The grain sector plays a crucial role in China's agriculture. The government has intervened heavily in grain marketing, markets, and price formation. The objectives of market and price intervention are to secure farmer incomesa nd ensure consumer food supply at low prices. The economic reform started in 1979 has provided farmers with more freedom to take advantage of free markets, but consumers are still heavily subsidized in food consumption. Grain marketing will be further liberalized, but the government will be in dilemma, given its unwillingness to raise consumer prices of food grains in the short run.