China's grain production will increase 15.6 billion kilograms to 546.4 billion kilograms this year as farmers' per capita net income grows 10 percent to 5,800 yuan ($865.7), according to a statement released at the conclusion of the central rural work conference which concluded here Wednesday.

Despite floods and drought, the country's grain production will increase for the seventh consecutive year, according to the statement.

Vice premier Hui Liangyu attended the annual central rural work conference, which mapped out policies for next year's development of agriculture and rural regions.

Minister of Agriculture Han Changbin said the increase in grain production this year is more than expected and supports the nation's overall economic growth.

Further, people's living conditions and public services in rural areas have improved, according to the statement.

The statement said the country overcame various difficulties, including natural disasters and abnormal price fluctuations in the agricultural commodities market, to achieve remarkable progress in 2010.

In the coming year, the government will step up research and development into water conservation projects while keeping grain supplies stable, increasing farmers' incomes and deepening rural reforms.

Senior officials of the State Council, China's cabinet, and provincial-level officials attended the conference.

At the Central Economic Work Conference earlier this month, policy-makers agreed to increase subsidies for agricultural production and steadily raise minimum grain purchase prices.

They also agreed to boost investment in the major grain-producing areas and water conservation facilities.

The central government has invested 828.3 billion yuan ($123.63 billion) to boost grain production and combat natural disasters in 2010.

Natural disasters, including earthquakes, floods, droughts, freezing temperatures, snowstorms, strong winds, hail and landslides, have hit China this year.

In the first half of the year, natural disasters left 3,514 people dead and 486 missing, while affecting 20.29 million hectares of farmland and destroying 3 million hectares of crops.

China will also strive to boost the farm product market by improving circulation channels and building efficient sales networks. The government would crackdown on hoarding and speculation to stabilize the market, said the statement.

Further, the government would work to improve people' s livelihoods in the rural area, while water conservation would be one of China' s major tasks in agricultural work, it said.

REMAINING CHALLENGES

Despite continual increases in China' s annual grain output, agricultural experts and observers believe that the country is still facing conspicuous challenges that might weigh on its path to sustained development, especially in times of massive urbanization and industrialization.

Reducing farm production, decreasing cultivated land, and production imbalances are among the top concerns in China' s agricultural development, said observers.

In China, although the government continues increasing direct subsidies to farmers to encourage grain production, the exact amount is far from an effective boost. According to the current policy, Chinese farmers could be paid 40 to 50 yuan for growing a mu of crops, but compared with the average output, they only receive less than 0.05 yuan for each kilogram of the harvest.

"The subsidy is utterly inadequate, and certainly resulted in very limited motivation," said Zhen Fengtian, a professor of agriculture and rural development works with the Beijing-based Renmin University of China.

In Dehua County of southeast China's Fujian Province, up to two-thirds of its 310,000 population are living in its town area, leaving 30 percent of the arable land uncultivated.

Liu Zhiyang, chief of the local Land and Resources Bureau, said only the sick, elderly, and women have remained home to do farm work, and they have little knowledge of technologies and are not able to achieve high outputs.

Moreover, rapid urbanization and industrialization, which resulted in massive land development, has caused decreases in arable land.

Data has shown that China witnessed a drop of 123 million mu in the country's arable land from year 1997 to 2007, while the country's 13 major farm producing provinces produced up to 77.1 percent of the country's total grain output in 2009.

"China's growing reliance on northern region's grain production has raised concerns about the country's grain safety and the balance between food demand and supply," warned Chen Xiwen, director of the office for the Communist Party of China Central Committee's Leading Group on Rural Work, in a published article.

China is also facing growing food demands due to citizens' rising living standards, and as grain imports rise, fluctuations in international grain prices would have more influences on the domestic market, which might in turn have a impact on China' s farm production and even the nation's macro-economic performance.

Chinese Premier Wen Jiabao once pointed out that China should work to boost agricultural modernization and push forward technology advancement so that the agriculture sector could increase its production capacity, anti-risk capability and competitiveness in the international market.