AGRICULTURAL POLICY REFORM

IN CHINA IN LIGHT OF

OECD’S SUPPORT INDICATORS

Andrzej Kwieciński Development Division, Trade and Agriculture Directorate Landmark Hotel, Beijing, 24 October 2013

2

Country coverage expands

3

Results are published regularly

Support indicators were developed to:

• monitor and evaluate developments in agricultural policies

• have a common base for policy dialogue, domestically and internationally

• provide input into policy impact analysis

OECD: Analysis based on support indicators

4

Producers collectively Producers

individually

Consumers

Taxpayers

Key concepts: Flows of policy transfers

BT incl. revenue foregone

MPS (M) BT

MPS (X)

MPS (M, X)

MPS - Market Price Support BT – Budgetary Transfers M – imported commodity X – exported commodity

%PSE =

Total PSE Gross Farm Receipts

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Key support indicators: Relative indicators

• %PSE: PSE as a share of Gross Farm Receipts

• %GSSE: as a share of Total Support Estimate

• %CSE: as a share of consumption expenditure

• %TSE: as a share of GDP

• NPC (Nominal Protection Coefficient): gap between domestic and border price as a ratio of the border price

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Support to Chinese farmers tends to grow

driven by growing transfers from consumers…

7

-16

-12

-8

-4

0

4

8

12

16

20

24

28

32

36

-80

-60

-40

-20

0

20

40

60

80

100

120

140

160

180

Transfers, billion USD

Transfers from consumers Budgetary transfers

% Producer Support Estimate for China (right scale) % Producer Support Estimate, OECD average (right scale)

% PSE

…and from taxpayers. Area payments became

the largest component of budgetary support

8

0

5

10

15

20

25

30

35

40

45

50

55

Variable input useFixed capital formationOn-farm servicesPayments based on current A/An/R/I, production requiredPayments based on non-current A/An/R/I, production not requiredPayments based on non-commodity criteria

Billion USD

China’s level of support is close to that in

Mexico and Canada

9

0

5

10

15

20

25

30

35

40

45

50

55

60

65

% PSE, 2010-12 average

The level of implicit taxation of the Chinese

consumers is higher than the OECD average

10

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

% CSE, 2010-12 average

In China, the relative importance of transfers

differs across commodities

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-5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Eggs

Peanuts

Apple

Poultry

Rice

Maize

Pigmeat

Beef and veal

Sheepmeat

Soybean

Rapeseed

Sugar

Wheat

Milk

Cotton

% of commodity gross farm receipts

Single commodity transfers, 2010-12 average

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Infrastructure and public stockholding dominate

China’s GSSE, 2010-12 average

China’s Total Support Estimate as % of GDP

remains high…

13

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

-150

-100

-50

0

50

100

150

200

Market Price Support (MPS) Budgetary transfers to producers

General Services Support Estimate (GSSE) Transfers to consumers from taxpayers

% TSE (expressed as share of GDP) - right axis

Billion USD % of GDP

… and is one of the highest among monitored

countries

14

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Australia

South Africa

New Zealand

Chili

Israel

Brazil

Canada

Ukraine

Mexico

EU27

Norway

OECD

United States

Switzerland

Russia

Kazakhstan

Iceland

Japan

Korea

China

Turkey

Indonesia

TSE as % of GDP, 2010-12 average

Evaluation of agricultural policy developments

in China

• China’s support to agricultural producers tends to grow

• Transfers from consumers show strong growth due to:

– Growing minimum purchase prices for rice and wheat

– Expanding range of other commodities subject to market interventions

– Appreciation of the Chinese Yuan

– Net import position for a growing range of commodities which triggers the impact of border measures on domestic prices

• Transfers from taxpayers grow each year, but…

– …to an increasing extent, they are paid at a flat rate per unit of land

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Recommendations

• Enhance efforts to improve rural infrastructure and access to basic public services for the rural population

• Over time, consider shifting from decoupled direct payments to investment in improving the productivity and sustainability of agriculture and food system

• Increase investments in R&D, technology adoption and transfer, farm training and extension services

• Narrow the scope of grains covered by the 95% self-sufficiency target

• Extend agricultural land use rights to match those in urban areas so as to enhance investment

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For more information

• Visit our website: www.oecd.org/agriculture www.agri-outlook.org

www.oecd.org/agriculture/PSE

• Contact us: tad.contact@oecd.org

• Follow us on Twitter: @OECDagriculture

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Trade and Agriculture Directorate