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Sustainability of the Adjustment Schemes in China’s Grain Price Support Policy—An Empirical Analysis Based on the Partial Equilibrium Model of Wheat

Jingdong Li (), Weidong Liu () and Zhouying Song ()
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Jingdong Li: Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, China
Weidong Liu: Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, China
Zhouying Song: Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, China

Sustainability, 2020, vol. 12, issue 16, 1-21

Abstract: The minimum purchase price policy for wheat and rice implemented by the Chinese government has achieved the fundamental goals of stabilizing grain prices, promoting production, and ensuring food security. This policy has also had negative impacts such as domestic and foreign price spreads and continuous increases in stocks and imports, which are not conducive to China’s grain security development and thus unsustainable. Therefore, this paper builds a partial equilibrium model of China’s grain market by simulating the effects of canceling or reducing the minimum purchase price on the market price, production, consumption, stock, and net import of wheat and then evaluates the sustainability of various adjustment programs. The research results show that first, lowering the minimum purchase price of wheat can reduce the domestic and foreign price spread, stock, and imports to a certain extent; however, it cannot fundamentally solve the negative impact of this policy. Second, cancellation of the minimum wheat purchase price policy can significantly reduce domestic and foreign price spread, stock, and imports; however, it will also significantly reduce wheat production and threaten China’s grain security. Third, cancellation of the minimum wheat purchase price and the increase in agricultural production subsidies can solve the negative impact of the minimum purchase price policy and reduce the impact of the cancellation of the minimum purchase price policy on grain supply security. This policy adjustment is more sustainable than China’s current policy. Finally, this paper asserts that China’s grain price policy reform will influence and have implications for stakeholders in the global grain industry.

Keywords: wheat price; policy adjustment; sustainability; partial equilibrium model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2020
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