Regulation and Policy 

New Measures Taken to Reform Grain Distribution System (June 15, 1999)

The Chinese government has announced a series of new measures in a bid to further reform its grain distribution system and push the state-owned grain firms to become more market-oriented. 

The new reform package includes promoting adjustment of the mix of farm produce, relinquishing administrative protection for prices of grain and exercising a limit on financial aid to state-owned grain enterprises. 

The announcement came as a result of a national meeting on reforms last week, when Premier Zhu Rongji urged governments at all levels to earnestly carry out the measures.

Describing the move as an important follow-up of the reform measures taken last year, Zhu said he expected that. it will help cope with new problems which have emerged during the past 12 months. 

Since the central authorities began a reform of the grain distribution system last May, remarkable progress has been made nationwide in protecting farmers' interests and ensuring normal grain production, Zhu said. 

During the reform process, the state has exercised administrative protection for grain prices, asked state-owned grain enterprises to improve management to stop losing money and strictly prohibited the misuse of funds for grain purchasing appropriated by the government. "Those measures have been well carried out," Zhu said, noting that state-owned grain enterprises have begun to pull themselves out of the heavy losses and farmers have been encouraged to expand grain production, factors which are of huge significance to the nation's economic development and social stability.  

"While the reform is in line with the demands of developing a market economy and is correct, we should have a deeper understanding of the new situation and the problems which have emerged at this time," Zhu told the officials participating in the meeting. 

As China has witnessed good grain harvests for the past four consecutive years, grain supply has generally met or outstripped demand, leading to mounting stockpiles and increasing pressure on the state's fiscal expenditure. 

Zhu said that it is now an urgent task for farmers to improve the mix of grain crops and the government should adopt relevant policies and measures to speed up the improvement.

The premier said that the central government has decided to reduce administrative protection for the prices of a range of grain varieties that are oversupplied and  poor in quality. 

"Prices for state purchasing of such grains will be lowered this year in an attempt to send a signal to producers and make them aware of market demand, and the government will then phase out protection for prices of those varieties next year," Zhu said. 

Meanwhile, Zhu again vowed to turn state-owned grain distribution enterprises into profitable ones by putting a lid on the amount of government subsidies for them, which will also help alleviate the burden on state budgets. 

"Grain enterprises should operate in line with the market and increase their competitiveness, and should not merely live off government subsidies," he warned. 

The premier also asked government departments to tighten supervision over the grain market and take strict measures to maintain normal order. 

Vice premier Wen Jiabao also addressed the meeting, which was held by the State Council, China's top governing body, on May 13 and 14.