China's New Subsidy Policy for Corn Producers: Does It Alleviate Market Distortions?

ABSTRACT This paper examines China's corn subsidy policy reform, aiming to provide insights for future policy adjustments and optimizations in China and other developing countries facing similar agricultural subsidy challenges. It constructs a partial equilibrium model of corn supply and demand to assess the effects of policies such as the temporary reserve program and producer subsidy on production, trade, and subsidy allocation, using cross‐country corn supply and demand data from 1990 to 2020. The findings reveal several key insights: First, both the temporary reserve program and producer subsidy distort corn production and trade, with the producer subsidy causing less distortion. Second, transitioning from the temporary reserve program to a producer subsidy can reduce policy costs by 7–15%, while maintaining the same level of corn self‐sufficiency. Third, within WTO rules, China can increase corn self‐sufficiency with minimal costs by limiting producer subsidies and investing in agricultural R&D to boost yield per unit area, which cause minimal distortion to production and trade. This study highlights that, under open market conditions, the price support policy is ineffective in ensuring food security in developing countries such as China. Instead, the producer subsidy and agricultural R&D subsidy, which are exempt from the Aggregate Measurement of Support (AMS) calculation, may offer developing countries a practical way to balance WTO compliance and domestic food security.