What Does "Grain-Finance Inversion" Mean? Understanding This Phenomenon in One Article

According to a report by China National Radio's "CNR News," a recent survey report by the China Well-off Society Construction Research Association states that among China's 800 major grain-producing counties, 105 are national-level poverty-stricken counties, with a poor population of 36 million. The phenomenon of "grain-finance inversion" between grain output and county-level fiscal capacity is very pronounced.

It should be said that "grain-finance inversion" is indeed a widespread phenomenon, and "major grain-producing counties, financially poor counties" has long attracted the attention of governments at all levels, including the central government. An important characteristic of major grain-producing counties is that farmers have relatively more arable land per capita and agricultural production conditions are good. From the perspective of grain production, this is of course a good thing, especially in terms of commercial grain production. However, places with more arable land per capita do not necessarily have locational advantages. And places with locational advantages, such as the Pearl River Delta and the Yangtze River Delta, although they have good agricultural production conditions and high grain yields per mu, have historically been densely populated areas with very little arable land per capita. Only those areas with relatively good agricultural production conditions but relatively remote locations and relatively late development will have both large amounts of high-yield arable land and relatively small agricultural populations, resulting in more arable land per capita and more commercial grain output, thus becoming major grain-producing counties. Without locational advantages, industrial and commercial development is slow, and tax revenue from industry and commerce is low. After the abolition of the agricultural tax, the state no longer collects agricultural taxes and fees from farmers either. Major grain-producing counties lack both tax revenue from industry and commerce and tax revenue from agriculture, so of course their finances are poor.

⟦NL> Major grain-producing counties being financially poor counties does not mean that farmers' incomes are low. Nationwide, farming households have generally formed a household livelihood model of "half work, half farming based on intergenerational division of labor," with farming household income mainly relying on two parts: the work income obtained by young adult children who migrate to cities for employment, and the agricultural income obtained by middle-aged and elderly parents who stay in the villages to farm. In recent years, farmers' work income has grown relatively quickly, becoming the main source of growth for farming household income. As for major grain-producing counties, because farmers have relatively more arable land per capita, farming households' agricultural income is relatively higher, and because agricultural income is relatively high, ordinary farming households generally face less pressure to go out to work, and the proportion of work income in household income is lower than the national level. A high proportion of agricultural income in farming household income also means that farming households are more intact.

To change the situation of major grain-producing counties being financially poor counties, a common suggestion is to promote industrialization and urbanization. The problem is that industrialization and urbanization have their own internal laws, and artificial promotion often backfires. Not only is fiscal capacity not strengthened, but because of the disruptions, the basic stability of the local economy is affected. In other words, industrialization and urbanization are being promoted and developed in all regions of China today. This promotion and development has its own laws, has a very weak relationship with whether a place is a major grain-producing county, and has a very strong relationship with location.

Major grain-producing counties are the foundation of China's food security and also the key focus of agricultural modernization. The central government has always attached great importance to building grain production capacity in major grain-producing counties. Various agricultural modernization construction projects have also been mainly directed toward major grain-producing counties. In recent years, major grain-producing counties have also been actively advancing the pace of agricultural modernization. The problem is that the current local understanding of agricultural modernization is often large-scale operation based on corporate management, and state funds supporting agriculture have been mainly directed toward agricultural companies that go to the countryside to compete with farmers for land and profits. We must be clear that agricultural modernization is not modernization that excludes farmers, but modernization for farmers.

There are more than 2,000 county-level administrative regions nationwide, which can be roughly divided into three major categories: first, counties with good locational advantages, a good industrial base, and strong fiscal strength; second, counties with relatively many resources and average economic development; and third, counties in old revolutionary base areas, ethnic minority areas, border areas, and poor areas. Major grain-producing counties mostly belong to the second category, among which the greatest resource is arable land. It is just that compared with resources such as coal and water conservancy, having more arable land per capita, because the agricultural tax has been abolished, means local finances cannot benefit from agricultural development. But farmers do benefit from these resources. According to the aforementioned survey by the China Well-off Society Construction Research Association, among China's 800 major grain-producing counties, 105 are national-level poverty-stricken counties. Compared with nearly 600 poverty-stricken counties among the more than 2,000 counties nationwide, the proportion of poverty-stricken counties among major grain-producing counties is far lower than the national average. China's poverty-stricken counties are mostly concentrated in the old revolutionary base areas, ethnic minority areas, border areas, and poor areas mentioned above.

An important reason for major grain-producing counties being financially poor counties is that the state abolished the agricultural tax. Since the state abolished the agricultural tax, it should increase fiscal transfer payments to major grain-producing counties. It should be said that in recent years, the state's transfer payments to major grain-producing counties have been relatively large, and these transfer payments are mainly used to improve grain production capacity, which is correct. The problem is that, in addition, the state should also transfer funds to major grain-producing counties to cover the gap in their general fiscal expenditures. Local governments should also note that the state's transfer payments for improving grain production capacity construction should not only be used to develop large-scale operations dominated by industrial and commercial capital, but should mainly be used to improve the production conditions of ordinary farming households, provide better socialized services for ordinary farming households, make it more convenient for farmers to carry out agricultural production, and continue to obtain returns from agriculture.