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Right be­fore the Chi­nese New Year, the Min­istry of Fi­nance (MoF) in China re­leased up­dated guid­ance regarding agri­cul­ture in­sur­ance for the country. It has in­creased the pre­mium sup­port to­wards cen­tral and west China, and high­lighted its com­mit­ment in sup­port­ing its ma­jor three crop types: rice, wheat, and corn.

China Upgrades

The guidance, which has been in effect since the start of 2017, sees the cen­tral gov­ern­ment in China covering 40 percent of the crop in­sur­ance pre­mium in cen­tral and west provinces, while for the east area it re­mains at 35 percent. Within counties and districts defined by the MoF as of significant agri­cul­tural importance, coverage will be fur­ther increased up to 47.5%.

More gen­er­ous sup­port from cen­tral gov­ern­ment is meant to fur­ther relieve some of the fi­nan­cial pres­sures experienced by provin­cial, pre­fec­ture, and county-level gov­ern­ments, as the new pol­icy sets a 20 percent pre­mium to be cov­ered by the farmer as the pre­con­di­tion to benefit from the increased support.

With this be­ing in­tro­duced, we believe that two ma­jor changes could take place. The first is the uni­fied pre­mium rate at provin­cial level, which will take the im­pact— and we could then see a county level rate struc­ture emerge. Sec­ondly, the insurance pen­e­tra­tion rate for rice, wheat, and corn, which currently averages around 70 percent in av­er­age, will see a ro­bust in­crease.

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