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Abstract
Based on a case study, this paper analyses China's current price and subsidy policy for
grain and discusses some questions relating to the reorientation of this policy. First, the pricing system
for the grain market, especially that for the state-run grain marketing agencies, is illustrated. Ways of
subsidizing grain and the scale of the subsidy are then analysed. After discussion of the three major
problems inherent in the system and a brief look at recent reform efforts, some points to be considered in
terms of further reform are examined, including the need to modify the way of deciding priorities among
conflicting policy objectives as well as the relationship between the state-set price and the open-market
price. Finally, a proposal is made for gradual abolition of the subsidy and an operational cost-efficient
approach is suggested.