Grain distribution companies should play more of an important role in the development of China's agriculture, according to Liu Xianlu, a deputy from Jilin Province to the 10th National People's Congress.

Liu is the general manager of the Jilin Grain Corporation: a state-owned enterprise, founded in 1996 with 25 subsidiary companies, 10 shareholding companies and total assets of 8.56 billion yuan.

"The farmer is the core problem of agriculture in these areas: how to raise their income and solve the employment issue," he said, in an exclusive interview with China.org.cn

As the price of farm produce has been consistently low in recent years, farmer's confidence has dropped. The government has responded by securing farming interests by setting a protective price policy for grain producers which guarantees a minimum price for certain grain types.

"But the problem is that 40 percent of the government's agricultural subsidies are given to some grain distribution companies," Liu said, urging the government to explore more ways to subsidize farming, for example, seed production and farming machinery. He said that the protective price policy has made farmers dependent on government assistance.

"The price of farm produce should be set according to the demands and supply of the market. Farmers should adjust agricultural structure to develop technology-intensive production according to market demand while grain distribution enterprises should shoulder the responsibility of conveying market information to farmers, helping them to sell grain in both domestic and overseas markets," he said.

He said it would also be possible to reduce risks by hedging goods in the futures market.

At the moment rural surplus labor goes to the cities and creates pressure there. Liu believes that the farmers should stay put. He was critical of the government for driving farmers to the cities to look for work.

"Modern farmers should learn the technology to enable farming as well as market information. The very important thing being that if they learn these models and use the relationships between processing producers and distribution companies, they will prosper," Liu told China.org.cn.

His company set up experimental agribusiness in Fuyu County, Jilin Province last year. The grain corporation signed a renting contract of the land of 82 local households. Farmers can get 2,500 yuan for 10 mu (0.66 hectare) by selling operational rights to the company and paying no tax or fees. "Our company helps farmers to develop industry on their land," he said.

He concluded that it was possible to raise farming income and solve the employment surplus issue but that it needed further cooperation from the government with policy support and market instruction.

Grain circulation companies in strengthening their links with the farmers would not only increase farming income and help the employment issue but would also strengthen the domestic agricultural infrastructure in China in line with competitive demands made by the membership of the WTO.

(China.org.cn by Staff Reporter Tang Fuchun, March 11, 2003)