Grain Pricing

Abstract

In China, as in other countries, grain prices act as a link between consumers and producers and across economic sectors. Higher grain prices can raise farm incomes, but they reduce the purchasing power of consumers. By encouraging production and discouraging consumption, they can also reduce the need for imports. In addition, grain prices can alter the flow of resources between industry and agriculture. Grain pricing thus influences the rate and composition of economic growth, the level and distribution of income, economic stability, and national selfreliance. Consequently, implicit in grain price policy are choices among the national economic objectives of growth, equity, stability, and national security. An examination of grain pricing in China reveals an additional linkage. In China a close relationship exists between food pricing, including grain pricing, and public finance. In China's socialized economy, the profits and losses of industrial and commercial enterprises have, at least until recently, entered directly into the state budget. Through its effects on enterprise profitability, then, agricultural pricing influences state revenues and expenditures. China's price policies, by keeping the prices of agricultural products low relative to industrial products, have enhanced industrial profitability and thus benefited state coffers. At the