Analysis of China's Food Security Situation: Supply and Demand Fundamentally Balanced
The total net imports of the three major staple grains last year were around 19 million tonnes, and the total for the first seven months of this year has already reached 11.439 million tonnes. Moreover, after corn entered its “first full year of imports” in 2011, China is also expected to surpass Egypt this year to become the world's largest wheat importer. The China National Grain and Oils Information Center predicts that total imports will reach 6.5 million tonnes.
With domestic production facing numerous difficulties, limited room for increasing imports, and overseas investment unlikely to yield results in the short term, although China has achieved ten consecutive years of grain production increases, it is becoming increasingly difficult for China to honor its commitment to “feed itself.”
China Food Security Report
On November 29, the National Bureau of Statistics issued a notice stating that China's total grain output in 2013 reached 601.935 million tonnes, a year-on-year increase of 2.1 percent. Counting from 2004, this has been the tenth consecutive year of increase in China's grain output.
Behind the production increase figures, however, the reality of “grain shortage in a bumper year” is rarely mentioned: also over the past decade, except for 2008 and 2009 when production slightly exceeded demand, China's grain situation in all other years has been one of production falling short of demand, with the gap growing ever wider. Although the official target of a 95 percent grain self-sufficiency rate has been maintained for many years, by the end of 2012 this figure had already fallen below 90 percent.
One of the reasons for the gap between the target and reality is that China has always included soybeans in its grain statistics. Given that imported soybeans already account for more than half of the domestic market, the self-sufficiency rate has thereby been pulled down by nearly 10 percentage points. But beyond this, the trend toward normalized net imports of China's three major staple crops has already emerged, and its impact is increasingly becoming apparent.
In terms of specific figures, the total net imports of the three major staple grains last year were around 19 million tonnes, and the total for the first seven months of this year has already reached 11.439 million tonnes. Moreover, after corn entered its “first full year of imports” in 2011, China is also expected to surpass Egypt this year to become the world's largest wheat importer. According to the China National Grain and Oils Information Center's forecast, total imports will reach 6.5 million tonnes.
The surface reason for the normalization of staple grain imports is the shrinking price gap between domestic and foreign grain. However, given that large-scale domestic grain production is difficult to fully achieve in the short term, and that arable land and multiple resource-related factors are increasingly scarce, causing grain production costs to remain high and room for yield improvement to narrow, this situation may be in an “irreversible” state in both the short and long term.
Given that the concentration of China's import source countries for soybeans and staple grains even exceeds that of oil, the urgency of how to maintain its own food security and how to restructure its security concept centered solely on self-sufficiency rates is growing ever greater.
In fact, maintaining a balance between imports and exports is only one of the criteria for China's overall food security balance. In addition, this framework should also include four aspects: aggregate balance (total demand and total supply), structural balance (grain and non-grain crops), regional balance (grain-producing areas and grain-consuming areas), and production-sales balance (output and sales).
Constrained by a large population and a vast territory, it is not easy for China to fundamentally achieve these five balances. In terms of domestic conditions, it will face a triple constraint of “fragility, coercion, and tension.” That is, the resource conditions for ensuring security are poor, the input of economic and social factors under strong government leadership is large, and the capacity to guarantee food and grain security for the entire population is insufficient.
Therefore, how to leverage overseas resources has become a new subject that China must study in order to maintain its own food security. But in this field, judging by current performance, China, despite its enormous size, can only be considered a “late-arriving schoolchild,” lacking both experience and opportunities.
On the one hand, if China were to purchase land overseas, setting aside the increasingly tightening policies of seller countries and the pressure of international political opinion, China would still face the same fundamental problem as domestic production: how to improve efficiency. And in an unfamiliar foreign environment, the risks brought by multiple uncertain factors such as production conditions, law, and politics would double the difficulty of success for China's fledgling overseas agricultural strategy and its executors.
