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Abstract
Concerned about national grain self-sufficiency and rural household incomes, in 2004
China announced that it was planning to reverse its longstanding policy of taxing farm
households and instead began to provide them with subsidies. Over the past five years,
annual announcements have trumpeted rises in subsidies. Surprisingly, despite the historic
turnaround of policy and the likely implication of this subsidy policy to China’s
grain economy, there has been no household-level survey-based research that has
sought to understand the effect of China’s subsidy programme on household behaviour.
Using data from a national survey of more than 1000 households, we examine in
detail a number of different dimensions of the subsidy programme. According to the
survey-based findings, we have shown that although agricultural subsidies per farm
are low, on per unit of cultivated area basis or total amount of budget, the subsidies
are high. Almost all producers are receiving them. Subsidies are mostly being given to
the land contractor, not the tiller. Most importantly, the subsidies appear to be nondistorting.
No matter if we look at descriptive statistics in tables, scatter plots or
regression analyses, there is no evidence that grain subsidies are distorting producer
decisions in terms of grain area or input use decisions.