Will China's new maize policy be able to solve its messy maize problem?

Wusheng Yu and Lijuan Cao

No 332851, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: China’s maize sector has experienced major issues in the form of rising costs and domestic prices, increasing domestic production but also increasing imports, and a historically large public stockholding accumulated due to the now defunct maize temporary procurement and stockpiling policy initiated at a time of receding world market prices. To tackle these challenges, the Chinese government replaced abolished the procurement and stockpiling policy with direct producer subsidies, initiated trade remedies such as antidumping and countervailing duties to curb increased imports of substitute products such as DDGS, and started to provide substantial incentives to domestic maize processors. This paper investigates the effects of China’s recent maize policy changes and explores future domestic and trade policy options.The net outcomes of recent reforms are likely to include reduced maize planting areas and production (particularly in Northeast China and Inner Mongolia), slowing build-up of maize stock, continuing imports within China’s TRQ, and possibly faster release of existing stock at subsidized prices, especially to the maize processing industries. In the immediate short run when planting decisions cannot be easily adjusted, it is expected that direct subsidies will become quite substantial to compensate for the loss to producers due to the repeal of the procurement and stockpiling policy. Judging from the size of China’s DDGS imports, anti-dumping and countervailing duties on DDGS imports will likely have modest effect on China’s domestic maize market, whereas the cost associated with the provision of assistance to the domestic maize processing industries may also be substantial. In the longer run, substantial reductions in maize planting area and outputs will be expected to reverse the increasing trend induced by the procurement and stockpiling policy, particularly if the newly introduced direct producer subsidies are effectively decoupled.

Keywords: Crop Production/Industries; Agricultural and Food Policy (search for similar items in EconPapers)
Date: 2017
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