Sustainability of the Adjustment Schemes in China’s Grain Price Support Policy—An Empirical Analysis Based on the Partial Equilibrium Model of Wheat

Jingdong Li,Zhouying Song,Weidong Liu

doi:10.3390/su12166447

Abstract

The minimum purchase price policy for wheat and rice implemented by the Chinese government has achieved the fundamental goals of stabilizing grain prices, promoting production, and ensuring food security. This policy has also had negative impacts such as domestic and foreign price spreads and continuous increases in stocks and imports, which are not conducive to China’s grain security development and thus unsustainable. Therefore, this paper builds a partial equilibrium model of China’s grain market by simulating the effects of canceling or reducing the minimum purchase price on the market price, production, consumption, stock, and net import of wheat and then evaluates the sustainability of various adjustment programs. The research results show that first, lowering the minimum purchase price of wheat can reduce the domestic and foreign price spread, stock, and imports to a certain extent; however, it cannot fundamentally solve the negative impact of this policy. Second, cancellation of the minimum wheat purchase price policy can significantly reduce domestic and foreign price spread, stock, and imports; however, it will also significantly reduce wheat production and threaten China’s grain security. Third, cancellation of the minimum wheat purchase price and the increase in agricultural production subsidies can solve the negative impact of the minimum purchase price policy and reduce the impact of the cancellation of the minimum purchase price policy on grain supply security. This policy adjustment is more sustainable than China’s current policy. Finally, this paper asserts that China’s grain price policy reform will influence and have implications for stakeholders in the global grain industry.

Highlights

China is the world’s largest grain producer and consumer, and because of its population size, ensuring grain self-sufficiency is crucial
To ensure food supply security, the Chinese government set a policy intervention objective that the grain supply should be dominated by domestic production and supplemented by imports [1]
Through the estimation results of the equation parameters in the wheat partial equilibrium model, to simulate the effects of gradually reducing the minimum purchase price, only canceling the minimum purchase price policy, and a combination of canceling the minimum purchase price policy and greatly increasing agricultural subsidies on wheat market price, total production, total consumption, stock, and net import, can we explore the impact of various policy adjustment programs on the sustainable development of China’s grain market

Summary

Introduction

China is the world’s largest grain producer and consumer, and because of its population size, ensuring grain self-sufficiency is crucial. To ensure food supply security, the Chinese government set a policy intervention objective that the grain supply should be dominated by domestic production and supplemented by imports [1]. The rapid development of international bioenergy has increased grain demand, impacted the balance of global grain supply and demand, and made the grain market associated with the development of biomass energy. This attribute is called the energy attribute of grain [5]). Because of the minimum purchase price policy of China’s grain, the domestic grain price has risen rigidly and higher than that price abroad [7], and redundant stock has increased; the implementation of the policy has become less sustainable. The continuous increase of net food imports has triggered international public opinion and aroused the Chinese government’s awareness of policy reform

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Results

Discussion

Conclusion