Additional subsidies needed to ensure grain production: state media editorial

Grain production trades off with economic development in the rural area and this requires the central government to further subsidize grain production, according to an editorial in the state-media outlet Economic Times. 

Recently, China’s central government announced 211.5 billion yuan in support for grain production in 2023 to motivate farmers. 

Economic Daily notes that while grain production is key to the country’s food and national security, it has a “limited contribution to economic growth”. The paper further notes that many rural areas have to give up the potentially lucrative income from industrial projects to ensure land is available for relatively low-income farming operations. 

This creates a “food vs wealth tradeoff” and there is a tension between what is better for the country in terms of food security versus what might be best for the local economy.

Due to this situation, the central government has needed to financially incentive farmers and rural counties to produce grain and supplement the income they would have otherwise earned by converting the land to other use. 

The editorial, however, notes this type of vertical, or top-down, subsidization has limits and the central government can’t fundamentally resolve this local tradeoff between economic growth and grain production. 

Instead, the editorial argues that the country should look at “horizontal” subsidization, whereby economically powerful urban food demand centers also subsidize their poor rural counterparts for producing food. 

China continues to face a long-term challenge where its economic growth has meant that food demand, but also land demand, has risen. At the same time, it wants to have a high degree of food self-sufficiency despite having comparatively inefficient farms.