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Nailene Chou Wiest
Shanghai, Apr 5: China's exhortation on last Monday to keep staple grains under tight state control served only to highlight the dismal results of the farm reforms launched a year ago, analysts and industry sources said.
The impending harvest of winter wheat would put more strain on the financially strapped system and policy modifications were likely to follow, they said.
"When Beijing tells provinces to carry out the policy, it is the last effort before changing direction," a foreign analyst said. The Futures Daily reported on Monday that senior officials of the State Planning Commission reiterated that the state monopoly on wheat, rice and corn must be strengthened and private dealings stamped out.
Government grain bureaux, under farm reforms instituted in 1998, have to buy all the grain farmers want to sell, but they may not resell grain at a loss.
With a bumper crop last year and economic uncertainties weakening demand, the grain bureaux were hard pressed to recoup the purchasing and storagecosts, industry sources said.
For example, the China Grains and Oils Market News has reported that Henan, a major wheat producing province in central China, sold only 900 million kg of the 5.56 billion kg of grain bought since last April and faced crippling interest costs.
But Beijing has invested a lot of political capital in the grain reforms and it was loath to admit failure, another foreign analyst said.
The reforms were aimed at reducing the government's financial losses, but they appeared to have grown worse, he said.
"Beijing puts blame on the local authorities for not patrolling private dealings of grain," he said. Allowing more private participation, in fact, could go a long way to alleviate the burden on the state grain system, he said.
A report by the US Department of Agriculture estimated the grain bureau system was posting 14.5 million yuan ($1.8 million) a month in purchase, storage and loan servicing costs, as well as maintaining a bureaucracy that employed four millionpeople.
Chinese grain market sources said they were unsure whether Beijing was ready to shift gear, but they said the difficulty of implementing the policy in its existing form was increasing.
In the face of slowing economic growth, townships and villages, which operate many of China's food processing plants, were circumventing the rules and continued buying grains from farmers, a wholesale grain dealer said.
"The policy has contradictions," he said. "People have been confused from the beginning."
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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