IDEAS home Printed from
   My bibliography  Save this article

What Drives China’s New Agricultural Subsidies?


  • Lopez, Rigoberto A.
  • He, Xi
  • De Falcis, Eleonora


China’s agricultural policy has undergone a fundamental transformation in the four decades since the introduction of market reforms in 1978 and now involves a wide array of policy instruments that range from output and input subsidies to public infrastructure expenditures. This article analyzes the political-economic determinants of China’s agricultural subsidy changes using producer subsidy equivalents (PSEs) drawn from annual data from 1984 to 2015 on 16 agricultural commodity sectors that include multiple policy instruments. Empirical results indicate that national factors, such as high rates of economic growth and a lower share of agriculture in the economy, have been the primary drivers of increases in PSEs, and that larger, more geographically concentrated agricultural sectors are more likely to be subsidized at a higher PSE rate. Finally, China’s joining the World Trade Organization in December 2001 led to significant increases in PSEs that were not already explained by internal national or commodity-specific factors. In essence, China’s agricultural subsidy programs and levels increasingly resemble those of developed countries, primarily as a result of economic transformation and the ability to structure agricultural policies within the WTO rules. Moreover, this article predicts that agricultural subsidies will trend slightly upward in the next decade and that the strongest opportunities to export to China will be in animal products or grains that are utilized for feed or processed foods, where the levels of subsidies are predicted to increase but remain lower than for traditional food crops.

Suggested Citation

  • Lopez, Rigoberto A. & He, Xi & De Falcis, Eleonora, 2017. "What Drives China’s New Agricultural Subsidies?," World Development, Elsevier, vol. 93(C), pages 279-292.
  • Handle: RePEc:eee:wdevel:v:93:y:2017:i:c:p:279-292
    DOI: 10.1016/j.worlddev.2016.12.015

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Wang, Xiaxin & Shen, Yan, 2014. "The effect of China's agricultural tax abolition on rural families' incomes and production," China Economic Review, Elsevier, vol. 29(C), pages 185-199.
    2. Beghin, John C & Kherallah, Mylene, 1994. "Political Institutions and International Patterns of Agricultural Protection," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 482-489, August.
    3. Rigoberto A. Lopez, 2001. "Campaign Contributions and Agricultural Subsidies," Economics and Politics, Wiley Blackwell, vol. 13(3), pages 257-279, November.
    4. Magee,Stephen P. & Brock,William A. & Young,Leslie, 1989. "Black Hole Tariffs and Endogenous Policy Theory," Cambridge Books, Cambridge University Press, number 9780521377003.
    5. Frank Fuller & Dermot Hayes & Darnell Smith, 2000. "Reconciling Chinese Meat Production and Consumption Data," Economic Development and Cultural Change, University of Chicago Press, vol. 49(1), pages 23-44.
    6. Zhuang, Renan & Abbott, Philip, 2007. "Price elasticities of key agricultural commodities in China," China Economic Review, Elsevier, vol. 18(2), pages 155-169.
    7. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    8. Ma, Hengyun & Rae, Allan N. & Huang, Jikun & Rozelle, Scott, 2004. "Chinese animal product consumption in the 1990s," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(4), pages 1-22.
    9. Lin, Justin Yifu, 1990. "Collectivization and China's Agricultural Crisis in 1959-1961," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1228-1252, December.
    10. Zhi Da & Wei Yang & Hayong Yun, 2016. "Household Production and Asset Prices," Management Science, INFORMS, vol. 62(2), pages 387-409, February.
    11. Liverpool-Tasie, L. S. L. S. & Omonona, B.T. & Sanou, A. & Ogunleye, W., 2016. "Fertilizer Use and Farmer Productivity in Nigeria:," Food Security Collaborative Policy Briefs 234952, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    12. Huang, Jikun & Wang, Xiaobing & Rozelle, Scott, 2013. "The subsidization of farming households in China’s agriculture," Food Policy, Elsevier, vol. 41(C), pages 124-132.
    13. Gardner, Bruce L, 1987. "Causes of U.S. Farm Commodity Programs," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 290-310, April.
    14. Roodman, David, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 1-51.
    15. Jikun Huang & Fangbin Qiao & Linxiu Zhang & Scott Rozelle, 2000. "Farm Pesticide, Rice Production, and Human Health," EEPSEA Research Report rr2000051, Economy and Environment Program for Southeast Asia (EEPSEA), revised May 2000.
    16. Barigozzi, Francesca & Ma, Ching-to Albert, 2018. "Product differentiation with multiple qualities," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 380-412.
    17. Oecd, 2016. "Online Product Safety: Trends and Challenges," OECD Digital Economy Papers 261, OECD Publishing.
    18. Sullivan, John & Wainio, John & Roningen, Vernon, 1989. "A Database For Trade Liberalization Studies," Staff Reports 278178, United States Department of Agriculture, Economic Research Service.
    19. Honma, Masayoshi & Hayami, Yujiro, 1986. "Structure of agricultural protection in industrial countries," Journal of International Economics, Elsevier, vol. 20(1-2), pages 115-129, February.
    20. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    21. Gawande, Kishore & Hoekman, Bernard, 2006. "Lobbying and Agricultural Trade Policy in the United States," International Organization, Cambridge University Press, vol. 60(03), pages 527-561, July.
    22. Wusheng Yu & Hans G. Jensen, 2010. "China’s Agricultural Policy Transition: Impacts of Recent Reforms and Future Scenarios," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 343-368, June.
    23. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    24. Yumiko Taba & Yasunori Ishii, 2016. "Product R&D Investment Policies in an International Duopoly," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 574-582, May.
    25. Aslan, Hadiye & Kumar, Praveen, 2016. "The product market effects of hedge fund activism," Journal of Financial Economics, Elsevier, vol. 119(1), pages 226-248.
    26. R. Lopez & I. Hathie, 2000. "The Structure of Government Intervention in African Agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 37(1), pages 57-72, October.
    27. Jeroen Klomp & Jakob de Haan, 2013. "Conditional Election and Partisan Cycles in Government Support to the Agricultural Sector: An Empirical Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(4), pages 793-818.
    28. Liu, Chih-Chen & Mukherjee, Arijit & Wang, Leonard F.S., 2016. "Product market cooperation, entry and consumer welfare," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 277-280.
    29. Amir Ikram & Qin Su & Muhammad Yasir Rafiq & Ramiz-Ur-Rehman, 2016. "Time series modelling for steel production," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(3), pages 191-207, July-Sept.
    30. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:men:journl:v:3:y:2017:i:1:p:29-43 is not listed on IDEAS


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:93:y:2017:i:c:p:279-292. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.