Ensuring Food Security Requires Both Openness and Self-Reliance

From the perspective of a trading enterprise, a country's agricultural policy and the global form of agricultural trade should be said to influence each other. In the context of globalization, agricultural policy can influence trade policy and affect global trade flows.

China's Agricultural Policy Has Achieved Remarkable Results

China's agricultural trade has developed very rapidly over the past six or seven years. Soybean imports have grown in a stepwise manner, from 50 million to 60 million, reaching 70 million tons in 2015, and may reach 80 million tons in the next year or two. Driven by consumption growth and urbanization, the dietary structure has shifted from eating grain in the past to eating meat, eggs and milk, which directly drives the development of the feed industry and directly drives the import of feed ingredients. With 80% of soybeans used as feed ingredients, one can see that the market is driving continuously growing imports. At the same time, other feed ingredients are also growing, and grain imports are also growing; the reason ultimately comes down to economic development as the driver.

Corn imports have been relatively stable, basically around two to three million tons per year, not a very large scale, but feed other than corn has shown rapid growth. The first reason why China's corn import volume is difficult to increase is because there is a price gap. Trade chases prices. Barley, distillers dried grains with solubles (DDGS), and sorghum saw relatively large import volumes in the past two years, and ultimately there are market reasons for this. Second, it is more a result of agricultural policy. China's agricultural policy has achieved very good results over the past decade or so, with agricultural output continuously rising and domestic stocks very ample. From the overall perspective, grain is abundant and farmers' incomes have increased. From another perspective, it has also affected agricultural production in other countries to a certain extent and affected China's imports. From this angle, it should be said that trade has been influenced by agricultural policy to a large extent. From this angle, the impact of globalization is very interesting.

Combining Production and Consumption

Now the prices of Chinese agricultural products are beginning to adjust. How can a better price stimulate consumption while increasing production and income, and boost domestic consumption? The agricultural product processing industry in the past two or three years may have been at its worst in history, and some corn processing plants have already stopped production this year. At this time the state has adjusted agricultural policy in a timely manner, and I think this was indeed a scientific adjustment made from an overall strategic height. Although the import business will be affected to a certain extent, the entire domestic market has come alive.

The policy orientation in the past was to "encourage production and increase farmers' incomes"; today's orientation is "from the field to the table"; what plays a decisive role today is the consumption of the urban population and the overall cost of living, whether people can live well and live safely. This is the main direction of policy. Agricultural policy at the current stage needs to balance the relationship between production and consumption.

From the perspective of agriculture, at the current stage there is a great concern about the slowdown in exports. First, because domestic agricultural production has decreased, fragile land must be withdrawn from cultivation, leading to reduced output. Second, domestic grain stocks are relatively high, and we need to digest them. In the short term, imports will also slow down because of price factors. But in the long term, the import trend cannot be changed. From the national perspective, the food security policy will not change; there should be appropriate imports, especially moderate imports of feed and grains, while oilseeds should be fully liberalized. Judging from the trend of domestic consumption growth, the per capita consumption level of meat, eggs and milk still lags far behind that of the United States, Europe, Australia and other regions, and this growth remains rigid. Therefore, from these angles, it may take two or three years in the future to digest domestic stocks.

Combining Environment and Agriculture

I hope the state will introduce policies on the industrial use of agricultural products as soon as possible. At present our corn enters the production link of fuel ethanol, which is a direct boost for domestic consumers and will not affect the entire traditional food sector. Whether it is corn processing, rapeseed processing, or the use of biodiesel, bioenergy and the like in the field of industrial ethanol, all can greatly increase consumption in the short term and also help with long-term environmental improvement and the long-term boost of agricultural production. In fact, precedents abroad in this regard also provide us with a very good reference. After some countries used large amounts of ethanol, corn production increased greatly, stimulating domestic consumption; this is a point that well combines industry and agriculture. This is a short-term arrangement and also a long-term consideration, because it combines the environment and agriculture.

Combining Reform and Opening Up

Today the world has become more integrated. APEC, G20, FTA and others are all good mechanisms for multilateral, bilateral and regional consultations on agricultural trade and investment. In particular, the "Belt and Road" policy proposed by China's central government provides a very good opportunity for China and neighboring countries to carry out agricultural consultations, facilitate agricultural trade, and for agricultural enterprises to go global.

First, as the market opens up with agricultural products, agricultural trade will become increasingly convenient, and tariffs will also be reduced or exempted to some extent. China's ample grain stocks precisely provide us with favorable conditions for opening up agricultural trade and also provide a good direction for agricultural price reform. Often when there is reform, there is concern that farmers' output will decrease and supply will be unstable. Today, with ample stocks, this will bring a very good opportunity for negotiations on agricultural trade in the entire international market. Especially in the long run, after price marketization, China's imports will be guided onto a sound track. From this angle, we are still very pleased to see this kind of price change. Over the past two or three years, COFCO has been "going global," continuously making overseas investments and building supply chains. As an agricultural enterprise, we will certainly develop supply chains abroad, because in the future we will be a global enterprise.

Second, in the process of multilateral and bilateral negotiations, more consideration should be given to what the investment environment is like when Chinese enterprises go global. At present, China still has some special approvals for state-owned enterprises "going global." Of course, there is no prominent problem with the approvals now, but compared with competitors from other countries there are still some additional procedures, which is an unfair situation.

Recommendations

Based on the above observations, I have recommendations in the following four areas.

First, in improving agricultural policy, we must still firmly uphold the attitude toward reform and the direction of reform. Only in this way can China's agricultural enterprises become increasingly competitive and increasingly strong. With reform, the scale of China's agricultural enterprises will continue to expand, agricultural organization will continue to strengthen, and agricultural enterprises will become stronger and more competitive. Along with the changes, the state may have a comprehensive plan for the layout of agricultural production. Especially in terms of agricultural subsidies, after directly subsidizing farmers, how much income farmers have, what farmers produce, and how farmers' incomes are composed need to be improved as soon as possible. In addition, attention should also be paid to the domestic industrial layout, including the health of the industry. It cannot be said that farmers are happy while processing enterprises suffer greatly; that is not the policy orientation.

Second, increase transparency in links such as agricultural production, supply and marketing. Along with the development of APEC, the WTO and the TPP, the transmission of market information at home and abroad is very important. China's stocks are very ample. If the Chinese government increases transparency every year regarding the production, supply and marketing of major agricultural products, it will give global agricultural production planning a very good expectation. In this way, global resources will also be used better. At the same time, the government should have a very clear and definite grain reserve plan. Only then, after the market is truly opened up, will there be an automatically optimized adjustment.

Third, after COFCO "went global," its degree of internationalization has increased significantly, and international peers no longer regard COFCO as a domestic enterprise. I hope the government can also promote the building of commercial self-regulatory institutions in the industry and accelerate alignment with international standards. COFCO is very willing to play a positive role in this regard.

Fourth, in the process of promoting multilateral negotiations, I hope the government will consider issues more from the angle of improving the international investment environment to promote Chinese enterprises "going global."