Improving the agricultural product price formation mechanism helps enhance market competitiveness

“The market competitiveness of China's agricultural products is not strong, which requires operating them by industrialized means; this can improve efficiency and thus make it possible to truly enhance the market competitiveness of agricultural products. At present, the overall direction of reform is to gradually reduce administrative intervention and let the market mechanism play its full role.” Tan Yunming, a professor at the Central University of Finance and Economics, said in an interview with a Securities Daily reporter.

The General Office of the CPC Central Committee and the General Office of the State Council recently issued the Comprehensive Implementation Plan for Deepening Rural Reform (hereinafter referred to as the Plan), proposing to improve the agricultural product price formation mechanism and the agricultural product market regulation system.

Mao Xuefeng, an agricultural product price expert at Renmin University of China, said that China's agricultural development faces many problems, but one of the core problems is that the price gap between domestic and foreign agricultural products is too large. At present, the after-tax price of imported agricultural products is 30%-40% lower than domestic ones. China's agricultural products are priced high, so they lack competitiveness in the market, which leads to foreign goods entering the market and domestic goods going into warehouses.

For many years, the temporary grain purchase and storage policy implemented in China has protected farmers' interests while running counter to market laws. Since 2008, due to the effect of the market-support policy, grain prices have risen rapidly. Starting in 2014, the state carried out a target price pilot project for two varieties, cotton and soybeans, “breaking the ice” in domestic agricultural product price reform.

The Plan released this time requires that, according to the importance of various major agricultural products to the national economy and people's livelihood, the method of “implementing policies by variety and advancing gradually” be adopted to improve the agricultural product price formation mechanism. The minimum purchase price policy for rice and wheat should be improved and continued. Following the idea of “separating price from subsidy,” the pilot reform of target prices for cotton and soybeans should continue to be implemented, and the subsidy distribution method should be improved. The corn purchase and storage policy should be reformed and improved. The method of regulating the agricultural product market should be improved, excessive government intervention should be avoided, market circulation should be revitalized, and market vitality should be enhanced.

Everbright Futures believes that after prices are liberalized, the role of the market in determining prices will be better brought into play, and the distortion of market prices caused by long-standing market-support policies such as purchase and storage and minimum protective prices will also disappear. This will make the market more transparent and align prices with the international market.

“Liberalizing agricultural product prices does not mean the government will no longer manage them.” Xu Kunlin, director of the Price Department of the National Development and Reform Commission, said that agricultural product prices are completely formed by the market, and there are no government-priced items. However, after liberalization, the government will adopt various means and measures to stabilize agricultural production, protect farmers' enthusiasm for production, and increase farmers' incomes.