"Institutional reform is the key to increasing farmer's incomes and reducing their financial burdens," Chen Xiwen, an expert at the Development Research Center of the State Council, was quoted by the China Daily Business Weekly as saying.

Reform should include the removal of some 25,000 township governments across China which would also work to invigorate county-level governments while giving farmers a bigger say in village-level management, he said.

Some of the biggest challenges facing China following its expected entry into the WTO early next year are seen as coming from the agricultural sector, on which some two thirds of China's population of 1.3 billion people live.

Competition by foreign imports is expected to be fierce due to China's outdated farming practices, small plots of land, lingering effects from a planned agricultural economy and imperfect market conditions.

"WTO accession will put Chinese farmers in a tight corner as cheaper foreign agricultural products flood in," Chen said.

According to Chinese statistics domestic wheat prices are currently 75 percent higher than that on the international market, while the price of corn is 63 percent higher and the price of cotton is 12 percent higher, the report said.

Such a situation has been due to high central government procurement prices that have been part and parcel of the government's long-term efforts to keep rural incomes rising.

Meanwhile, local governments have often negated centrally-subsidized grain prices by levying "numerous chaotic fees" and increasing taxes on local farmers.

Although China's rural incomes kept pace with double-digit economic growth for much of the 1990s, during the last three years per capita rural income has largely stagnated with rural incomes rising only 2.5 percent in the first nine months of the year, government officials said.

The government views income growth as key to social stability and has pledged to keep rural income growth on a par with growth in per capita urban income, which was up 8.4 percent in the first nine months of 2000.

"The decline in the income growth will hinder the overall economic development and even undermine social stability," Chen said.

The government should free up the labor movements, implement a "tax-for-fee" system and invest in food processing industries which could be used to employ excess rural labor, he said.

According to China's WTO accession protocol, which is still being negotiated in Geneva, China has so far committed to allowing up to US$2 billion of agricultural imports into its market over the first five-years following entry through cuts in import tariffs.

(China Daily 12/11/2000)