1.The background and main content of policy
During the 11th Five-year Plan period (2006-2010), the reform of China's grain circulation system made remarkable progress. The reform was carried forward in a steady manner, following the basic principle of "liberalizing the market, providing direct subsidies to grain farmers, transforming the mechanism of enterprises, maintaining market order and strengthening macro-regulation and control". The reform of the grain circulation system gradually shifted its focus to providing subsidies to grain farmers, strengthening macro-regulation and control and improving facilities for logistics and storage.
In May 2006, the State Council issued Opinions on Improving Policies and Measures for the Reform of the Grain Circulation System. The document set down a string of policies to promote the reform of the grain circulation system. The Decision on Major Issues Concerning the Advancement of Rural Reform and Development approved by the Third Plenary Session of the 17th CPC Central Committee in October 2008 asked to increase subsidies for grain farming by a big margin year by year, steadily raise the minimum purchasing prices for grain, improve the price formation mechanism for grain and other major farm products, rationalize price relations and give full play to the role of market prices in boosting grain production and farmers，earnings. It also asked to continue to open the market, stimulate circulation and improve links between production and marketing. The document urged efforts to improve regulation and control of the market for farm products, increase farm produce reserves and speed up the development of a modern logistics system for grain. The Documents No. 1 of the CPC Central Committee in recent years made specific requirements for the reform of the grain circulation system.
2. Implementation of the policy and evaluation
During the 11th Five-year Plan period, various localities and departments earnestly implemented the policies and measures of the CPC Central Committee and the State Council concerning grain, deepened system reform, strengthened macro-regulation and control, pushed for the development of logistics and administration in accordance with law, worked to ensure grain supply and market stability. Their efforts made great contributions to national food security and stable and fairly rapid growth of the national economy.
1) The reform of grain purchase and marketing was further deepened.
First, a new grain circulation system led by state-owned grain enterprises with the participation of plural players took shape. During the 11th Five-year Plan period, the "three olds" problems of state-owned grain enterprises were almost solved and 494,000 workers had been moved to other jobs. Hidden debts incurred in grain transactions of policy nature were moved to grain administration departments for settlement. A total of 99.7 billion tons of "old grain" were sold off. Some 25.1 billion yuan of hidden debts incurred in operations of state-owned grain enterprises were removed.
At the end of 2010, the number of state-owned grain enterprises was further reduced to 16,549 with better corporate structures and more rational geographical distribution. These enterprises became more competitive. Their total assets amounted to 829.16 billion yuan and total net assets 93.67 billion yuan, an increase of 35.23 billion yuan and 96.78 billion yuan respectively compared to the end of the 10th Five-year Plan period (2001-2005). In the past five years, a profit of 9.01 billion yuan was achieved , 89.7 billion yuan higher than the 10th Five-year Plan period, when there was a deficit.
At the same time, other players on the grain market saw rapid development as well. At the end of 2010, there were more than 70,000 market players qualified for grain purchases in the country.
Second, changes in the functions of grain administration departments were promoted. Grain administrative departments at various levels speeded up reform to promote the separation of the government from the enterprise and to regulate the relationship between government macroregulation and business operations of enterprises. The grain administrative departments' work was directed to macro-regulation and control, supervision and guidance and services. Grain enterprises were indeed allowed to make their own managerial decisions and be responsible for their profits and losses.
Third, the grain price formation mechanism was further improved. As the prices of grain were determined by demand and supply, when prices were too low, farmers' interests were protected through the enforcement of minimum purchasing prices for grain, temporary purchase and storage and subsidies for purchases. When grain prices were too high, auctioning of grain of a policy nature was held to stabilize the market.
Fourth, the development of the grain market system picked up pace. The development of markets for the purchasing, retail sale and wholesale of grain and for grain futures was carried forward in a steady manner. Their businesses became bigger, their regional distribution optimized and their services improved. National online markets for grain auctions were established and improved, which played an important role in allocating grain resources and in serving macro-regulation and control.
2) Macro-regulation and control measures were strengthened and improved.
