CHINA: ESTIMATES OF SUPPORT TO AGRICULTURE
Contact person: Andrzej KWIECIŃSKI
Email: Andrzej.KWIECINSKI@oecd.org
Tel: (33 1) 45 24 95 08 Fax: (33 1) 44 30 61 19
The Estimates of Support to Chinese agriculture and derived indicators in Table 1 cover all agricultural commodities produced in the country.
Market Price Support (MPS) and Consumer Support Estimate (CSE) by commodity in Tables 2.1 to 2.15 are calculated for the following commodities: wheat, maize, rice, rapeseed, soybeans, peanuts, apple, sugar cane, cotton, milk, beef and veal, pigmeat, sheepmeat, poultry and eggs. Definitions are provided only for basic data sets from which all the other data sets in these tables are derived, following the formula indicated in each commodity table. Specific sources are indicated in bold square brackets.
Level of production and consumption, producer price and reference price for all products as well as budgetary payments are on a calendar year.
All values in the tables presented are expressed in Yuan renminbi (CNY).
(Table 1)
Definitions
I. Total value of production (at farm gate): total agricultural production valued at farm gate prices, i.e., value (at farm gate) of all agricultural commodities produced in the country.
1. Of which share of MPS commodities (%): share of commodities for which MPS is explicitly calculated (in Tables 2.1 to 2.15) in the total value of agricultural production.
II. Total value of consumption (at farm gate): consumption of all commodities domestically produced valued at farm gate prices, and estimated by increasing the value of consumption (at farm gate) of the MPS commodities according to their share in the total value of agricultural production [(II.1) / (I.1) x 100].
III.1 Producer Support Estimate (PSE): associated with total agricultural production, i.e. for all commodities domestically produced [Sum of A to H; when negative, the amounts represent an implicit or explicit tax on producers].
A. Market Price Support (MPS): on quantities domestically produced (excluding for on-farm feed use - excess feed cost) of all agricultural commodities, estimated by increasing the MPS estimated for the MPS commodities according to their share in the total value of production [(A.1) / (I.1)].
1. Of which MPS commodities: sum of the MPS (net of price levies and excess feed cost) for the MPS commodities produced in the country as calculated in Tables 2.1 to 2.15.
Note: Budgetary information related to Sections B-H below for the period 1993-2005 originates from the Ministry of Finance and other sources listed below [1, 2, 3, 4, 5].
B. Payments based on output
1. Based on unlimited output
2. Based on limited output
C. Payments based on area planted/animal numbers
1. Based on unlimited area planted/animal numbers
Direct payments to grain farmers: based on area planted to grains and introduced nationally in 2004, usually at the rate CNY 10 (USD 1.2) per mu (1/15 ha) of area sown to rice, wheat or maize. Funding for this programme was appropriated from the state grain risk fund. The programme was continued in 2005.
2. Based on limited area planted/animal numbers
D. Payments based on historical entitlements
1. Based on historical plantings/animal numbers or production
2. Based on historical support programmes
E. Payments based on input use
1. Based on use of variable inputs
Input subsidy programme: subsidy made to compensate state-owned agricultural input manufacturers’ losses resulting from selling their products to farmers at the state administered price for the purpose of reducing farmers’ production cost. Pesticide, fertiliser and mulching film costs are covered.
“New Variety Extension Payment”: in 2002 the central government launched payments to promote the fine variety of soybean seeds to cover 10 million mu of demonstration fields testing the results of the fine seeds. In 2003, the total acreage of demonstration fields was extended to 20 million mu and the coverage was extended to cover soybeans, wheat and maize. The subsidy was directly paid to farmers participating in the programme with an average payment of CNY 10 for each mu. In 2004 and 2005, this scheme was extended to cover improved seeds of wheat, maize and rice.
2. Based on use of on-farm services
Extension and advisory services: 50% of budgetary expenditures on advisory services has been allocated to this category and the remaining 50% to category J: agricultural schools (see below).
Pest and disease control: 50% of budgetary expenditures on this programme has been allocated to this category and the remaining 50% to category K: inspection services (see below).
3.Based on on-farm investment
On-farm land amelioration: as large part of budgetary allocations for agricultural infrastructure, including those from Agricultural Development Funds, can be considered as on-farm investment, 25% of total budgetary spending on agricultural infrastructure has been allocated to this category (see note under category L for more explanations).
“Payment to Mechanisation of Farming” and “Agricultural Technology Extension Payment”: two minor programmes applied in 2004 and 2005. Both addressed a small number of large farms of sufficient scale warrant mechanisation.
F. Payments based on input constraints
1. Based on constraints on variable inputs
2. Based on constraints on fixed inputs
Agricultural Environment, Water and Soil Conservation: payments launched in 1996 to protect agricultural production resources.
“Grain for green programme”, officially titled the Returning Farmland to Forests Programme: budgetary expenditures commenced in 1999 to encourage farmers to turn fragile agricultural land to forest or pasture. Participating farmers are provided with grains and cash subsidies according to the area of damage-susceptible land they “retire”. For each mu (1/15 ha) retired, farmers in the upstream regions of the Yellow River basin in northern China received yearly 100 kg of grains and CNY 20 (USD 2.4) in cash; and in the upstream regions of the Yangtze River basin they received 150 kg of grains and CNY 20 (USD 2.4) in cash. In 2004, the grain allocation was converted to a cash equivalent. The period for which “retired” land is subsidised is set at two years for land returned to pasture, five years for land converted to “economic” forests and eight years for land converted to “ecological” forests. Free seedlings are also made available for afforestation.
