Abstract In international trade, agricultural trade is an extremely sensitive and complicated issue. Agricultural subsidy is an important policy that many countries and regions, especially the developed ones, adopt to protect and develop their agriculture. It raises the competitiveness of agricultural products in both international and domestic market and protects peasants of one country or region. From the Uruguay Round to ongoing Doha Round, agricultural subsidy is always an important issue in the WTO. Since China joined WTO on December 11th 2001, all WTO disciplines and the China Accession Protocol are legally binding to China hence have impact and implications on China which means that China's policies on agricultural subsidies made in future should be in line with the WTO rules: on the one hand China's policies on agricultural subsidies should be subject to the restrictions of WTO rules, but on the other hand China can make use of legal means WTO permits to protect and develop its agriculture. After the reform and opening up, China has paid more attention to agricultural issues than before. However China's current policies on agricultural subsidies have many problems. This thesis will firstly analyse the WTO rules on agricultural subsidies and their new development, then analyse the problems of China's current policies on agricultural subsidies, and finally make suggestions on improving China's policies on agricultural subsidies in line with WTO rules and their new development.