On the other hand, if China were to learn from the experience of the world's four major grain traders, known as the ABCD group, and implement contract farming, it would face a dual dilemma: mature markets are basically saturated, while emerging markets lack infrastructure. Moreover, in this process, China would also face the problem of who the strategic executors should be —— enterprises with state-owned backgrounds going abroad have resource advantages but are easily demonized and thus have their hands tied; private enterprises and individuals, constrained by lack of financing channels and being too small in scale, find it difficult to solve overall problems. And regardless of who the executors are, contradictions will also arise from time to time between the pursuit of pure commercial interests and the implementation of national strategy.
Regarding the above-mentioned difficulties, China has proposed basic solutions for some of them, but due to multiple practical reasons they are difficult to implement; in addition, a considerable portion still cannot escape the awkward state of “having ideas but no means.”
As former U.S. National Security Advisor Brzezinski said in his book “The Grand Chessboard”: “Food and energy will be the soft underbelly of China's economic growth. Dependence on food imports will strain China's economic resources and also make China more vulnerable to external pressure.” How to solve the above multiple difficulties and how to prevent China from having this soft underbelly struck is precisely the original intention of this report, which can be called a “warning in a bumper year.”
Report One
The basic characteristics of China's food security are: fragile balance, forced balance, and tense balance. The so-called fragile balance refers to poor resource conditions for ensuring security; forced balance refers to large inputs of economic and social factors under strong government leadership; and tense balance refers to insufficient capacity of total supply to guarantee food and grain security for the entire population.
Supply and Demand Fundamentally Balanced
Food security, energy security, and financial security are together known as the “three major security” issues of economic development in today's nations.
What Is Food Security
“Food security” in the modern sense originated from the global grain production decline in the early 1970s, when global grain reserves fell from 18 percent to 14 percent, grain prices tripled, leading to the most severe food crisis since World War II.
To address the crisis, in November 1974, the United Nations Food and Agriculture Organization (hereinafter referred to as “FAO”) convened the first World Food Summit in Rome, adopted the “International Undertaking on World Food Security,” and for the first time proposed the concept of “Food Security.”
The definition of this concept at the time was: ensuring that all people at all times have access to the food they need for survival and health. It required governments of all countries to take measures to guarantee a minimum world cereal security coefficient at year-end, that is, the cereal stock at year-end should be at least equivalent to 17 percent-18 percent of the following year's cereal consumption. If a country's cereal stock security coefficient fell below 17 percent, it was considered cereal insecurity, and below 14 percent meant entering a state of emergency.
In November 1996, at the second World Food Summit held in Rome, the FAO gave a new formulation of this concept: food security is achieved only when all people at all times have physical and economic access to sufficient, safe, and nutritious food to meet their dietary needs and food preferences for an active and healthy life. This includes achieving food security at the individual, household, national, regional, and global levels.
Then-Premier Li Peng made a commitment at that conference to ensure China's food security. In the same year, the State Council issued the white paper “China's Food Security Issues,” clearly stating that China could rely on its own strength to achieve basic food self-sufficiency. The policy it proposed of basing itself on domestic resources and achieving basic food self-sufficiency has become the unchanging general outline of China's food strategy to this day.
Under the guidance of this policy, the self-sufficiency of agricultural products, with grain as the representative, has always received high official attention, and a mainstream view of China's food security has taken shape: crop farming is an important foundation of agriculture, grain, cotton, oil, and sugar are important commodities related to the national economy and people's livelihood, and ensuring an effective supply of grain is the primary task of agricultural development.
In the Ministry of Agriculture's “Twelfth Five-Year” plan for agriculture, specific numerical criteria for China's food security concept were also given: striving to achieve “one guarantee, three endeavors.” That is, to guarantee basic food self-sufficiency, to achieve basic self-sufficiency based on domestic resources, to ensure a self-sufficiency rate of above 95 percent, with the self-sufficiency rate of the three major grain crops of rice, wheat, and corn reaching 100 percent.
