‘China didn’t hoard grains’: stockpiling to ensure domestic food security has global implications

April 10, 2022 GMT

As China imports record levels of grain every year, an oft-repeated vow by President Xi Jinping is given greater impetus: “The Chinese people’s rice bowl must be firmly held in their own hands.”

But China’s amassing of grain stockpiles has sparked allegations by some Western critics who say such a mentality has contributed to rising food prices globally amid the prolonged pandemic and now war between two of the world’s biggest grain suppliers ” Russia and Ukraine.

Many analysts point to China’s grim history of hunger and poverty to explain the unprecedented emphasis Beijing has been placing on food security, and some say it is a prudent choice in the face of extreme weather, shipping disruptions, sanctions and conflicts that have globe-spanning implications.

ADVERTISEMENT

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

Others contend that China should not be held responsible for global price hikes or regional shortages, and that it should focus on improving domestic production and making structural changes to the industry to ensure that the world’s biggest population has enough foodstuffs on hand.

“China didn’t hoard grains,” said Yu Chunhai, deputy dean of Renmin University’s School of Economics. “The imports were just used to meet the domestic supply gap.”

The world’s second-largest economy is at a disadvantage because it lacks international price-setting power, and international prices have been mainly driven up due to supply issues.

“If China can successfully improve domestic production through a variety of policies, that would be its biggest contribution to the stability of global grain prices,” Yu added.

In the government’s narratives, it is a remarkable achievement for the country to successfully feed 1.4 billion people, or 20 per cent of the global population, with only 7 per cent of the world’s arable land.

But in reality, a growing amount of China’s agricultural products must be imported every year. In 2004, it reported its first agricultural deficit of US$4.6 billion. That deficit ballooned to US$94.8 billion in 2020 and a record high of US$133.5 billion last year.

ADVERTISEMENT

China’s total imports of grain also reached a new high of 165 million metric tonnes in 2021, including 9.7 million in wheat, 4.47 million in rice and 96.5 million in soybeans. The total is equivalent to about a quarter of its domestic output.

That hardly places China’s rice bowl firmly in the people’s hands, as Xi intends.

The president put the focus back on food security in December 2020 during the closed-door Central Rural Work Conference, an annual gathering for the nation’s leaders to discuss agriculture and areas where many of the country’s poorest residents live.

“Considering the persistently rising grain demand, and the complicated international situation, grain security must be highlighted constantly. We’d rather produce and stockpile more. The pressure of more is incomparable to that of less,” Xi said, according to the recently disclosed transcript of his speech.

“We must play the card of farm-produce trade well. The key is risk control, substitution and preparations. The imports shall be diversified.”

The undertaking already appears to be paying off, as the National Food and Strategic Reserves Administration said in February that the national grain inventory was at a high level from a historical perspective, and that it had provided a solid foundation for supplies and stable prices.

Qin Yuyun, research head at the administration, said the current inventories of wheat and rice, two major staple grains on Chinese tables, account for more than 70 per cent of total grain inventory.

“The existing inventory (of wheat and rice) is sufficient to meet the demand. There is even a surplus that can be used for other consumption,” he said at a recent media briefing.

No official figures were provided on China’s stockpiles of wheat ” a key food on Western tables ” and its supply is now being affected by the war in Ukraine, which is considered the breadbasket of Europe.

The US Department of Agriculture estimated in its March report that China’s stock of wheat is expected to be 142 million tonnes at the end of 2021-22 market year ” accounting for about 50.5 per cent of the world total, and up from 45.5 per cent in the 2017-18 market year. However, China still falls short of estimated domestic consumption of 147.5 million tonnes for 2021-22, the US department said.

China has been a net wheat importer since 2008, with a 17.9 per cent rise to 9.7 million metric tonnes bought overseas last year. The absolute amount was about 7 per cent of national output last year, or 2.6 per cent of the world total.

Meanwhile, China’s rice imports rose 53 per cent to 4.47 million metric tonnes last year, customs data showed.

