context: Compliance with WTO rules on farm subsidies takes on even greater importance with the US–China trade war. Expanding farm income insurance coverage in particular can guarantee farmers’ livelihoods via ‘green box’ insurance premium subsidies without encouraging production of unwanted crops or intervening in market pricing. Companies growing grains for seed production are also eligible as of August 2018.

Ministry of Finance (MoF) released ‘Notice on pilot on full cost and income insurance for three major grains’, calling for improvements to ag insurance systems and marketisation of ag production risk control mechanisms. Specifically, the notice stipulates

  • piloting ag production cost insurance or income insurance in 24 major grain producing counties in six provinces (four in each province) over three years, starting from 2018
  • building a small guiding group with MoF, Ministry of Agriculture and Rural Affairs, and China Banking and Insurance Regulatory Commission participation, overseeing
    • pilot county conditions
    • insurance plans
    • subsidy plans
    • safeguard measures
    • ag production data
    • other issues as they arise
  • MoF will allocate funding by 30 September 2018
  • localities should monitor the use of fiscal subsidies; any fraud or misappropriation will be punished

The work plan specifies

  • pilot areas include
    • four corn producing counties in Inner Mongolia and Liaoning; two for cost insurance and two for income insurance
    • four rice producing counties in Anhui and Hubei, piloting cost insurance
    • four wheat producing counties in Shandong and Henan, piloting cost insurance
  • insurance plan
    • cost insurance should cover natural disasters, pest and disease damage, and emergencies
    • income insurance should cover losses due to price and production volatility
  • subsidy standards
    • ag producers should cover at least 30 percent of insurance premium cost
    • central government to subsidise 40 percent for central–western and northeastern regions, 35 percent for eastern and other regions; county-level subsidies are to be cancelled
    • impoverished households can be exempt from insurance premium payment requirements