First, the minimum grain purchasing prices were steadily raised and grain purchase policies were properly implemented. The state raised the minimum purchasing prices year by year, taking into consideration grain production costs, demand and supply, price trend and the economic situation. In 2010, the minimum purchasing prices of wheat and rice were raised by 25% to 40% compared to 2005. Also raised were minimum prices for grain in temporary purchases and storage. The state constantly improved planning for grain minimum purchasing prices and for temporary purchases and storage and implemented in earnest the various policies on grain purchase. The efforts stabilized the market and at the same time protected the interests of farmers.
Between 2006 and 2010，various grain enterprises purchased 1,314.3 billion tons of grain (unprocessed grain), including 710.6 billion tons by state-owned grain enterprises, an increase of 23% compared to the previous five-year period. The remaining 603.7 billion tons were purchased by other market players. Between 2006 and 2010, 267.4 billion tons of grain and edible oil were purchased by market-supporting policies such as the minimum purchasing price, temporary purchase and storage and price subsidies, effectively boosting increases in grain production and farmers' earnings.
Second, efforts were made to maintain supply and stabilize prices. Between 2006 and 2010，relevant departments put in 244.92 billion tons of grain and 702,000 tons of edible oil of policy nature on the market in a balanced way. In 2010 alone, 81.33 billion tons of grain and 502,000 tons of edible oil of policy nature were sold. Enterprises for national grain reserves were ordered to stop purchasing grain when grain prices were too high.
At the same time, a platform was set up to promote links between grain production and marketing and regional balance in grain supply. Between 2006 and 2010, 31.4 billion tons of grain of policy nature was moved across provinces to boost stock in certain areas. A cooperation mechanism between grain producers and dealers saw continuous development. During the five years, 75 billion tons of grain were sold through cooperation agreements. These measures effectively ensured grain supply and price stability, playing an important role in managing inflation expectation.
Third, grain storage was enhanced and storage was more regionally balanced. Administration of central grain reserves was further enhanced and the mix and geographic distribution of grain reserves were improved. The proportion of edible oil and soybeans was raised in central reserves. Grain storage in the Southwest and Northwest was boosted. Taking advantage of bumper harvests in recent years, efforts were made to increase local grain and edible oil reserves. Local grain and edible oil reserves raised by 26% and 208% respectively compared to the end of the 10th Five-year Plan period. Small packed processed grain and edible oil reserves were developed and raised for emergency needs.
Fourth, the grain statistical system, market information system and contingency system were improved. Statistics of grain purchases, sale and stock, statistics of grain and oil processing industry, and surveys on supply and demand were conducted in an orderly manner. Mechanisms of reporting the purchases of grain of a policy nature by five days, rice market monitoring by 10 days, and reporting the temporary purchase and storage of rapeseeds and special sale in the Northeast by month were set up. A grain emergency response system was established. Various localities had designated 3,521 enterprises for emergency grain processing and 11,142 enterprises for emergency grain supply. These emergency response measures effectively ensured grain and edible oil supply during low temperatures in the South, the Wenchuan earthquake, the Yushu earthquake, and the landslide in Zhouqu.
3) The modem grain circulation industry saw rapid development.
First, infrastructure for grain circulation was further improved. During the 11th Five-year Plan period, the funding of grain circulation infrastructure construction shifted from sole state investment toward investment by enterprises with the help of subsidies from the central and local finances. The central finances spent 10 billion yuan, and local finances and enterprises put in 70 billion yuan in the five years for the construction of grain storage facilities, the development of grain logistics facilities and the transformation of warehouses.
At the end of 2010, the country had a grain storage capacity of 320 million tons, 23.1% higher than at the end of 2005; an edible oil storage capacity of 11.784 million tons, up 145.3%; a grain drying capacity of 71,000 tons per hour, up 47.9%; and a grain transit capacity of 477,000 tons per hour, up 53.9%.
The "grain storage by rural households with scientific methods" project produced notable achievements. About 2 million new type small-scale granaries were built for farmer households, avoiding a loss of 255,000 tons of grain for farmers.
Second, the grain and oil processing industry saw rapid growth. Large-scale grain and oil processing enterprises achieved a total output value of 2,500 billion yuan in 2009, accounting
for 49.7 % of the total output value of the entire food industry. The total output value was 270% higher than that of 2005. These enterprises had sales of 2,300 billion yuan, 250% higher than 2005. They achieved 250 billion yuan in profit and taxes, 320% higher than in 2005.
