China is moving to replace decades-old agricultural subsidies with a more flexible pricing mechanism, as domestic harvests in the world's largest grain importer are expected to see their 11th consecutive year of growth.

Experts say the change will not endanger food security nor result in steep price drops in major agricultural products.

Decisions to scrap the minimum purchasing price for rice, the temporary storage policy for soy and cotton and other agricultural subsidy policies were made on Wednesday at a State Council executive meeting led by Premier Li Keqiang.

Under the new policy, the government will set up a target price for each kind of major agricultural product. Farmers will receive subsidies from the government when the market price is below the target, while low-income groups will receive subsidies when the market price sours.

The reform, which aims to restore a market-oriented pricing mechanism, as domestic grain prices are usually above the global price, will be conducted first from selected areas and particular types of agricultural products.

According to a statement released after the meeting, soy and cotton will be first in line to test the concept before the policy is applied to other major agricultural products, such as wheat, rice and corn.

China gradually has set up various subsidy policies since 2004 to shore up grain prices and protect the motivation for farming.

These subsidies, along with the removal of the agriculture tax, have somehow contributed to the country's decadelong growth of grain output. But analysts argued that the minimum purchasing price, which is much higher than the market, has resulted in a considerable price discrepancy between the domestic and global markets.

This year, the government increased its mandated minimum purchasing price for wheat by 70 percent to ensure food security.

As Wednesday's meeting pledged more market involvement in the pricing of agricultural products, the central government's responsibility for price controls will be mainly seen with "grains, cotton, oil plants and sugar plants", the statement said.

"Under the premise of self-sufficiency and food security, policies on imports and exports and the storage of grains will be adjusted to prevent steep price fluctuations," it said.

"The harvest of the summer grain crop this year is settled,... but the shortage of storage rooms has become a problem," the statement said, pledging that the country will build another 100 billion metric tons of storage capacity by 2015.

Gao Fang, vice-president of the China Cotton Association, said linking subsidies to target prices can protect the interests of farmers while nurturing a market-oriented pricing mechanism. She rebutted the allegation that the change will dent the motivation of farmers.

The Ministry of Agriculture said it expects higher output of winter wheat and early-season rice this year, which will bolster food self-sufficiency and ease worries about food security.

China's annual grain output in 2013 reached 601.9 million tons. China's grain output increased 134 million tons between 2000 and 2012, accounting for nearly one-third of the total increase of the global food harvest.

New polluting projects barred from regions

Coal-fired power plants and other highly polluting energy projects will not be allowed in major economic engine areas of coastal China under the country's plan to redistribute its industrial layout.

The State Council's executive meeting decided on Wednesday to prohibit any new high-pollution and high-consumption power projects in the Beijing-Tianjin-Hebei triangle as well as Yangtze River Delta and Pearl River Delta areas - three major economic regions in China.

The meeting required different areas to develop their own advantages on industries and make full use of their geographic positions, while vowing to fasten infrastructure construction and improve finance and taxation services in underdeveloped western China. New policies will be issued to attract labor-intensive industries to move from eastern China to the west.

One of the ongoing industrial redistribution pilots is the planned coordinated development of a Beijing-centered "economic circle", including Tianjin and Hebei province.

An industrial redistribution directory is being drafted to rearrange industries in the three areas, according to the Ministry of Industry and Information Technology, covering the triangle with more than 100 million population and a combined GDP of more than 6 trillion yuan ($960 billion).

China to shore up grain purchase, storage

China will step up efforts to purchase and store grain and build more granaries as its grain output rises, according to an official statement on Wednesday.

In 2014 and 2015, the country should build new grain-storage facilities capable of holding 50 billion kg of grain, concentrating them in its northeast and south, said the statement, issued after a State Council executive meeting presided over by Premier Li Keqiang.

The meeting concluded that China should innovate in financing for granary construction by guiding social capital to participate in the process.

It should also support the construction of storage buildings with drying facilities by farmer cooperatives and major specialized farming households in the main grain-producing areas.

In 2013, China's grain output rose 2.1 percent from a year earlier to 601.94 million tonnes, marking the 10th consecutive year of growth.

"This year's summer grain is set to see another bountiful harvest, but granary capacity is insufficient on the whole and seriously inadequate in some regions," the statement said.

As a result, grain storage is not only an urgent task, but also an important mission in the long term, it said.

China implements a policy of national grain purchase and storage in an effort to adjust total grain supply, stabilize the grain market and make reserves for natural disaster and other emergency cases.

The country should make room for new grain by selling old grain and conduct special inspections to make sure that all national granaries are used for storing grain, according to the statement.

On the condition that farmers' interests are guaranteed, China will push for transformation from the current policies on minimum purchase prices, temporary grain purchases and agricultural subsidies to a target price system for agricultural products.

The country will start experiments with varieties of soy bean and cotton. When market prices fall below the target price, the government will subsidize farmers to ensure their earnings, it was decided at the meeting.

However, if market prices rise and lead to rapid increases in the overall price level, the government will offer subsidies to low-income people.

No exact timetable was given in the statement.

"The country must fully capitalize on the functions of foreign trade and national grain reserves in adjusting demand and supply to avoid excessive fluctuation of agricultural product prices," according to the statement.

It also said the country should guide the transfer of some industries from the east to its central and western regions in an orderly manner.

The move aims to promote balanced regional development, push forward the urbanization of the less-developed regions, create more jobs and seek economic growth at a higher level.

Local governments were urged to cultivate sound environments for receiving industries from the eastern regions by improving infrastructure and providing quality support services.

The country will give full play to market forces and meanwhile underline policy guidance to facilitate the industrial transfer, the statement said.