For Chinese farmers, this year's bumper harvest is good cause for optimism. Undoubtedly, the current rise in grain prices will more or less fatten their wallets.

However, for policy-makers, the fact that farmers' income growth is still not fast enough should remain a top concern.

According to the Ministry of Agriculture, China's grain output is expected to exceed 490 billion kilograms this year. It's the first time the country's grain output has risen for three consecutive years since 1985.

Meanwhile, National Bureau of Statistics figures show that the price of grain products rose 4.7 per cent in November.

As a result, the agricultural authorities predicted that the per capita annual income of Chinese farmers would increase by more than 6 per cent this year, the third yearly actual rise of over 6 per cent in a row.

These growth figures, in themselves, are quite impressive given the huge difficulties in raising the income of Chinese farmers.

To boost agricultural production, the Chinese Government has adopted policies to encourage farmers to grow crops, such as exemption of farm taxes and subsidies for growing crops and purchasing agricultural machinery, fertilizers and other materials.

The current growth of farmers' income clearly indicates that these policies are bearing fruit.

Nevertheless, in comparison with that of urban residents, the growth of farmers' income still lags far behind.

Urban residents' disposable income rose by 9.6 per cent to 10,493 yuan (US$1,340) last year and accelerated to 10.2 per cent in the first half of this year. Farmers' net income was only 3,225 yuan (US$412) last year, up 6.2 per cent year-on-year.

When grain prices on the domestic market picked up recently, many expected that farmers would do well from the price hikes. The combination of a 6-per-cent increase in grain output and an above 4-per-cent hike in grain prices, in theory, could easily lead to a double-digit growth in farmers' income.

Yet, the forecast of a mere 6-per-cent growth in farmers' income shows that most of the profits resulting from rising grain prices have not gone to producers.

Instead, as reported, it is the distributors that have taken the lion's share of profits, though originally these State firms were set up to help stabilize the grain market in the interest of farmers.

Policy-makers should attend to this thought-provoking situation. While most of the policies designed to support farmers work fairly well, a small loophole in the regulation of the grain distribution sector can erode deeply into farmers' pockets, which would be much deeper otherwise.

In view of both the absolute income disparity and the relative income growth gap between rural and urban residents, the Chinese Government will surely continue to focus on boosting farmers' income.

To that end, the authorities should facilitate adjustments of all agriculture-related policies to ensure farmers can benefit most from not only the harvest but also the price hike.

(China Daily 12/26/2006 page4)