December 03, 2003

 

 

China To Reassure Jittery Public of Sufficient Grain Reserves
 

Following a month of declining grain yields and rising prices, Chinese policymakers are embarking on a campaign to reassure a jittery public that the country has enough grain reserves to feed itself.

On Tuesday, grain was the top story in the People's Daily. ''China's grain and oil supply: Feel at ease,'' read the headline in the newspaper regarded as the mouthpiece of China's Communist Party. The front page of the English-language China Daily proclaimed, ''Nation capable of meeting grain needs,'' on the same day.

At a high-profile meeting on food security in late October, Chinese Premier Wen Jiabao insisted that the government would ensure long-term food security in China. ''Food safety is a policy priority for our leadership and we have always regarded it very seriously,'' he was quoted by the state-run Xinhua news agency as saying. ''While proceeding further with grain circulation reform, we should remain sober and remember that China's future food needs are compounded by two trends - the decrease in cultivated land and the rise in the living standards of our citizens,'' he said.

For the first time in six years, China has seen the surging of grain prices, setting off alarm bells across the country. China has had a long history of famines resulting from wars, natural disasters and misguided political campaigns. Many people in China can still painfully recall the Great Leap Forward famine from 1959-1961, a disastrous period in which historians have estimated anywhere from 10-30 million people starved to death. And in the early 1990s, a grain supply shortage and surging grain prices triggered a round of inflation, driving up consumer prices.

The government is currently looking for ways to reassure its anxious citizens that a grain shortage will not severely affect prices or the overall economy.

According to state media sources, wheat prices in the northeast - China's breadbasket - have risen by 32% since early autumn. Adding to that, corn prices have shot up by 50% and rice and rape seed prices have risen by as much as 15%.

The rise in grain prices has also driven up the prices of edible oil, forage and other finished products, according to official reports.

China's grain output fell from a peak of 512 million tons in 1998 to 457 million tonnes last year. This year the harvest is expected to fall even further to 440 million tons, according to Li Jingmo, an industry expert and general manager of Zhengzhou Wholesale Marketplace.

Since 2000, China's grain demand has ranged between 480 and 490 million tons per year. In other words, the gap between demand and China's actual grain output is between 25 and 35 million tons, says Li.

''The central government has been using the national grain inventory to offset the gap over the past four years,'' added Yan Bo, deputy director of the policy and regulation department of the State Grain Reserve Bureau. ''This gap, however, has increased in some grain-producing areas such as Jiangsu and Shangdong,'' he explained.

''A new period of grain shortage will arrive soon,'' warned Li. ''The year 2005 may be a turning point for China's grain market unless we boost grain production.''

Some analysts have pointed the finger at China's state-planned economy as the source of the grain problem. Liu Chenggui, a researcher at the Chinese Academy of Social Sciences' Rural Affairs Policy Research Institute, added ''The issue of food safety is far too politicized in China. Being self-reliant in terms of food supply was regarded as crucial to our national security in the past and this mentality still prevails today.''

''China has joined the World Trade Organization but we don't have enough trust in the international community and grain imports are still a very sensitive issue,'' he explained.

Li Jingmo of Zhengzhou Wholesale Marketplace argues that "China's grain production needs to increase in order to meet growing demands. This is determined by population growth, urbanization, rural labor mobility and demand for animal fodder.''

Currently, China's annual grain imports account for less than 5% of its total consumption. But if grain harvests continue to decline, policymakers might be forced to consider importing more grain.

In the early 1990s, China boosted grain production in an attempt to rein in runaway inflation. Beijing was also responding to predictions by US environmental activist Lester Brown that China's growing dependence on imports would drive world grain prices up.

As harvests increased, however, the government lowered its official target for agricultural output and gradually abandoned grain price protections. Farmers were encouraged to grow other crops in order to satisfy demand for a wider variety of agricultural products from China's increasingly sophisticated consumers.

Experts estimate that China's population will increase from the current 1.3 billion to 1.6 billion by 2030. That means that grain demand will rise to 640 million tonnes per year, far outstripping China's current output capacity.

In recent months, China has cracked down on private developers who have bribed local officials to change land use rights in order to construct buildings on government-leased land originally designated for agricultural use.

Xinhua reported that a total of 168,000 cases involving illegal land use have been investigated so far this year, twice as many as in the same period last year.

The government is also planning to create 2.7 million hectares of farmland by 2010 by reclaiming abandoned state mining and construction sites, according to China's Land and Resources Ministry.