“China’s grain imports are set to meet its structural shortage. It’s a necessary supplement on top of high domestic production. It has nothing to do with hoarding,” said a commentary published by the state-controlled Economic Daily in January.

It also revealed that China’s current rice and wheat inventory is enough to feed its people for more than 18 months.

“Western hype ” in terms of either demand or hoarding ” is intended to blame China for global grain price hikes. But China has no reason to be blamed for the faults of others, and it must not,” the commentary added.

Zhang Hongyu, a former agriculture ministry official and now a senior researcher with Tsinghua University’s China Institute for Rural Studies, puts China’s dependence ratio for overseas grains at 19 per cent, while those of meat and dairy products are at 9 per cent and 30 per cent, respectively, in his estimations.

Other factors driving up domestic demand, including a rise in population size, are waning, however. China, which is poised to become a high-income country with per capita GDP of US$12,000 last year and a rising urbanisation rate, has seen a correlated rise in food consumption, with a drop in staple grains but a sharp rise in meat, dairy and eggs.

However, “global economic and social turbulence have made uncertainties and instability routine. They have had an obvious impact on the global supply chain of grain and key farm produce”, Zhang said, adding that “enhancing stockpiling capacity and inventory is a must” for China.

According to research by China International Capital Corp, China’s grain-storage capacity has reached 670 million metric tonnes, while 10- to 15-days worth of emergency reserves are ready in big cities, and it had more than 5,500 emergency grain-processing enterprises as of the end of last year.

Ma Wenfeng, a senior analyst with Beijing Orient Agribusiness Consultant Ltd, attributed the global price inflation more to the unprecedented money-printing by much of the world to fight the coronavirus pandemic.

“There is no shortage of food at the global level. What it really lacks is peace and a stable macroeconomic foundation,” Ma said.

He attributed China’s rising imports to its agricultural productivity gap with developed countries, but said that this can be addressed by making domestic improvements.

“As a responsible country, it needs to export part of its grain to help ensure global food security and national food security,” he said.

Beijing has also been playing a more prominent role in helping less-developed countries with their emergency food supplies.

Last year, China reached a deal with the Food and Agriculture Organisation (FAO) to provide food to Uganda, which benefited 130,000 schoolchildren. Two weeks ago, China announced it would provide emergency food aid to Sri Lanka.

Li Guoxiang, a fellow at the rural development institute under the Chinese Academy of Social Sciences, said Chinese stockpiles help take the pressure off domestic production while reducing price fluctuations.

“China has no grain surplus. The domestic supply and demand are tight,” he said. “To fulfil international obligations, China often cooperates with the FAO to buy grain in the international market with cash.”

According to a government white paper published in January 2021, China had provided emergency food to more than 50 countries since 2016, and aid to 24 countries, in collaboration with the FAO.

Yu at Renmin University said it seemed unlikely that China will release grain stockpiles to the international market.

“China won’t reject its international obligations. But it tends to help less-developed countries foster long-term farming capacity,” he said.

Meanwhile, Beijing keeps pounding the drums on the importance of boosting domestic production.

The State Council has vowed to keep grain output at last year’s level, and particular attention has been shed on corn, wheat and rice, particularly as Beijing’s zero-Covid approach poses a threat to farming amid a surge in domestic infections.

Huatai Securities said that the mainly affected provinces ” northeast China’s Jilin, east China’s Shandong and the northern region of Hebei ” account for 30 per cent of the national corn and wheat production, but current lockdowns are mainly in cities, where most infections have been reported.

“The coming month is a key period to sow in northeastern regions. Local pandemic-control results are crucial,” its analyst, Zhang Jiqiang, wrote in a note on Wednesday.

“If the rural (situation) is well controlled, and the supply of farming materials such as seed resumes, the direct impact on agricultural production will be relatively small.”

This article originally appeared on the South China Morning Post (SCMP), the leading news media reporting on China and Asia. For more SCMP stories, please download our mobile app, follow us on Twitter, and like us on Facebook.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.