13th Five-Year Plan reform of agricultural input mechanism launched, agricultural subsidies to be adjusted
“13th Five-Year Plan” reform of agricultural input mechanism launched
Expand the scale and scope of “green box” policies, clean up and integrate some transfer payments
A reporter from the Economic Information Daily recently learned that in response to problems such as the obvious inversion of domestic and external prices of some major agricultural products, huge agricultural product inventories, and low returns for farmers from farming, the state will carry out a series of reforms of the subsidy system and the ways in which agriculture-related fiscal funds are invested during the “13th Five-Year Plan” period.
Regarding China's agricultural subsidy reform measures for the period ahead, multiple experts disclosed that the focus will be on adjusting government subsidies that distort production and trade (a type of “amber box” policy), and gradually expanding the scale and scope of “green box” policies. The agricultural subsidy reform pilot recently launched is an important practice; specifically, it merges China's current three main agricultural subsidy policies - the crop improved seed subsidy, the direct subsidy to grain farmers, and the comprehensive agricultural input subsidy - into an “agricultural support and protection subsidy”, with the policy objective adjusted to support farmland fertility protection and appropriately scaled grain operations.
As for the ways in which agriculture-related fiscal funds are invested, the reporter learned that the focus is to establish a mechanism for stable growth of agricultural and rural input, but agriculture-related transfer payment funds that are “small, scattered, and chaotic” and have insignificant effects will be sorted out; agriculture-related special funds with similar objectives and similar investment directions will be integrated, while expenditures for which local governments have an information advantage in management will be allocated as a lump sum under general transfer payments.
Tu Xinquan, executive dean of the WTO Research Institute at the University of International Business and Economics, told the reporter that constrained by fiscal pressure, the proportion of agricultural subsidies among current WTO members is relatively low, and developed countries believe China's level of agricultural subsidies is too high. When China joined the WTO, it promised that agricultural subsidies could not exceed 8.5% of agricultural output value, but subsidies for some of China's products have already crossed that limit.
This situation is mainly caused by the squeezing effect of rising domestic grain production costs. At the same time, because the inversion of domestic and external prices of agricultural products is severe, imported agricultural products are pouring into the Chinese market in large quantities, causing large backlogs of major agricultural product inventories. Taking corn as an example, according to calculations, as of now China's temporary storage corn surplus is at the level of 150 million tons. Because the shift of planting areas for soybeans, cotton, miscellaneous grains, and others to corn is becoming increasingly obvious, according to forecasts by the National Grain and Oils Information Center, China's corn surplus this year is expected to reach more than 200 million tons for the first time.
The agricultural subsidy reform pilot merges the three main agricultural subsidy policies that have been implemented for 11 years into one. In response, an expert told the reporter that in many places at present, some farmers can receive subsidies even if they do not grow grain. But large grain-growing households, family farms, farmer cooperatives, and other new types of operating entities that actually engage in grain production find it difficult to obtain subsidy support beyond their own contracted farmland. After the three subsidy policies are combined, 20% of the existing comprehensive agricultural input subsidy funds will be used to support appropriately scaled grain operations, and the other 80% plus the direct farmer subsidy and crop improved seed subsidy funds will be used for farmland fertility protection. The subsidy recipients are all grain-growing farmers who hold farmland contracting rights, which can truly achieve “whoever grows grain benefits”.
Regarding reform of the ways in which agriculture-related fiscal funds are invested, Wang Dehua, associate researcher at the National Academy of Economic Strategy of the Chinese Academy of Social Sciences, told the Economic Information Daily reporter: “Cleaning up, integrating, and regulating agriculture-related transfer payments is closely connected with the reform of China's overall fiscal transfer payment system. China's special transfer payments are too numerous and too excessive, which has long been criticized by all sectors.” Wang Dehua said that cleaning up and integrating special transfer payments is a key point of China's fiscal and tax reform. In fact, many problems with special transfer payments are concentrated in agricultural fiscal subsidies, while the main problem with agricultural fund input is multi-channel input. “For the grassroots, doing one thing often involves funds from multiple ministries and commissions. The phenomena of being small, scattered, chaotic, and fragmented are serious.”
⟦NL> Precisely because problems with agriculture-related fiscal funds occur frequently, audit departments have also made auditing agriculture-related fiscal funds one of their key tasks. Taking the audit report released by the Nantong City Audit Bureau in mid-May this year as an example, 7 Nantong municipal-level high-efficiency facility agriculture projects in Rudong County, Nantong City, engaged in violations such as substituting old for new, consolidated applications, and early demolition to fraudulently obtain subsidies, involving nearly 4 million yuan in fiscal subsidy funds at the county and municipal levels.
In addition, a staff member of an agricultural bureau in a county in a western region told the reporter that the purposes of special transfer payment funds allocated by higher-level governments to the grassroots are specified too narrowly, while higher-level governments do not fully understand local specific conditions, often resulting in places that need money having none, with obvious mismatches. “Moreover, special transfer payments also require local matching funds. For places with fiscal difficulties, requiring them to provide matching funds is tantamount to adding to their burden.” Experts believe that for expenditures where local governments have an information advantage in management, allocating them as a lump sum under general transfer payments and giving local governments more discretion in the use of funds will help improve the performance of fund use.
Wang Dehua also said that from the perspective of farming households, the vast majority of current subsidies focus on incentivizing them to rapidly increase output. This fund orientation may lead farmers to abuse pesticides and reduce soil fertility. “Large-scale use of pesticides and chemical fertilizers can indeed ensure grain output growth within one or two years, but in the long run it harms food security.” Wang Dehua said that the direction of agricultural subsidies has a guiding role that cannot be ignored.