China’s grain supply
The ravening hoards
Apr 17th 2008 | BEIJING
From The Economist print edition
No need for alarm; but some Chinese ring bells anyway
“WITH grain in our hands there is no need to panic,” according to China’s prime minister, Wen Jiabao. But officials worry about how to keep China near self-sufficiency in grain and sheltered from rising world prices. Mr. Wen’s remarks during a farm tour in Hebei in the north were meant to calm public anxieties about food-price inflation elsewhere in the world. Chinese food prices have been rising fast too in recent months, but the main impact has been on meat. Rice- and wheat-price increases have been modest, except for high-quality imports, a small share of domestic consumption. China produces more than 90% of the grain it consumes.
With global grain markets so jittery, officials are rather smug about having so long stressed the need for self-sufficiency. It has enabled the government to keep the domestic market relatively calm. Early this year, to control demand, it began curbing grain exports through quotas and taxes. It promised continuing supplies to Hong Kong. But now grain importers there have had to pledge that they will not re-export. Diplomats say that China’s caution has even affected the flow of food to North Korea, an old ally heavily reliant on shipments from abroad. Aid workers say North Korea is facing its worst food-supply crisis since a famine in the late 1990s.
Mr Wen offered reassurances that China has no shortage. When output fell in 2003, the government renewed efforts to encourage grain production (see chart). They entailed big increases in subsidies for grain farmers and in the state’s guaranteed minimum purchase price for grain. Much else has also been done to raise farmers’ living standards, from tax exemption to free education. This year’s centralgovernment spending on rural development including education, welfare and subsidies is due to grow by 30% to nearly $80 billion.
Last month Mr Wen even revealed what had been a state secret: that China had grain reserves of 150m-200m tonnes, equal to 30-40% of annual production. Officials note that China’s ratio of reserves to consumption is much higher than the 17-18% level regarded by the United Nations’ Food and Agriculture Organisation as a safe minimum for global stocks.
But not everyone is convinced. Reports in the state-controlled
press say that some people in Guangdong province, next to Hong
Kong, have been stockpiling grain. In March a senior agriculturalist, Yuan Longping, accused officials in some areas of exaggerating the size of grain reserves in order to get more subsidies for storing them. A commentator in the China Daily said export curbs would encourage smuggling. Others worry that the harsh winter in the south and spring drought in the north might dent output growth this year; and rising prices of fertiliser and other inputs could deter farmers from growing grain.
Officials acknowledge that maintaining near self-sufficiency in grain will become harder as the population grows and arable land shrinks. In 2006 the government said that the minimum amount of arable land needed to protect “grain security” was 120m hectares. At that time it was already giving warning that China was approaching the “red line”, with about 121.8m hectares available. For local governments building on arable land is often a money-spinner. Central-government efforts to curb this have not worked. Some Chinese commentators say the line has already been crossed: some land registered as arable is in fact being used for non-agricultural purposes.
There has long been debate in China over whether the country’s grain policy, which calls for 95% selfsufficiency, is too conservative given the potential for imports. On grain, however, conservative thinking
is now back in vogue.（Enditem）