Analysis of China's Grain Supply and Demand Situation
The Economist Intelligence Unit of the United Kingdom recently released the “Global Food Security Index Report,” pointing out that China ranks 42nd among 107 participating countries globally, placing it in the “good performance” tier. Relative to its ranking of 52nd in GDP per capita, China is one of the few countries whose food security level exceeds its level of social affluence.
This should be partly attributed to China's “ten consecutive increases” in grain since 2004. But behind the rising output, the situation of demand increasing even more has been ignored, intentionally or not: China has in fact been in a state of production falling short of demand for many consecutive years. In 2008, China's grain production exceeded demand for the first time. Starting from 2009, the supply-demand relationship began to become increasingly tense again, with that year's production exceeding demand by only 7.82 million tonnes. By 2010, it re-entered a state of production falling short of demand, with a gap of 3.523 million tonnes that year.
This trend remains unchanged to this day. Calculated using 2012 data, the quantity of soybeans China imported was equivalent to 16.6 percent of its grain output, meaning that about 14 percent of China's grain consumption needs to be met through imports. The grain self-sufficiency rate is below 86 percent, already lower than the 95 percent grain supply self-sufficiency target.
Therefore, from the supply perspective, China's grain situation has the following basic characteristics: fragile balance, forced balance, and tense balance. The so-called fragile balance refers to poor resource conditions for ensuring security; forced balance refers to large inputs of economic and social factors under strong government leadership; and tense balance refers to insufficient capacity of total supply to guarantee food and grain security for the entire population.
On the basis of an increasingly tense supply, China needs to face an ever-growing domestic grain demand market. According to the current situation, the three decisive factors leading to increased grain demand are: First, population growth. The National Population and Family Planning Commission predicts that by 2030, China's population will increase to 1.53 billion-1.63 billion people; Second, the rapid rise in income levels of urban and rural residents, with changes in dietary structure leading to continued significant increases in feed grain demand; Third, the continued increase in urbanization. Over the 20 years from 2011 to 2030, China will add about 300 million urban residents, directly driving consumption growth.
Taking 2020 and 2030, which are of great concern to both official and academic circles, as milestones, how large a demand scale will these three factors lead to? There are currently two widely recognized authoritative forecast reports. The first is the “Outline of the Medium- and Long-Term Plan for National Food Security Demand (2008-2020),” which forecasts: per capita grain consumption of 395 kg in 2020, with total demand of 572.5 million tonnes; the second is the previously published State Council white paper “China's Grain Issue,” which forecasts: the population will peak at 1.6 billion by 2030, and calculated at 400 kg per capita, total demand will reach around 640 million tonnes.
In addition, regarding China's grain demand in 2020, various relevant departments have also given their respective forecast results: in 2005, a relevant research group of the Ministry of Agriculture gave a forecast of 565 million tonnes; in 2006, the National Bureau of Statistics raised its forecast to 558 million tonnes; in 2008, the “National Plan for Adding 50 Million Tonnes of Grain” raised the forecast again to 575.88 million tonnes.
“Looking at these statistics and forecast reports, a notable feature is that —— the closer in time to today, the more forecasts there are, and previous forecasts have all been proven to be too conservative.” said a relevant official from the Ministry of Agriculture.
From the supply-demand perspective, none of the above forecast results mentioned China's possible grain gap. However, in the book “Research on the Path of Agricultural Modernization with Chinese Characteristics” published this year by the Development Research Center of the State Council (hereinafter referred to as DRC), it was pointed out for the first time: by 2020, calculated at a population of 1.43 billion and per capita consumption of 409 kg-414 kg, total demand will reach 584.87 million tonnes-592.02 million tonnes. According to China's grain production capacity, the domestic grain supply gap (excluding soybeans) will be 40 million tonnes-50 million tonnes by then.
