China will speed up grain reform before entering WTO

Introduction: Chinese Vice Premier Wen Jiabao promised to speed up grain reform, analysts said on Wednesday, which will make China's high food prices more consistent with the world's before joining the world trade organization But traders say it will take years for food prices to fully liberalize, because China has to protect hundreds of millions of farmers who are overwhelmed by high production costs On Tuesday night, Wen said the government will push forward the reform of the grain circulation system to ensure food security and farmers' income "Through the reform, we hope that the purchase and sale of grain and the price of grain will be determined by the market," Wen was quoted by the state media as saying China also wants to maintain adequate food production capacity and a stronger food storage system " Wen said the reform includes liberalizing grain prices, increasing the state's grain inventory as a means of regulating the market, and supporting farmers to produce specific crops The State Council said on Tuesday that the central grain storage will be increased to 75 million tons by 2002, while the national grain depot, which can hold 10 million tons of grain, has started construction this year An official from the Ministry of Agriculture said in May that China's current grain inventory, including the central and provincial grain reserves, has exceeded 200 million tons Analysts say this is a step in the right direction "The purpose of this reform is to rationally build domestic grain production and prepare for the agricultural industry after China's accession to the WTO," said Zheng Qi, an agricultural analyst at Huaxia Securities China is expected to join the World Trade Organization at the latest in early 2002 * coastal areas Wen said that the government will liberalize grain prices in major consumer areas, especially those in developed coastal areas in East and South China, such as Zhejiang, Shanghai, Fujian, Guangdong, Hainan, Jiangsu, Beijing and Tianjin But traders say China is not ready to liberalise prices in food producing areas "Liberalizing prices in food consumption areas is only the first step," said one trader from the international grain company The reason why the price of grain producing areas has not been liberalized now is that the farmers can not afford it " "China's farmers has higher production costs than overseas," he said "If everything has the final say in the market, some farmers may not be able to sell their own food." China's Grain Bureau sets purchase prices for most types of grain and controls domestic trade, a system that analysts say has resulted in prices 20 to 30 per cent higher than the normal selling prices of farmers Wen said China will increase its support for grain producing areas "This is the key to ensuring the national food supply and making full use of the comparative advantages of food producing areas," he was quoted by state media as saying Last year, China cancelled protection prices for spring wheat in North China, wheat south of the Yangtze River and early rice in the South as part of an effort to encourage farmers to plant higher quality crops "Maybe the reason the government doesn't continue to provide support is because it doesn't have so much money to do so," said a Western diplomat based in Beijing