Institutional constraints on agricultural production are an important
feature of the Chinese rural economy that restrict the mobility
of productive resources and influence the structure of agricultural
production.
The following table provides a brief overview of the
Chinese government's main policies that affect agricultural land,
labor, and input use.
Summary of policies affecting China's
agricultural inputs and factors of production |
Measure |
Description |
Collective land ownership |
Agricultural land is owned collectively by villages. Each
household in a village is allocated a share of the village's
land to cultivate. At present, households cannot sell their
land but they are allowed to rent it to be cultivated by other
farmers. Local authorities can sell farmland or convert it
to nonagricultural uses. In such cases, compensation is paid
to villagers. |
Migration restrictions |
China's national household registration system has historically
limited rural-urban migration by preventing rural residents
from legally residing in cities. In addition, cities often
exclude migrants from social services and may have local
regulations, taxes, or fees that discourage rural migrants.
Cities are gradually relaxing these restrictions and the
national government is encouraging migration to small towns
and "satellite cities" on the outskirts of large
metropolitan areas. |
"Grain for green" |
Farmers cease cultivation of environmentally fragile land
in exchange for in-kind payment of grain. |
Seed subsidies |
In 2004, the national government began giving subsidies
for purchase of grain and soybean seeds that are considered "high
quality." These include soybeans with high oil content,
corn for industrial use, and wheat with high protein. Subsidies
are offered only in selected major grain-producing counties
and are paid to seed dealers, which should pass the savings
on to farmers. Growers of other commodities, such as cotton
and rapeseed, are now eligible for seed subsidies. |
Machinery subsidies |
In 2004, China began giving subsidies for purchase of
farm machinery. Subsidies are paid to machinery dealers,
which should pass the savings on to farmers. |
Dairy breeding stock subsidy |
In 2005, the national government announced subsidies for purchase
of dairy breeding stock. |
Breeding sow subsidy |
Farms can receive a fixed payment for each breeding sow
and subsidized insurance. |
Fertilizer and input subsidy |
The national government attempts to control increases
in fertilizer prices and pays a subsidy to grain farmers
to compensate them for rising costs of fertilizer, fuel,
and other inputs. |
Water and irrigation policies |
The national government provides preferential loans for construction
of water-saving irrigation and water control projects, field
irrigation, drainage works, and rural drinking water projects.
Irrigation use of water is metered and controlled by quotas.
The national government subsidizes purchase of water-saving
equipment by farmers in selected areas. |