3. Based on constraints on a set of inputs
G. Payments based on overall farming income
1. Based on farm income level
Payments for relief from natural disasters: compensations for natural disasters, i.e. crop failures.
Poverty alleviation programme: payments targeting poor farmers.
2. Based on established minimum income
H. Miscellaneous payments
1. National payments
2 Sub-national payments
III.2 Percentage PSE [100*(III.1)/((I)+(B)+(C)+(D)+(E)+(F)+(G)+(H))]
III.3 Producer NPC. For all agricultural commodities the Producer NPC is estimated as a weighted average of the producer NPC calculated for the individual MPS commodities and shown in Tables 2.1 to 2.15. For each commodity Producer NPC = [domestic price received by producers (at the farm gate) + unit payments based on output] / reference price at the farm gate.
III.4 Producer NAC [1+(III.2)/(100-(III.2))]
IV. General Services Support Estimate (GSSE): total budgetary expenditure to support general services provided to agriculture [Sum (I to O)].
I. Research and development
Budgetary expenditure on research institutions.
J. Agricultural schools (including academies, institutes)
This category includes budgetary expenditure on agricultural schools; farmers’ training payments launched in 2004, and 50% of the budgetary spending on advisory services with the remaining 50% allocated to category E.2 (payments based on use of on-farm services).
K. Inspection services
Budgetary expenditure on inspection services and 50% of budgetary expenditure on the pest and disease control scheme with the remaining 50% allocated to category E.2 (payments based on use of on-farm services).
L. Infrastructure
Infrastructure: budgetary expenditure for the infrastructure improvements schemes, including pollution control, land rehabilitation, water and soil reservation, transport and irrigation infrastructure maintenance and development.
Investment in agriculture-related infrastructural projects is by far the largest component in government’s budgetary support for agriculture and is a major tool for the government to achieve development targets. However, the available budgetary information remains very aggregated and for many programmes the coverage of payments within a given programme is so large that it is impossible to separate precisely:
i) PSE-type payments from those which could be classified as General Services; and
ii) Support to agriculture from support to rural areas in general, including for non-agricultural activities in rural areas.
Therefore, on the basis of available information and in consultation with the Chinese experts, the overall amount budgeted for rural infrastructure has been distributed in the following way: 50% of the total has been allocated to General Services in the category L (infrastructure); 25% of the total has been allocated to category E3 (payments based on on-farm investment; see above) and the remaining 25% of the total has been excluded from the PSE and GSSE calculations under the assumption that this part represents expenditures not serving agriculture.
M. Marketing and promotion
N. Public stockholding
Budgetary expenditure on public stockholding of food grains.
O. Miscellaneous
V.1 Consumer Support Estimate (CSE): associated with agricultural production, i.e. for the quantities of commodities domestically produced, excluding the quantities used on-farm as feed – excess feed costs [(P) + (Q) + (R) + (S); when negative, the amounts represent an implicit tax on consumer].
P. Transfers to producers from consumers: associated with market price support on all domestically produced commodities, estimated by increasing the transfers calculated for the MPS commodities according to their share in the total value of production [(P.1) / (I.1) x 100].
Q. Other transfers from consumers: transfers to the budget associated with market price support on the quantities imported of domestically produced commodities, estimated by increasing the transfers calculated for the MPS commodities according to their share in the total value of production [(Q.1) / (I.1) x 100].
R. Transfers to consumers from taxpayers
Food price subsidies for consumers: budgetary expenditure launched in 1992 to offset the price increases of staple food products for urban consumers. Paid directly as part of wages and salaries. Currently of marginal importance.
S. Excess Feed Cost: associated with market price support on quantities domestically produced and used on-farm as feed as calculated in Tables 2.1 to 2.15.
V.2 Percentage CSE: (V.1)/[(II)-(R)]
V.3 Consumer NPC: For all agricultural commodities the Consumer NPC is estimated as a weighted average of the consumer NPC calculated for the individual MPS commodities and shown in Tables 2.1 to 2.15. For each commodity Consumer NPC = domestic price paid by consumers (at the farm gate)/ border price (also at the farm gate).
V.4 Consumer NAC: (V.2) / [1 - (V.2)]
VI. Total Support Estimate: [(T)+(U)+(V)] or [(III.1)+(IV)+(R)]
T. Transfers from consumers: -[(P)+(Q)]
U. Transfers from taxpayers: [(III.1)+(P)+(IV)+(R)]
V. Budget revenues: [(Q)]
Sources:
[1]. MOF (Ministry of Finance People’s Republic of China), China Financial Yearbook, various editions.
[2]. MOF (Ministry of Finance People’s Republic of China), Outlay Documents of the Ministry of Finance.
[3]. NBSC (National Bureau of Statistics of China), China Statistical Yearbook, various editions.
[4]. ABC (Agricultural Bank of China), Statistical Yearbook of China’s Rural Finance and Banking.
[5]. SSTC (State Science and Technology Commission of China), Statistical Data Collection of Science and Technology, 1995.