Old Grain Passed Off as New: Getting a Clear Picture of Grain Reserves Requires Tighter Oversight

Chaotic practices in China's grain reserve system, such as passing off old grain as new, are linked to unsmooth mechanisms and unsound institutions, and even more to the lack of management and lax oversight by the relevant departments. Straightening out the mechanisms and reforming the institutions will take time, but tightening the granaries and strictly investigating the "big rats" is an urgent task that brooks no delay.

On the 21st, the State Administration of Grain issued an urgent notice, deciding to carry out a key inspection of state policy-oriented grain purchasing and storage enterprises. Earlier, a CCTV report disclosed that some grain depots in Liaoning and Jilin provinces, in the course of policy-oriented grain purchasing, storage and sales, passed off old grain as new to fraudulently obtain price-difference subsidies, seriously harming the interests of the state and grain farmers.

Collusion between grain depots and grain traders to pass off old grain as new and earn the price difference is a long-standing "arbitrage" model within China's grain system. That old grain becomes new grain has long been no secret in the industry. There was previously the so-called "circling grain" practice -- the grain depot had enterprises "help" buy up the old grain in the depot, after which the depot bought the old grain back as new grain; the grain never left the depot from beginning to end, and after going in a circle on the spot, it brought the depot a hefty sum of fiscal subsidy income. In this incident of passing off old as new in Liaoning and Jilin, the grain no longer circled in place but underwent real circulation. Compared with the previous "circling grain," there is another important difference in the practices in the two places, namely that the subsidies fraudulently obtained through "circling grain" basically went into the units' slush funds, whereas in this incident the huge price-difference subsidies most likely went into individuals' pockets. The nature of this incident of old grain becoming new grain has already changed, from the previous illegal and disciplinary violations by units to illegal and criminal acts involving relatives of grain depot heads, inside-outside collusion and corruption.

⟦NL> Food security has a decisive influence on the overall situation of the national economy and social development. The grain depots in trouble this time in Liaoning and Jilin are affiliated with Sinograin. As a large, important state-owned backbone enterprise bearing on national security and the lifeline of the national economy, Sinograin cannot shirk its responsibility for this. In October 2013, Sinograin, long plagued by numerous problems, completed a major reshuffle of its senior management team, with a new chairman, general manager, chief accountant and others taking office, and the new leadership conducted large-scale investigations and handling of the industry's "four pests" behaviors, including "circling grain," unauthorized use of reserve stocks, grade-depressing and price-depressing purchases and grade-raising and price-raising purchases, and the setting up of slush funds. However, this incident of passing off old as new in Liaoning and Jilin is even worse than the previous "circling grain" phenomenon, and this reality is thought-provoking. This incident of passing off old as new shows that "big rats" are coveting the delicacies in the granary at every moment and are constantly changing and updating their methods of theft. This is a test for Sinograin's top leadership and, further, a test for China's food security.

The State Administration of Grain's issuance of an urgent notice this time, deciding to carry out a key inspection of the state-owned "granaries," is undoubtedly very necessary. Old grain that gives off a musty smell and whose quality is hard to guarantee, if it really ends up on the dining table, will inevitably pose a serious threat to public health. The State Administration of Grain must promptly investigate and hold the bottom line of food safety. At the same time, in inspecting state policy-oriented grain purchasing and storage enterprises, the grain authorities must also get a clear picture of the reserves and hold the bottom line of China's food security.

In recent years, Sinograin's illegal and disciplinary problems have mostly occurred in the course of implementing the state reserve grain depot "market-supporting purchase" policy, and this incident of passing off old as new in Liaoning and Jilin is one example. An important reason for Sinograin's frequent problems is that the work rights and responsibilities in policy-oriented purchasing and storage have far exceeded Sinograin's actual capacity, thus creating a so-called "small horse pulling a big cart" situation of being unable to do what one wants. Because the system's purchasing and storage capacity is insufficient, Sinograin must entrust local grain enterprises to carry out purchasing and storage. In recent years, the scale of policy-oriented purchasing and storage has grown larger and larger, and the number of grain enterprises involved has also increased. However, Sinograin can neither manage the personnel nor control the finances of the various "franchised" grain depots, so rats running wild is hard to avoid.

Chaotic practices in China's grain reserve system, such as passing off old grain as new, are linked to unsmooth mechanisms and unsound institutions, and even more to the lack of management and lax oversight by the relevant departments. Straightening out the mechanisms and reforming the institutions will take time, but tightening the granaries and strictly investigating the "big rats" is an urgent task that brooks no delay. The cases of passing off old grain as new in Liaoning and Jilin are certainly not isolated cases, and people expect more "granary rats" to be caught.