Growth in food imports is a long-term trend in China as the
nation further integrates itself into global trade and becomes
wealthier, Chinese economists said.??
But China is not a hungry nation facing a food crisis, they
added.
China logged an agricultural trade deficit in the year's first
seven months, importing US$4.49 billion more than it exported,
indicate the latest statistics from the Ministry of Agriculture
(MOA).
The nation saw an annual average agricultural trade surplus of
US$4.3 billion between 1995 and 2003.
"It is too early to conclude whether the agricultural trade
deficit will run for the whole year or the coming years," said Xu
Hongyuan, director of the agricultural trade sector under the MOA's
International Cooperation Department.
"But given China's World Trade Organization (WTO) accession, it
is a general trend that we will meet our own food demands by making
good use of international markets," Xu said.
The entry, since December 2001, has rendered the country more
general trading opportunities in the international market while
giving foreign agricultural brokers more chances to enter China,
experts say.
"The deficit is not surprising. The impact of the entry began to
surface this year given an understandable time lag caused by the
implementation of WTO rules," said Li Weimin, a senior research
fellow with the Institute of Agricultural Economics under the
Chinese Academy of Agricultural Sciences.
"China may not be able to sustain a long-standing agricultural
trade surplus as it always did before its WTO accession," Li
said.
China's average tariffs for agricultural products decreased from
21.2 percent before WTO accession to 16.8 percent by the end of
last year. It will be further lowered as the country opens the
sector wider.
The nation's agricultural trade surplus last year dropped to
US$2.5 billion from US$5.7 in 2002, a decrease of 56.2 percent,
setting the stage for the present deficit.
Li said the agricultural trade deficit in the year's first seven
months is also due to an animal products trade deficit in this
period.
"China's animal products have been long regarded as advantageous
in terms of export," Li said.
China exported US$1.67 billion worth of animal products and
imported US$2.40 billion, creating a deficit of US$730 million, the
MOA statistics indicated.
"The bird flu epidemic that occurred earlier this year and the
ever-growing technical barriers imposed on Chinese agricultural
products have set back Chinese exports," Li said.
Compared with the first half of last year, China imported 1.8
times as much grain, or 4.115 million tons, in the year's first
half.
In particular, the nation imported 2.727 million tons of wheat
by the end of June. Back in the first half of last year, China was
a net exporter of wheat.
"It is a rational choice for China to import more land-intensive
agricultural products, such as high quality wheat, in which China
is not competitive, by using its rich foreign exchange reserve," Li
said.
Given China's low per capita farmland and water
resources, it is even "economical for China to import such products
at favorable prices," Li said.
"But the key for China is to have diverse sources of imports and
to forge long-term contracts with these grain producing countries,
rather than just relying on one or two countries," Li added.
China's foreign exchange reserves surged 40 percent year-on-year
to reach US$403.3 billion at the end of last year, indicate State
Administration of Foreign Exchange statistics.
The nation imported most agricultural products from North
America in the year's first half. The United States alone exported
US$4.96 billion worth of farm produce to China, a year-on-year jump
of 68.1 percent, indicate customs statistics.
China's comparative advantage lies in labor-intensive products,
such as poultry, pork, fruit and vegetables. These industries are
cost-competitive in the international market.
But land-intensive grain production is less economically
attractive and faces growing water supply constraints, particularly
in the vast irrigated cropping areas of north China.
Food crisis?
The Financial Times recently reported on fears of a "food
crisis" in China following a near doubling of grain imports in the
year's first half.
But academics hold different views.
"China never relies on grain imports for its food security.
Grain imports will represent no more than 5 percent of China's
annual grain consumption," said Huang Jikun, director of the Center
for Chinese Agricultural Policy under the Chinese Academy of
Sciences.
Li agreed, saying the growth in imports in the year's first half
is "no cause for concern from a food security perspective.
"China has been virtually self-sufficient in grain for many
years. Even if its grain imports this year reached 8.2 million
tons, more than three times last year's grain imports, they would
represent less than 2 percent of China's annual grain consumption
and production," Li said.
Analysts estimated China's annual grain consumption this year
will reach 487 million tons.
The MOA has vowed to guarantee an annual grain output of 455
millions tons this year, bringing an end to the production slump
that started in 2000.
China is expected to fill the gap through imports and grain
reserves, experts said.
"The Chinese government's recent down-to-earth policies to
stimulate farmers' enthusiasm for grain production will increase
China's annual grain output and minimize the possibility of a
sudden surge of imports in the coming years," Huang said.
At the beginning of this year, the Central Committee of the
Communist Party of China and the State Council issued the so-called
"No. 1 Circular," which contained a basket of new policies aiming
to raise farmers' incomes to help spur rural growth.
Major policies include lowering and eventually abolishing
agricultural tax, directly subsidizing grain producers, and setting
minimum purchasing prices for staple grain products.
China witnessed a good summer wheat harvest this year with a
production volume of 101.05 million tons, a year-on-year increase
of 4.8 percent. That has put an end to a four-year summer wheat
slump.
The rice yield is also expected to rise as the area planted has
been expanded by 533,000 hectares this year compared with 2003, MOA
officials said.
The Financial Times report said China's grain reserves
are under pressure this year and possibly in 2005 given the
nation's straining supply-demand relations.
The level of China's national grain reserves is a state
secret.
"The size of the reserves should not be a problem, since the
Chinese government has paid lots of attention to build the nation's
grain stocks since the founding of the People's Republic of China,"
said Wu Zhihua, director of the Institute of Food Economics under
the Nanjing University of Finance and Economics.
"But the government should improve the management of food
reserves. Grain should not only be stored in granaries but in
enterprises," Wu said.
The Shanghai municipal government is drawing up such plans. The
city plans to allow grain enterprises from Heilongjiang
and Jilin
provinces, which are China's major grain producing areas, to set up
firms combining grain storage, processing and selling in the
eastern city. Shanghai's major grain processing enterprises are
also expected to shoulder part of the city's grain reserves, the
report said.
(China Business Weekly September 12, 2004)