A 287-yuan (US$35) grain subsidy handed out during the weekend and an exemption from the agricultural tax will lift Li Shuhai's net profit by 1,000 yuan (US$121) this year. That sum of money may be insignificant for most urban residents, but it is a boon for Li, a grain farmer in northeast China's Heilongjiang Province.

Li Shuhai is one of several hundred million Chinese grain growers struggling to make ends meet.

An official with the Ministry of Finance said it is difficult to give an exact number of recipients, as the subsidies are being paid according to the size of their plots.

The Ministry of Agriculture announced yesterday it would offer subsidies to major grain producers across the country for using selected rice, soybean, wheat and corn seed.

For example, farmers in Heilongjiang Province will get 150 yuan (US$18) for each hectare of high oil-bearing soybeans grown.

“We will grow more grain, better grain in return,” Li Shuhai said after he was paid the subsidy in Heilongjiang’s Gushanzi Village.

The farmer said he is confident his family would earn at least 10,000 yuan (US$1,219) in net profit this year from his two hectares of farmland “if everything goes smoothly.”

Earlier this year, the Chinese government allocated 10 billion yuan (US$1.2 billion) in subsidies from its grain risk fund to the country's grain farmers in 13 major provincial grain-producing areas. The move is an effort to reverse the continuous drop in grain output and sluggish income growth, thus narrowing the now-widening gap between rich and poor.

The 13 grain-producing areas are the provinces of Heilongjiang, Jilin, Liaoning, Hebei, Henan, Jiangsu, Anhui, Hunan, Hubei, Sichuan, Jiangxi and Shandong, and the Inner Mongolia Autonomous Region.

From 1997 to 2003, the per capita income of farmers rose 4 percent annually on average, in sharp contrast to an 8 percent jump in the disposable income of urban dwellers.

Farmers have complained that planting grain crops is less lucrative than growing fruit or raising fish or poultry, which experts fear as a potential threat to the country's food security.

The unprecedented subsidies and grain prices soaring on concerns over grain shortages in the past few months have boosted the interest of farmers in cereal production.

Zhang Xiaoshan, director of the Rural Development Institute of the Chinese Academy of Social Sciences, said the subsidies send a strong message that the state supports grain production.

Wan Baorui, former deputy minister of agriculture, said China used to earmark tens of billions of yuan in subsidies for the state-owned grain distribution and wholesaling sector which, in an indirect way, subsidized grain production.

But grain growers benefited little as they went to the state-owned grain sector, which operated at a loss and had, until recently, a monopoly over grain purchase and the wholesale business, said Wan.

(China Daily April 20, 2004)