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The Chinese government should again raise direct subsidies to its 600 million grain growers to help in purchasing production materials, said a government agriculture official on Tuesday.

 

Fan Xiaojian, Vice Minister of Agriculture, said the government should extend subsidies on high-quality seeds to more farmers and increase subsidies on farm machinery.

 

The government should convert indirect subsidies into direct subsidies to ensure farmers enjoyed immediate benefits, said Fan at the Third China-Europe Senior Forum on Government Management.

 

The government used to offer billions of yuan in grain subsidies each year to the state-owned grain trading firms so they could purchase grain from farmers at state-set prices, usually higher when the market prices were too low to be profitable for grain growers.

 

But indirect subsidies actually benefited farmers little due to the inefficiency and business losses of grain firms.

 

To spur production and reverse falling output, the government has been offering direct subsidies to grain growers since 2004, after output had dropped for four consecutive years.

 

Growers were paid a total of 11.6 billion yuan (US$1.45 billion) in direct subsidies in 2004 and the amount rose to 17.8 billion yuan (US$2.23 billion) last year.

 

In April, the Ministry of Finance pledged to pay an extra 12.5 billion yuan (US$1.6 billion) in direct subsidies, increasing this year's total to 26.7 billion yuan (US$3.3 billion).

 

The rise was meant to offset higher prices for diesel oil, fertilizer and other production materials, but analysts said the sum was far less than the losses incurred from rising costs.

 

Though China has seen faster development in rural areas in recent years, the gap between its booming cities and the backward countryside is still growing, Fan said.

 

Meanwhile, Chinese farmers should increase the competitiveness of their produce in order to meet the trend of globalization and free trade, he said.

 

"The government should focus its rural policies more on supporting agriculture and benefiting farmers in the coming years." he said.

 

Lifting farmers' incomes and improving national grain security have been listed as government priorities.

 

(Xinhua News Agency June 21, 2006)