Abstract: In recent years, China is suffering the “high production, high inventory and high import” dilemma in agriculture. It is the lagged urbanization that causes the small agricultural farm size and the lack of scale economy. Furthermore, the willingness of farmers to migrate into cities is curbed and land circulation rate is low, because Hukou system discriminates migrants’ access to public service in cities, while agriculture is greatly subsidized. By international comparison, we find that large-farm models are better for improving agricultural competitiveness, while the Japanese model with small-sized farms is very costly. We also find that the countries whose agricultural labor share matches agricultural production share in GDP have more arable land per worker, and consequently have more net cereal exports. If China eliminates the barriers of labor mobility in 2011, its net cereal import may decrease by 89 percent next year.