China's soybean industry suffers an irreparable disaster
It is not an easy thing for China to feed itself: because China has 21% of the world's population but only 9% of the world's arable land. China's most fertile land depends on irrigation and is therefore vulnerable to water pollution, floods or drought. China's water resources are quite scarce, and their distribution is extremely uneven. The "arid north"——all areas north of the Yangtze River basin have 2/3 of China's arable land but only 1/5 of the country's water. Even adding the "humid south," China's per capita water resources are less than 40% of the world average.
In recent decades, China's rapid economic growth has given China more financial resources to buy grain from abroad, but the extensive growth model has also brought more and more hidden dangers to grain production. The driving force of China's economic growth mainly comes from the Pearl River Delta and Yangtze River Delta regions, which were formerly lands of fish and rice. Now, half of the grain in the Pearl River Delta must be transferred in from other regions, while the Yangtze River Delta can barely feed itself. Rising incomes have also led people to shift toward eating more animal protein, and the production of animal protein consumes more resources. Pressure is constantly increasing, and China's grain prices, like those in other countries, are also constantly climbing.
Even so, China's grain can still be considered self-sufficient. In the last ten years, annual per capita grain output has hovered between 333.29 kg (2003) and 411 kg (1998), averaging 380 kg per capita. Some grains such as soybeans and edible vegetable oil mostly rely on imports, but the main grain crops such as rice, wheat and corn are overwhelmingly grown domestically, with imports amounting to less than 5% of total consumption. Because of this self-sufficiency in grain, although the prices of high-end foods such as meat, eggs and milk have risen relatively sharply and provoked public complaints, the prices of bulk grains such as rice and wheat have remained relatively stable. According to figures from the National Bureau of Statistics, in 2007 the average price of grain rose by only 10%, far below the increase in international market prices. The price increases for rice and wheat were relatively small, while corn and soybeans rose by 15%-25%. In the first quarter of 2008, rice rose by only 3.5%; by comparison, in the last week of March 2008 alone, the price of Thai rice on the international market rose from $580 per ton to $760 per ton, soaring by 31%. The Chinese government, as in previous years, stockpiled a large amount of grain. In March 2008, Premier Wen Jiabao of the State Council revealed that the government had stockpiled 150 million to 200 million tons of grain, equivalent to 30%-40% of total annual grain consumption. This figure is far above the 17%-18% safety line proposed by the UN Food and Agriculture Organization (FAO) for global grain reserves. For rice alone, the reserve reached 40-50 million tons, enabling China to stay unaffected amid the continued chaos in the international rice market.
If that is the case, then why still worry about the question of how to feed China? In the foreseeable future, apart from severe natural disasters, there should be no force capable of shaking China's food security. Long-term threats such as global warming may gradually become more apparent over time, but are strong economic and technological progress not the best defense against these threats?
In fact, China must now worry about its own food security. With record use of chemical fertilizers and pesticides as well as soil and water loss, grain output is very likely to shrink, while at the same time demand continues to grow. Rising energy prices lead to higher prices of agricultural means of production and also threaten the profitability of grain producers. In recent years, in response to this crisis, scholars have proposed two mutually opposed strategies, one emphasizing domestic food security and the other relying on the international market. Now is the time to draw some lessons and plan for the future.
Domestically based grain production
China's grain production has gone through ups and downs. For decades, the government encouraged the development of export industries in coastal areas at the expense of rural development. However, heavy use of chemical fertilizers and pesticides ensured grain supply. From 1994 to 1998, China had five consecutive years of bumper grain harvests, with annual grain output exceeding 500 million tons. Grain prices fell, and the fall in grain prices along with years of neglect of rural areas led to a major decline in grain output. In 2003, per capita grain output was only 333 kg, down 20% from 1998. National grain reserves fell to less than 30% of total annual grain consumption, also the lowest level since 1974.
The decline in grain output sent a dangerous signal. The government began again to encourage grain production. The government set minimum grain purchase prices and ensured payment by state-owned grain depots. The government increased subsidies for grain farmers. People gradually discussed the so-called "three rural crises" (rural areas, agriculture and farmers), a term covering many problems in China's countryside, including stagnant incomes, reduced public services, overstaffing in local government, spreading corruption, declining social capital, environmental deterioration and an increase in mass incidents. Now, the "three rural crises" are widely regarded as the greatest challenge facing China. Discussion of this crisis has caused the government's rural policy over the past 5 years to shift more from the neoliberal "structural adjustment" model toward a "Keynesian" model. In 2005 the government abolished the agricultural tax, and investment in rural development grew at an annual rate of 25%-30%, most of it used for free primary education and the rebuilding of rural health care.
Although quite a few of these policies are stopgap measures that treat the symptoms but not the root cause, it cannot be denied that they produced certain positive effects. Some migrant workers who had roamed about finally no longer saw life in their hometowns as so frightening, and returned home when they could not find satisfactory work. The sweatshops in the Pearl River Delta special economic zone genuinely experienced a labor shortage (the so-called "migrant labor shortage"), the first time in twenty years. On the other hand, grain output rebounded, reaching 500 million tons in 2007. In fact, in 2007 China's grain production even produced a certain surplus, with grain exports exceeding imports by 7 million tons. In order to stabilize domestic grain prices during the recent rise in international grain prices, the Chinese government in December 2007 canceled the export tax rebate policy for 84 grain products including wheat, rice, corn and soybeans. In early 2008, it further imposed a temporary export duty of 5%-25% on 57 grain products. The Chinese government was also wise not to become deeply mired in the then-fashionable biofuel trend. After 2002, China introduced a number of corn alcohol production lines from the United States, but people quickly realized this was a mistake, and in June 2007 the government halted all new biofuel projects using corn or other grain as raw material. In sum, these government policies encouraging domestic grain production and stabilizing domestic grain prices have been effective.
The "invisible hand" of the market? —— A case study on soybeans
Compared with other grain crops, in recent years China's soybean production has been at the mercy of world market forces, with serious consequences. Soybean is a crop with a long history in China, having been cultivated in China nearly 5,000 years ago. According to legend, the Yan Emperor Shennong cultivated the five grains, and soybean was the only legume among the five grains.
Thousands of years of cultivation bred a rich diversity of soybean varieties and also accumulated a great deal of related traditional knowledge.
By the 1990s, China had a long history of exporting soybeans, and by the early 21st century soybeans were to a large extent also self-sufficient. But during the WTO negotiations, the Chinese government decided to make considerable concessions in the agricultural sector. As a result, the import tariff on soybeans fell to 3%. Thereafter, soybean imports continued to increase.
In 2003, soybean imports reached 20.74 million tons (doubling in three years), and China also became the world's largest soybean importer. In 2005, soybean imports reached 26.5 million tons, 1.6 times domestic output. The vast majority of these soybeans were genetically modified soybeans imported from the United States, Brazil and Argentina. Soybean became one of the few grain crops on which China relies entirely on imports, and in 2007 imported soybeans accounted for more than 2/3 of annual domestic consumption.
The international media often focus on the producing countries in the soybean trade. On April 28, 2008, the German magazine Der Spiegel published an article titled "Striving to Satisfy the Appetites of China and India." In that article, soybean production in Brazil is described as a "culture of death." Soybean cultivation intensified deforestation and drove large numbers of small farmers into bankruptcy. The article also argued that the Chinese were draining the soybean market from the Rio de la Plata to the Amazon. Large tracts of land in Mato Grosso state had already become a green desert, with nothing but a single crop grown with heavy pesticide use.