Price controls hold China's farmers back
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Q: In order to safeguard national food security, China intentionally suppresses the food production by various measures. How do you view this? Should the domestic prices be in line with the international level?
Zhang: As China's agricultural productivity is lower than the world average, it is fair enough that the domestic grain prices should be higher than international food prices. However, as China intentionally lowers the domestic prices, there is a price inversion.
This has greatly dampened the enthusiasm of farmers for growing grain, which brings further food shortages. Another problem caused by artificially lowering grain price is grain smuggling. It also accelerates the supply shortage.
In the long run, China should gradually liberalize food prices and bring them in line with global standards. Once control over prices is eliminated, the income of the farmers will increase and the domestic demand will be boosted.
Because of low profits and a flawed rural social security network, our farmers don't dare to spend money. Once price controls are eliminated, the rural consumption will increase.