The total net imports of the three major staple grains last year were around 19 million tonnes, and the total for the first seven months of this year has already reached 11.439 million tonnes. Moreover, after corn entered its “first full year of imports” in 2011, China is also expected to surpass Egypt this year to become the world's largest wheat importer. The China National Grain and Oils Information Center predicts that total imports will reach 6.5 million tonnes
The Possibility and Disadvantages of Self-Sufficiency
With the urgency of a gap that could appear at any time, what other cards does China have to play in order to honor its commitment to “feed itself”?
To ensure basic food self-sufficiency, there are only two approaches: “broadening sources and reducing expenditure.”
In terms of broadening sources, the first is to increase per-unit yields, and the second is to increase or at least stabilize arable land area. Based on past experience, about two-thirds of China's grain production increase depends on improved per-unit yields, with the contribution of increased sown area being about one-third. Currently, both approaches to broadening sources still have room, but both are in fact limited. “There are reasons for increasing production, and there are reasons for not increasing production.” said the above-mentioned Ministry of Agriculture official.
From the perspective of per-unit yields: in 2010, China's grain yield per unit was 96.83 percent higher than in 1978 and 26.47 percent higher than in 1990. On the surface, the figures are encouraging. According to official explanations, organizational systems, marketization, agricultural infrastructure construction, labor and material inputs, and technological improvements are all reasons for China's grain production increases. But the more important direct cause is the increased use of chemical fertilizers and pesticides. In 2010, China's chemical fertilizer use was 55.61 million tonnes (converted to pure nutrients), an increase of 529.07 percent over 1978; pesticide use was 1.712 million tonnes, an increase of 229.23 percent over 1978. This is precisely the main reason leading to China's food security “forced balance.”
Precisely because of this, China's current grain per-unit yields do have considerable room for improvement. China's average per-unit yields of rice, wheat, and corn are respectively 75 percent, 70 percent, and 65 percent of the average levels of the top 10 countries in per-unit yield. The per-unit yield levels of rice, wheat, and corn rank 13th, 20th, and 21st in the world respectively. In addition, for the same crop in the same planting region within China, the per-unit yield gap between provinces is also relatively large.
To increase per-unit yields, the main measures China has taken in recent years include:
First, transforming low- and medium-yield fields, strengthening water conservancy infrastructure construction, and turning low- and medium-yield fields into high-standard farmland that ensures stable yields despite drought or excessive rain, achieves high and stable yields, and saves water while increasing efficiency.
This measure has great potential. By strengthening the transformation of low- and medium-yield fields, per-unit yield per hectare of low- and medium-yield fields can be increased by 1,500 kg. Based on the 2007 national arable land area of 121.78 million hectares, with low- and medium-yield fields accounting for two-thirds of China's existing arable land, and two-thirds of existing arable land being used for grain cultivation, if half of the low- and medium-yield fields could be transformed, grain output could be increased by 40.59 million tonnes.
However, compared with “doing everything possible” to hold the red line of 1.8 billion mu of arable land, the improvement of China's arable land quality is still at the stage of “having ideas but few means.”
Over the past decade or more, China has built 200 million mu of high-standard basic farmland (hereinafter referred to as high-standard farmland) that ensures stable yields despite drought or excessive rain through land consolidation. At this rate, it would take nearly a hundred years to complete the consolidation of all 1.8 billion mu of arable land.
According to the “National Land Consolidation Plan (2011-2015)” approved by the State Council in March 2012, China's land consolidation is expected to be greatly accelerated: during the “Twelfth Five-Year” period, China will build 400 million mu of new high-standard farmland and add 24 million mu of arable land. Calculated numerically, the amount of new high-standard farmland built each year during this period will be four times the amount built each year over the previous decade.
