Analysing levels of China's agricultural domestic support with an optimising model

Abstract

The paper analyses the impacts of alteration of agricultural domestic supports on state welfare adopting partial equilibrium theory. In order to find out the appropriate levels of agricultural domestic supports in China, a nonlinear programming approach was utilised, based on constraints of the annual financial budget and the Uruguay Round Agreement on Agriculture, to build an optimisation model for levels of China agricultural domestic support was built to aim at the maximum welfare. The result shows that the maximum levels of China “amber box” support are 50 billion dollars from welfare maximisation in the international agricultural product trade. The amber box support is about 174 billion RMB yuan according to the de minimis levels of China with 8.5%. The national annual budgetary expenditure for agriculture was 175.445 billion RMB yuan approximately in 2003, the amber box support of which was only 55.143 billion RMB yuan.