A unified, open and competitive grain market will be set up in the country, highlighting the role of the market in the distribution of the vital resource.

A newly approved grain trading regulation, which came into force on Wednesday, says grain prices will mainly be determined in line with market supply and demand, while the central government will intensify its macro control over the grain circulation market.

Introduction of the regulation comes hot on the heels of Premier Wen Jiabao insisting that liberalizing grain trading and pricing is the top priority in the reform of the nation's grain distribution system.

It is high time for China to liberalize grain trading in major grain-producing areas, and efforts should be made to improve the grain pricing mechanism, Wen told a national meeting on Tuesday.

According to the regulation, fair competition will be promoted by encouraging economic bodies of various forms of ownership to engage in the grain trading business.

The state-owned trading firms, which dominate the grain market, are being urged to transform their business mechanisms, improve their market competitiveness and continue to play the leading role as the main distribution channel of grain.

The regulation also stipulates the preconditions for grain trading companies to obtain market access and their application procedures as well as their responsibilities, saying qualification checks must be made before they are allowed to enter the sector.

Meanwhile, they must have the required financing capability, necessary grain storage facilities, quality checks and qualified management.

Sources from the Legislative Affairs Office of the State Council said the regulation aims to encourage fair competition in grain trading activities as the country liberalizes its grain business.

According to the regulation, the central government and local governments at various levels will establish grain risk funds to provide farmers with subsidies, offer support for grain reserves and help stabilize the fluctuating grain market.

Emergency measures will be implemented when grain prices are subject to major fluctuations resulting from natural disasters, epidemics or other unforeseen circumstances, the regulation said.

As of this year, China will introduce a nationwide system to offer subsidies directly to grain growers in leading grain-producing areas in order to encourage them to grow more.

The reform will encourage grain production, raise farmers' incomes, stabilize the grain market and ensure national food security, experts say.

While promoting the reform of the nation's grain circulation systems, equal importance should also be attached to opening the grain market and ensuring it operates on an orderly footing, Li Shenglin, vice director of the National Development and Reform Commission, told a national grain work conference.

He urged grain administrative departments at various levels to improve the system of grain market access and intensify their roles in supervising grain circulation.

(China Daily June 5, 2004)