The surge in numerical targets further highlights the chronic problem of insufficient consolidation funding. Local governments lack incentives and are unwilling to pay for food security goals that are a concern at the central government level, and funding sources are limited and highly volatile. The resulting “shortage of money” is the biggest constraint that caused the “snail's pace” of land consolidation over the previous decade, and in the new round of planning, this problem remains unresolved. The above “scaled-up” planning tasks may not be achievable.
According to the existing model of consolidation funding investment, for the construction of 400 million mu of new high-standard farmland alone, the funding gap has already reached 75 billion yuan. In addition, the current consolidation funding system does not take into account necessary maintenance costs. As time goes on, the funding gap will grow ever larger. For all these matters, there is still no solution at present.
Second, scientific and technological progress. The improvement and promotion of improved varieties and methods, pest and disease control, soil testing and formula fertilization, water-saving irrigation, disaster prevention and mitigation conservation tillage techniques and disaster avoidance techniques, agricultural mechanization techniques, and even integrated management techniques for agricultural industrial chains, as well as the improvement of division of labor and cooperation between different regions and different links in the agricultural industrial chain, are all conducive to increasing per-unit and total grain yields.
In recent years, to ensure food security, relative to the “first green revolution,” China has proposed the concept of a “second green revolution.” According to this goal, China's crop production must not only continue to increase yields and improve quality, but more importantly, significantly reduce the use of pesticides, chemical fertilizers, and water resources.
Therefore, in crop improvement, China has already made increasing disease and pest resistance of varieties, efficient nutrient utilization, drought tolerance, and stress resistance important goals. However, in concrete practice, China's agricultural research suffers from uneven emphasis, specifically manifested in breeding technology receiving more attention than cultivation and farming, with the former receiving dozens or even hundreds of times more funding than the latter. And within the breeding field, genetically modified organisms are more “favored” than non-GMO ones.
“A large amount of funding has been invested in GMO-related research. But due to safety and other reasons, the relevant results can only serve as technical reserves. A large amount of conventional technology is either ignored or barely maintained.” said a relevant person.
In response to this situation, scholar Wen Jiayun pointed out: “The second green revolution we need is not limited to reductionist science represented by GMOs, but rather a systematic approach centered on agroecology, integrating multidisciplinary research and practice, and simultaneously including traditional knowledge and local knowledge.”
As for arable land resources: constrained by various non-agricultural demands (development zone construction, real estate development, etc.), by 2012 China's retained arable land was already less than 1.818 billion mu, a decrease of about 100 million mu from a decade earlier, and stabilizing arable land at its current scale is already difficult.
In this regard, most studies believe that developing reserve land resources can become an important way for China to increase grain production in the future. The 2005 land change survey pointed out: China's developable reserve land resources are about 1.312 billion mu, with about 200 million mu of reclaimable arable land, and key areas of about 80 million mu. Among these, the Hexi Corridor, Junggar Basin, Ili River Basin, and Tarim Basin in the northwest region have the most concentrated reserve arable land resources, with 60 million mu available for development and utilization; the Sanjiang Plain, Songnen Plain, upper Nenjiang River, Liaohe Plain, and West Liaohe River Basin in the northeast region also have potential, with 10 million mu available for development and utilization.
Whether China possesses the above-mentioned large-scale reserve arable land suitable for agriculture is one of the key factors determining China's future grain production increases, but currently the competent functional departments of the state have major disagreements over the assessment of China's reserve arable land resources.
In 2010, when the National Development and Reform Commission reported to the National People's Congress on food security work, it held that China has less than 70 million mu of land that can be reclaimed into arable land; while in 2011, materials published by the Ministry of Land and Resources held that China has 110 million mu of concentrated contiguous reserve arable land resources, mainly distributed in the arid regions of the north and west.
Regarding this disagreement, the DRC pointed out in a report that “on the whole, it is unrealistic in the future to attempt to rely on reserve resources to fill the gap left by arable land ‘conversion from agricultural to non-agricultural use.’ Roughly estimated, the currently reliable national reserve arable land is around 30 million mu, but it cannot fill the gap of 45 million mu occupied by 2020.”
