Beijing reviews grain acquisition amid rising corruption

Beijing reviews grain acquisition amid rising corruption

Staff Reporter

2013-08-26

A group of China’s government agencies and scholars, led by the National Development and Reform Commission, are reviewing policy reforms dealing with grain acquisition, the Beijing-based Economic Information Daily reports. Discussions have yet to reach a consensus, although the direction will most likely move toward market-oriented policy, protecting the interest of farmers and reducing intervention in the market, said Li Guoxiang, a researcher at the Rural Development Institute of the China Academy of Social Sciences. Government acquisition concerns the minimum purchase price of wheat grain and rice, and the temporary storage of corn, soybeans and rapeseed. When market prices are lower, the government buys grain in order to protect the interests of farmers and boost confidence in growing grains. In recent years, acquisition prices have continued to rise, exposing a number of shortcomings.The biggest problem in government acquisition is distorted market prices, and the continuous rise of acquisition prices stiffens grain prices. The bizarre economic result is a large volume of imported grain simultaneous with large government purchases of domestic grain.

The stable rising of the minimum grain purchasing price has significantly mobilized farmer confidence and increased their income. Bur overall, market prices of major grains in the purchasing program tend to be higher than the international market average, and the temporary storage prices of soybeans far above average.

The temporary storage policy has resulted in the lack of competitiveness and a decline of domestic supply.

The government controls most of the grains on the market with their purchasing program, but excessive grain storage will result in the low utilization of finances and the inefficient use of resources.

In the acquisition system, China Grain Reserves, which is the main body responsible for carrying out the policy, has exploded with corruption cases in recent years. Recently, prosecutors dug out 100 suspects allegedly using acquisition fund pools to rob state funds of more than 700 million yuan (US$114 million).

Analysts said the government can add more agencies to balance the power, while separating policy-related businesses and operating businesses. If the conditions mature, the government can learn from the target price subsidy system adopted in the US.

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