January 14, 2005

 

 

China's Wheat Imports Record Sharp Rise

 

China imported 6.61 million tons of wheat in the first 11 months of 2004, up 17.83-fold from the same period of 2003, according to latest statistics provided by the General Administration of Customs.

 

Statistics from the United States show that over 300,000 tons of US wheat had been loaded on ships bound for China in December 2004. In addition to imports from other countries, China's wheat import for 2004 is expected to exceed seven million tons, much higher than the import of 424,200 tons in 2003. Thus China has become the world's No. 1 wheat importer.

 

China's wheat import has fallen below one million tons for five years running since 1999. China remained a net wheat exporter in 2003. However, China has jumped to be the world's No. 1 wheat importer just in one year. Why is this so?

 

China is an agricultural country, and the Chinese government has always attached great importance to wheat production. Continuous output decreases for four consecutive years in 2000-2003 has stirred a wave of debate on grain safety and has greatly boosted wheat prices.

 

Meanwhile, China's wheat inventory has fallen by a large margin. From the end of 2003 to the Spring-Autumn period in 2004, an estimated five million tons of wheat storage has been sold. Thus, even if China reports a great wheat harvest in 2004, the output still cannot meet the domestic demand. All these factors have spurred China to import wheat in large quantities.

 

Experts do not think such a huge amount of imports would produce much impact on China's wheat market, as most of the imports are quality wheat from the United States, Canada and Australia and have been stored by flour mills as compound flour.

 

According to a WTO agreement, China now has a nine million ton import quota for wheat, of which 90 per cent is held by State-owned trade companies, and only 10 per cent are in the hands of non-governmental enterprises.

 

Even if the import quota is used up, imports by non-governmental enterprises would not exceed one million tons. With wheat supply and demand trend on the Chinese market remaining unchanged, the wheat price will be out of any external influences. On the contrary, quantity import may help boost wheat prices.

 

However, from a long-term point of view, it is undesirable for China to import wheat in large quantities to fill the supply gap on the domestic market because it is not a permanent solution.

 

Before 2004, the prices of agricultural products on the Chinese market had long been at low levels, and low agricultural products prices had cut the profit margins in farmers' income.

 

As a result, many cultivated land lies idle, few farmland capital constructions have been made, and China lags far behind developed countries in terms of agricultural R&D capacity. However, things are improving at present.