PUBLIC INVESTMENT AND CHINA'S GRAIN PRODUCTION COMPETITIVENESS UNDER WTO

China's accession to the WTO poses great challenges to the Chinese agricultural sector, especially to the grain producers. Compared with major grain exporters in the world, most grain crops in China are high in production cost and weak in market competitiveness. This can be partly attributed to the fact that Chinese farmers are facing with poorer agricultural production infrastructures and inadequate public investment in agricultural research and extension, which leads to the lower efficiency in private inputs and thus higher private cost per unit of product. After China joining the WTO, protective and administrative measures conflicted with the URAA cannot be utilized as before. Alternative measures should be explored to provide help to farmers to improve competitiveness of their product. Public investment in agricultural research and other production infrastructures should be considered with high priority as one of the policy alternatives. This paper examines the effects of public investment in agricultural research on the reduction of production cost of major grain crops in China by using crop-specific data for the past 20 year. It is concluded that, increasing public investment in agricultural research, which is well within the "green box" policy framework and allowed by the WTO rules, is a plausible and effective measure to reduce grain producer's private input and to enhance the competitiveness of grain products. It is also of great significance to sustained food security in China