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From taxing to subsidizing farmers in China post-1978

From taxing to subsidizing farmers in China post-1978 PurposeThe purpose of this paper is to document the pace and extent to which China’s policy regime has transitioned over the past four decades from explicitly and implicitly taxing to subsidizing its farmers relative to its producers of other tradable goods; to present projections of the world economy to 2030 that suggest China will continue to become more food import-dependent under current policies and productivity growth rates; and to explore alternative policy instruments for remaining food secure and ensuring that farmers are not losers from economic growth.Design/methodology/approachThe data used to estimate the extent of distortions to producer incentives come from freely available World Bank and OECD sources that allow direct comparisons of China’s policy developments with those of more- and less-advanced economies.FindingsThe estimates of nominal and relative rates of assistance to farmers reveal that China has made the transition from negative to positive assistance to farmers far faster than an average developing country, and almost as fast as its Northeast Asian neighbors did in earlier decades at similar levels of real per capita incomes. That helped to ensure China remained food self-sufficient during the first two decades of reform; but self-sufficiency is now declining and is projected to continue to do so over the next decade under current policies.Research limitations/implicationsPreventing food self-sufficiency from declining further by increasing agricultural protection would be very costly, and is now unnecessary, thanks to the information and communication technology revolution that enables the government to directly support the well-being of poor farm households with conditional cash transfers.Originality/valueThis review of indicators of distortions to agricultural incentives in China is based on estimates of nominal and relative rates of assistance and consumer tax equivalents that are in the public domain. Its originality is in presenting the estimates for China in a comparative perspective, showing how they have evolved over time and as real per capita incomes have grown, and relating that to developments in China’s self-sufficiency in agricultural and food products. The paper also points to more-efficient ways of achieving societal objectives than using policy instruments that distort producer and consumer prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Agricultural Economic Review Emerald Publishing

From taxing to subsidizing farmers in China post-1978

China Agricultural Economic Review , Volume 10 (1): 12 – Feb 5, 2018

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1756-137X
DOI
10.1108/CAER-10-2017-0196
Publisher site
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Abstract

PurposeThe purpose of this paper is to document the pace and extent to which China’s policy regime has transitioned over the past four decades from explicitly and implicitly taxing to subsidizing its farmers relative to its producers of other tradable goods; to present projections of the world economy to 2030 that suggest China will continue to become more food import-dependent under current policies and productivity growth rates; and to explore alternative policy instruments for remaining food secure and ensuring that farmers are not losers from economic growth.Design/methodology/approachThe data used to estimate the extent of distortions to producer incentives come from freely available World Bank and OECD sources that allow direct comparisons of China’s policy developments with those of more- and less-advanced economies.FindingsThe estimates of nominal and relative rates of assistance to farmers reveal that China has made the transition from negative to positive assistance to farmers far faster than an average developing country, and almost as fast as its Northeast Asian neighbors did in earlier decades at similar levels of real per capita incomes. That helped to ensure China remained food self-sufficient during the first two decades of reform; but self-sufficiency is now declining and is projected to continue to do so over the next decade under current policies.Research limitations/implicationsPreventing food self-sufficiency from declining further by increasing agricultural protection would be very costly, and is now unnecessary, thanks to the information and communication technology revolution that enables the government to directly support the well-being of poor farm households with conditional cash transfers.Originality/valueThis review of indicators of distortions to agricultural incentives in China is based on estimates of nominal and relative rates of assistance and consumer tax equivalents that are in the public domain. Its originality is in presenting the estimates for China in a comparative perspective, showing how they have evolved over time and as real per capita incomes have grown, and relating that to developments in China’s self-sufficiency in agricultural and food products. The paper also points to more-efficient ways of achieving societal objectives than using policy instruments that distort producer and consumer prices.

Journal

China Agricultural Economic ReviewEmerald Publishing

Published: Feb 5, 2018

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