Aligning Public Expenditure for Agricultural Development Priorities Under Rapid Transformation : The Case of China

Public expenditure in agriculture is one of the most important policy instruments for government in developing countries to address food security and poverty reduction. This paper provides a comprehensive review of agricultural policy and public agricultural expenditure (PAE) in China. China shifted away from taxing agriculture to supporting agriculture in the mid-2000s, but the sector faces mounting demographic, biophysical, and trade challenges. PAE in China is outpacing that of other developing economies in Asia, but its composition does not align perfectly with the development challenges and priorities the sector faces. In 2012, approximately one-fifth of government PAE was allocated to subsidies, mostly for agricultural inputs. Spending on agricultural research and development (R&D) is insufficient, and its intensity falls below the global average for developing countries. Resources allocated to environmental and food safety issues remain extremely low, negatively affecting the country’s long-term sustainability and external trade position. To promote more equitable growth, China allocated about 18 percent of the 2012 national budget to reduce inequality, but the expenditure favors urban residents. The government also implemented policies to improve rural infrastructure and services. Redistributive transfers like subsidies help to close the rural-urban income gap. Policy recommendations are drawn from the analysis