July 24, 2008

 

Investigation yields irregularities at China's grain reserves system
   
  

An investigation of China's grains bureaux has unearthed irregularities as high prices and tight credit contribute to a failure to maintain planned levels of reserves, the Xinhua news agency warned on Wednesday (July 24, 2008).

 

Investigations have found irregularities at a minority of regions and incorporated grains bureau, Xinhua said, citing a circular from the State Grains Administration.

 

High prices may have tempted some bureaus to sell more than they should in hopes of buying back as soon as prices fell, while others were reluctant to buy at government-set prices when market prices were lower.

 

The circular from the State Grains Administration demanded that bureaux should stick strictly to plans.

 

Problems include bureaux failing to maintain planned levels because of losses and credit problems; filling reserves above approved levels in anticipation of policy and credit changes; failing to release stocks after auctions; speculating in the market with reserves, and failure to store grains in approved warehouses, Xinhua said.

 

Under a reform initiative carried out over the past few years, half the bureaux in China's grain reserves system has been spun out into companies allowed to decide the amount of grains they buy or sell but were obligated to maintain the centrally planned reserves.

 

The reform was sparked after China was forced to buy wheat from the global market in 2003, after discovering following a poor harvest that state reserves levels were far lower than reported.

 

Although four years of bumper harvests have dampened prices, corn and wheat prices in late 2006 set off a round of inflation that planners are still battling.

 

The exact level of China's reserves is a state secret.

Video >

Follow Us

FacebookTwitterLinkedIn