Third, a system for scientific and technological innovation in grain and edible oil sector took shape. Investment in grain-related science and technology totaled 6.1 billion yuan in the five years for the support of 510 projects and yielded more than 400 research achievements. Research institutions in the grain sector and enterprises applied for 201 patents. Breakthroughs were made in storage，information technology and biology. Research results won 73 national-level awards, including one first prize and four second prizes of the national science and technology advance awards.
Fourth, grain enterprises with industrial management saw rapid development. During the 11th Five-year Plan period, the State Administration of Grain and the Agricultural Development Bank designated more than 1,000 key grain enterprises for support. The number of large-scale state-owned grain enterprises reached 929. The industry chain was expanded and improved, boosting increases in farmers' earnings, corporate profits and the development of the grain circulation sector.
Fifth, the "safe grain and oil" project was carried forward. More than 170,000 points of sale of safe grain and oil were set up across the country, including more than 60,000 in rural areas. More than 95% of the products they sold were up to standard.
4) Administration of grain by law and grain-related services were improved.
First, the development of the legal system for grain circulation was carried forward. Grain departments formulated supplementary rules for the Grain Circulation Management Ordinance and the Central Grain Reserves Management Ordinance. Various localities speeded up grain legislation and formulated local regulations and rules, providing a basis for administration of grain by law. The Grain Law had been included in the legislative program of the 11th National People's Congress. Research on and drafting of the law progressed smoothly.
Second, the grain supervision system was gradually improved. By the end of 2010, all grain departments at provincial level had established grain supervision and inspection institutions, 84.1% of grain departments at city level and 71.8% of grain departments at county levels had done so. A total of 25,900 people obtained qualifications for grain law enforcement. Grain supervision and inspection became a regular, institutionalized and standardized practice. In
2009, 10 departments under the State Council carried out checks on grain in storage. In 2010, experiments were carried out on checks on edible oil in storage.
Third, the grain quality monitoring and testing system was almost complete. By the end of 2010, there were 793 grain and edible oil testing institutions under grain departments at various levels. During the five years between 2006 and 2010, 379 national grain and oil standards were examined and approved or submitted for examination and approval. Within this period, 84 industrial standards for grain and oil were formulated and released, and 53 industrial standards were abolished. National standards for important products such as rice and wheat and national standards for testing methods were put into use.
Every year, the State Administration of Grain carried out sample quality checks on at least 25% of storage points of central grain reserves and on a certain number of storage points of local grain reserves. Grain departments in various localities carried out universal quality checks on local grain reserves. The checks helped promote the quality of grain in storage and storage conditions.
Fourth, work to examine and approve qualifications of grain purchasers and storage agents for central grain reserves was strengthened. At the end of 2010, there were 87,500 qualified grain purchasers and 1,906 qualified storage agents for central grain and edible oil reserves. The storage agents had a total storage capacity of 95.65 million tons. The geographic distribution of storage agents was rationalized.
In the 12th Five-year Plan period, the reform of the grain circulation system faces many challenges.
First, the reform of state-owned grain enterprises needs to be deepened. After the disintegration of the traditional rural grain purchase and sale network dominated by grain depots and staple food control offices, a new properly regulated grain purchase and sale network that would facilitate grain sale by farmers has yet to be established. State-owned grain enterprises still need to tackle problems left over from the past and to boost their role as the market leader and to improve competitiveness.
Second, macro-regulation and control become more difficult. Domestically, there are outstanding problems with the regional distribution of grain and the mix of grain varieties. The country also sees growing consumption of grain and edible oil. On the other hand, links between the domestic and international markets are becoming closer. As grain prices fluctuate on the international market, domestic market price control becomes more difficult.
Third, grain supervision becomes an arduous task. Supervision becomes more difficult as the market becomes diversified with an increasing number of players. As the general public has higher demands for grain quality safety, the grain supervision and inspection system and quality safety system need to be further improved.
Fourth, grain circulation infrastructure needs to be improved. The regional imbalance of grain and oil storage facilities, the lack of emergency facilities in urban areas, the aging of grain storage facilities in grassroots grain depots are among the outstanding problems. Bulk grain transportation and grain circulation infrastructure remain unable to meet the needs of protecting farmers' interests, promoting grain macro-control and developing a modem grain circulation industry.
