Impacts of Public Agricultural and
Rural Support Programs on Chinese Food Economy:
A General Equilibrium Approach

XU Shiwei, ZHANG Yumei,
DIAO Xinshen, CHEN Kevin Z

Agricultural Information Institute, Chinese Academy of Agricultural Sciences；
Key Laboratory of Digital Agricultural Early-warning Technology, Ministry of Agriculture
International Food Policy Research Institute, Washington, DC 20006, USA

Abstract:
Chinese government has significantly increased their public spending on agricultural subsidy and rural education agricultural R&D, irrigation, in the recent years. These public spending is likely to affect not only agriculture and rural sector, but also other sectors in the economy. Public spending also has different impacts on food security through different channels. In this paper, a dynamic computable general equilibrium (DCGE) model is developed to analyze economy-wide impacts of different types of public spending in China. A particular focus is placed on their impacts on food economy. The effects of increased agricultural subsidy, R&D, irrigation and rural education are simulated by using China DCGE model. The results show that those public spending have significant impacts on food production, price, and trade. The increased public spending on agricultural R&D, irrigation, agricultural subsidy and rural education also has modest impacts on other sectors such as industry, service, and GDP growth. All types of public spending except agricultural subsidy have positive impacts on economic growth. All types of public spending have contributed to the increased food production, though investment in rural education has rather minimum effect. Increased spending on agricultural R&D, irrigation, and agricultural subsidy improves self sufficiency ratios for rice, wheat, maize, and bean. Increased spending on agricultural subsidy contributes to the increased prices for rice, wheat, and maize modestly, while increased spending on irrigation and R&D contributes to drops in prices of rice, wheat, and maize. In terms of income, increased spending on agricultural subsidy and rural education has positive effect on farmers’ income, while increased spending on agricultural R&D and irrigation has negative effect on farmers’ income. It is particularly interesting to note that the increased spending on agricultural subsidy has negative effect on urban households’ income, while urban household benefit a lot from irrigation and R&D investment for more cheap food. In term of rates of economic return, investment on rural education has the highest, followed by agricultural R&D and irrigation. While in terms of grain production effect, investment on R&D has the largest impact on increasing grain production, followed by irrigation and rural education.

Key words: CGE model, public spending, food security