Liberalization not part of China's grain reforms

by Teresa Acklin
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   China's commitment to reforming its grain marketing system will not include opening the system up to private trading. In a speech in November at a national forum in Beijing, Premier Zhu Rongji stressed that only state-owned grain procurement and reserve companies were permitted to buy grain from farmers and that purchases by private traders should stop immediately.

   Grain is of great importance to China's national economy, the premier said. Of China's population of 1.2 billion, an estimated 900 million are farmers. “Therefore it is vital to maintain stability in grain production and distribution,” Premier Zhu said.

   Past liberalization of China's grain markets led to sharp price fluctuations and threatened social stability, he said.

   Local grain bureaus can establish grain procurement and reserve companies as independent accounting units, but should be responsible for their own profits and losses, Premier Zhu said.

   “We must build a capable, incorruptible and highly efficient contingent of cadres in grain companies,” he said. “State-owned grain companies should try to provide convenience for farmers to sell their grain, set up temporary procurement stations, improve their service attitude, strictly prohibit themselves from lowering grain grades and prices, and occupy grain procurement markets actively.”

   He added that private grain companies were allowed to participate in other parts of the grain sector, such as processing and marketing finished products.

   But according to a recent report by the U.S. agricultural attache in Beijing, grain prices in China appear to be falling despite the government's efforts to reform its grain marketing system. The price of corn in China in November was down 9% from the month earlier, the report said. “The price of corn has been dropping steadily from a high of RMB1,305 (U.S.$158) per tonne in June shortly after the new grain reforms were announced,” the attache said. “What these prices indicate, after adjusting them for the price of drying, handling and shipping corn from the production areas in Dalian is that farmers are not receiving the ‘protected' price for their grain, which the government has directed the grain the bureaus to pay for them.”

   Many feed mills have reported buying corn at lower prices, both from the government and private traders, the attache said.

   While there was little new information in Premier Zhu's speech, the attache said, “it was noteworthy for the simple fact that this was the fourth time in nine months that the issue has been given such prominence by the Premier.”