This conclusion is supported by four aspects:
First, in the long term, the northwest region cannot provide large-scale cultivable land. In 2003, a research group of the Chinese Academy of Engineering provided to the State Council the “Strategic Research on Water Resources Allocation, Ecological Environment Construction, and Sustainable Development in the Northwest Region,” which pointed out: the northwest region (the six provinces and autonomous regions of Xinjiang, Qinghai, Gansu, Ningxia, Shaanxi, and Inner Mongolia) has a multi-year average water resource volume accounting for only 5.84 percent of the national total; the water resource development and utilization rate is severely excessive, with some rivers in the Hexi Corridor of Gansu, the Tarim River in Xinjiang, and the northern slopes of the Tianshan Mountains even exceeding 100 percent. Even if the western route of the South-to-North Water Diversion Project is completed, it cannot change the severe water shortage in the northwest region. Therefore, this region should adjust its industrial structure in the future, reduce land and water use for grain production, rather than continue to reclaim land for grain production.
Second, saving land through village consolidation and farmers becoming urban residents is difficult to achieve in the short term. After nearly a decade of village consolidation efforts, there is not much land left that is easy to consolidate and save, and the rest is mostly in mountainous areas, arid and semi-arid areas, and desert areas.
Third, continued decline in arable land quality is difficult to avoid. China's overall arable land quality is not high. Of the 1.8 billion mu of arable land, high-standard basic farmland accounts for only 30 percent, while low- and medium-yield fields account for 600 million mu and over 500 million mu respectively. According to the “two vertical and three horizontal” urbanization strategic pattern proposed in the “National Major Function-Oriented Zone Plan,” by 2020, construction will occupy 30,000 sq km (i.e., 45 million mu) of arable land, which in fact is still the traditional approach of land expansion. China's arable land quality grade distribution has the characteristic of high overlap among densely populated areas, economically developed areas, and high-quality arable land distribution areas. According to the plan, by 2020, 45 million mu of arable land will be occupied, most of which is good farmland, equivalent to more than 100 million mu of poor-quality arable land, and the reduction in grain output should be no less than 20 million tonnes. That is to say, in the first 20 years of this century, China will reduce grain production by 30 million tonnes due to arable land “occupying the good and compensating with the poor.”
Fourth, to improve the ecological environment, the state began implementing the Grain for Green Project in 1999, and by 2007 a total of 140 million mu of farmland had been returned to forest. However, from 2007, the area of farmland returned to forest stopped increasing, with the purpose of ensuring that arable land during the “Eleventh Five-Year” period would not be less than 1.8 billion mu. China still has ecological security debts from excessive land reclamation, and even a slight return of farmland to forest would breach the 1.8 billion mu arable land security line.
“China's food security guarantee conditions are very fragile, and even a slight relaxation will trigger serious problems affecting the whole situation. If arable land falls below 1.8 billion mu, combined with declining per-unit yields and factors such as drought, total grain output could easily fall to 500 million tonnes, in which case importing 80 million tonnes-100 million tonnes of grain is inevitable, meaning 15 percent-20 percent of domestic output.” pointed out Xiao Junyan, a researcher in the Rural Economy Research Department of the DRC.
In addition, the national annual post-harvest grain loss and waste is about 80 million tonnes, equivalent to 15 percent of total grain output, that is, the amount of grain consumed by 200 million people. In order to achieve China's grain self-sufficiency, reducing post-harvest grain loss and waste can also constitute “reducing expenditure.”
In this regard, the main approaches currently being planned by the state are: First, controlling the consumption of grain as an input. This means, first, reasonably controlling industrial grain use; second, vigorously developing grain-saving aquaculture; third, saving on seed use; Second, reducing losses in the grain storage and preservation stages. This means, first, reducing household grain storage losses; second, reducing transportation losses; Third, reducing wasteful consumption.