Impacts of China's agricultural policies on payment for watershed services

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Published: January 2006
Product code:G00343

This paper describes the evolution of China’s agricultural policies, principally those dealing with food supply, increasing farmers’ incomes, and restoring degraded agricultural lands,
and the policies’ impacts on payments for ecological services. China has many unique environmental, demographic, social and economic features. It is the world’s fourth largest
country and the most populous, supporting 22% of world’s human population. It is biologically diverse, containing 10% of the world’s higher plant species and 14% of animal species, many of them endemic. This diversity reflects the wide variety of ecosystems and diverse climates expected for such a large area. China’s large and multi-ethnic human population – much of which was, until recently, extremely poor, underdeveloped and dependent on agriculture for livelihoods – has posed many challenges in terms of governance, ensuring food security, and fostering orderly economic and social development.
In recent years, China has had one of the world’s fastest growing economies. Since 1990, real GDP has grown at an annual average of 9.7%. China is now the world’s third largest trading economy and the fourth or fifth largest economy overall (depending on how its
currency is valued).
Given the changes in agricultural policies over time, the authors analysed the impacts of these changes on payments for environmental services from the perspectives of government
and the private sector as purchasers of these services. The policies of rigorously protecting arable land (aimed at guaranteeing grain output), and of direct subsidies for grain
production, both negatively affected the establishment of mechanisms for the purchase of environmental services by government and the development of markets for these services.
Therefore, in addition to estimating the real value of environmental services, government needs to push forward with supporting reform measures that will help build environmental
service markets.