How do agricultural subsidies affect farmers’ non-grain cultivated land production? Evidence from the fourth rural Chinese households panel data survey

China has a low per-capita availability of arable land. The proportionate revenue generated by grain production has seen a modest increase in contrast to the general progress of the entire country. Since 2004, the Chinese government has openly adopted agricultural subsidy programs to stimulate the enthusiasm of small farmers for cultivating grain. During the early stages of policy implementation, it has a major impact on grain yield, but its impact is reducing. The four-period panel data from the CRHPS are used to empirically investigate the link between agricultural subsidies and non-grain production of cultivated land (NGPCL). The study is carried out to empirically examine Marx’s theory of absolute rent in order to understand the factors that contribute to the weakening of the impact of agricultural subsidy policy. The findings suggest that while the impact of agriculture subsidy policy is decreasing, it still hinders the expansion of the NGPCL. Agricultural subsidies impede the movement of farmers from the agricultural sector to other industries by impacting the fixed rent paid for cultivated land. This, in turn, promotes the persistence of the NGPCL, which could be a significant factor in reducing the effectiveness of agricultural subsidy policies. For households where the householder is in better health, agricultural subsidies inhibit the NGPCL more effectively. At various stages of the family life cycle, agricultural subsidies have a similar impact on the NGPCL. In addition, further study indicates that increasing the precision of agricultural subsidy policy could contribute to a greater impact of agricultural subsidies on the NGPCL. According to the conclusion of the research, we propose the optimal direction for China’s agricultural subsidy policy.