Farm subsidies will provide a long-term boost to China's economic growth besides revolutionising its agriculture sector, an arm of the country's largest state grains trader has said.

China Agri-Industries, Cofco's Hong Kong-listed offshoot, has said that China's programme of supporting farmers though raising minimum grain prices, improving subsidies and building up inventories would have "enormous" implications.

"The policies will help modernize the agricultural industry and improve the production and quality of crops," China Agri-Industries said, forecasting a drop in its own reliance on imported crops.

The group is China's largest ethanol producer, besides being the nation's biggest rice exporter and oilseed processor.

With 55% of China's population based in the countryside, higher farm incomes would "give lasting momentum to China's economic growth", China Agri-Industries said.

Help from handouts

Government grants helped the group achieve a near-doubling to HK$1.52bn in second half earnings despite a drop to 25% in revenue growth. Takings rose by 75% in the first half.

The company scooped HK$501m in grants during the July-to-December period, mainly for ethanol production.

"Our fuel ethanol business has benefited from the government's initiative to encourage investment in the industry in the form of subsidies," China Agri-Industries said.

However, oilseed processing remained the biggest division, with second half operating profits soaring sevenfold to HK$1.68bn on revenues up 19.6% at HK$14,400.