| By financial grain subsidy we mean the voluntary transfer of part of economic revenue on the part of the government to the subject of the micro-economy (the owner of the farm or cereal farmer) to protect the productive passion of the farmer by means of changing the prices of the grain products and production factors to bring about income effects and substitution effects as a measure to make up for the failure or insufficiency of the mechanisms of the market. In the current world, granting grain subsidy is an important policy adopted by numerous countries, especially by the more developed countries, for the aim of protecting and promoting agriculture. The present trend is to shift support in price to that in income. With the entry of our country into the WTO and the deepening reform of the grain flow sector, the previous indirect subsidy practice in grain price also need reform and improvement, in order to secure the safety of grain provision of this country and the function of the government in macro regulation and control.I. The Importance of the Grain Subsidy by the GovernmentFirst of all, as special commodity and strategic material, its limited elasticity of demand determines that the government has to give grain subsidy to regulate and control the market prices and protect production.Secondly, the nature of grain as a public product, would, without support from outside, lead to its decreased supply. Therefore, the government has to grant its grain subsidy in order to narrow down the insufficiency of the economic benefits.Thirdly, considering the low economic benefit of grain production, the government, in terms of protecting the farmer's interest, need to give grain subsidy to maintain the stability of the rural areas.Fourthly, in terms of protecting the agricultural sector, the Chinese government, to strengthen the international competitive power of the home grain products and prevent the Chinese agriculture from the impact coming from outside, should also provide grain subsidy, which has been proved sound by the experience of the developed countries.Fifthly, to secure abundant source of grain and have the ability of regulating and controlling the market, grain subsidy is also imperative.II. The Status Quo of Our Grain Subsidy we take, and Problems We Will Face1. Throughout the history of grain subsidy, China has adopted a policy of granting subsidies to grain enterprises, i.e. intermediate links, which is in essence subsidies to the consumers, an indirect way. 2. The price-protection-centered grain subsidy policy in China has quite a few disadvantages of, for instance, being against the law of marketing value, being astray from the right bodies of protection, and low effect, thus the State bears a heavy burden while the enterprises sustain heavy losses.III. The Country's Grain Subsidy Policy Needs Reform and Improvement.Before anything else, the subsidy policy of the country calls for reform. To begin with, the financial departments at all levels can hardly stand the burden; secondly, it is unfair to protect the state-owned enterprises when the grain market is open; it is a pressing task to adjust the grain production structure and increase the income of the farmers; fourthly, the grain subsidy policy of China has to be in line with the regulations of the WTO after her entry into it.On the second hand, the direct grain subsidy is a natural solution. In view of the worldwide general direction, direct subsidy is a trend; moreover, the implementation of the indirect subsidy has been proved unsatisfactory, therefore direct subsidy is a necessary choice; thirdly, the regulations of the World Trade Organization demands direct subsidy.IV. My Proposals for the Direct Grain Subsidy Approach in ChinaFirst of all, China has to have the right principle of grain subsidy for the current stage. The policy should be subject to the changes of the situation. The experience of European countries tells us that our efforts should be focused on: 1. effective protection of the far...
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