The Chinese Government has recently announced that “the government will let domestic grain prices be decided by the market, with the state’s price support no longer playing a role” (Terazono 2016). This position differs from a year ago when Chinese price support policy was “moving in the opposite direction from developed countries, which are gradually reducing such support” (The Economist 2015). Staring in the early 2000s, “agricultural support… included tax reductions, direct subsidies, price supports, policy loans, expenditure on infrastructure, and intergovernmental transfers” (Gale 2013). One of the key aspects of these policies were government enforced minimum price of crops like grain and corn. The goal of agriculture support was to help develop and modernize the agricultural sector and reduce rural-urban inequality, yet many economist point out adverse effects they had on Chinese agriculture.
As China’s economy rapidly industrialized, it went from taxing farmers to subsidizing the agricultural industry. Zheng Gu points out that according to “development economics… a nation begins to support agriculture when it enters the stage of industrialization” in order to support its industry based economy. (Gu 2014) While Gu claims that many of these policies had a positive effect on farmer’s incomes, thus accomplishing the goal of helping to developing rural areas, others point out that policies that force crop prices to be artificially high make Chinese crops noncompetitive with foreign crops. Therefore, Chinese farmers cannot export their crops on a foreign market and Chinese markets are encouraged to imports cheaper, foreign products. Emiko Terazono claims China’s new agriculture policy will “reduce the incentive to import alternatives” but “could also affect the incentive to plant”(Terazono 2016).