system by making good use collective system,industry association.Israel uses a well-developed agriculture research mechanism and skill promoting system led by its government to develop technology-intensive agriculture.Australia's export-oriented agriculture benefits from its good use of standardization and information the grain industry.Japanese government is efficient in making proper agriculture-related policies to guide and safeguard the country's agriculture and grain production.This paper proposes that the key for the structural reform on the supply-side of Chin's grain industry is to shift the focus from quantity to quality.With an aim to offer a proposal to solve the current problem in the Chinese grain industry,this research studied domestic and foreign literature,compared the import and export performance of major grain-producing nations and analyzed the successful experience of major grain exporting countries,to finally get an insight into and offer a policy recommendation to the grain supply mechanism in China.The thesis proposes that the reform of the grain supply mechanism in China should be carried out in the following aspects:Production system.This field includes the study of farming land circulation,producing agents,capital investment,agricultural R&D,labor,social service for grain production;Market system.This field includes the study of the grain-pricing mechanism,the market players and the supply and storage of grains;Policy system.This field includes the study of government intervention of the grain market,laws and regulations relating to grain production and circulation,and the protection of farmer's interest.Based on theoretical study,case analysis,empirical study and international comparison,this thesis offers a solution to reform and improve the current grain supply system in China,relating to the three systems.In the reform of China's grain production system,the fundamental role of families should be strengthened,while various measures should be taken to make good use of other agents in grain production,to increase the social service to the grain industry,to promote professional education of farmers and to facilitate rural social security system.In the reform of China's grain market system,the priority is to price the grain by the market,while ensuring national food security and the interest of farmers.Reform will also becarried on in the futures market of gain product,to cushion strong fluctuation of grain products.Modern information technology should be used to build the grain supply chain.Measures should be taken build a market system of various players in the retail and wholesale market,and encourage these markets at the need of the government to safeguard national food security.In the reform of the grain policy system in China,a package of laws and regulations should be made to guarantee the proper investment be made by government to research,technique promotion,farmer education and rural infrastructure,to secure grain supply by highly-productive land and advanced-farming technology.