Wheat in China

by bernat...(flickr.com)

Today I was exploring the Economic Research Service website of USDA, and attracted by a graphic and some analysis on Chinese wheat industry. Let see the graphic first:

We can see from the graphic that China had an increasing wheat trade deficit, until 1996, when the imports was almost equal to the exports. But then it worsened again in 2004.

China net trade of Rice, Wheat and corn (from ERS/USDA)

Bryan Lohmar summarized several reasons for the low production of wheat in China, in his report China’s Wheat Economy: Current Trends and Prospectsfor Imports:

  • Decreasing sown area in China
  • Low wheat prices: farmers moved productive land from wheat to high-value horticultural crops.
  • Policy changes, market development, and increasing commercialization in rural areas: many provinces abandoned the grain quota delivery obligation; instead, they accepted taxes and fees in cash.
  • Depleted resources, particularly water: both ground and surface water sources are showing signs of severe overexploitation

And he concluded:

China’s wheat production will likely remain at or below 90mmt for the foreseeable future. China will continue to expand horticultural production, especially for export markets. China’s wheat marketing institutions are becoming more market oriented and are moving beyond government intervention, and farmers are increasingly making decisions based on commercial considerations.

Is this the case for Chinese wheat production? Chinese wheat industry is going to be market-oriented and the government intervention is going to fail?

Well, it may be not. China is self-sufficient in wheat production last season, even when a series of flood and drought in several provinces have badly damaged the wheat and other grains’ productions in China, the wheat price is constantly going up, but it is basically self-sufficient. Chinese government considers food self-sufficiency as “a matter of national security”, and has been trying to subsidize the wheat production and sale in many ways.

What Leslie Hook wrote in this article at Financial Time precisely describes the whole picture:

China’s self-sufficiency policies are often costly for consumers as they drive up the cost of grain. But today, as world wheat markets shudder after an export ban from Russia and similar talk from Ukraine, China’s leaders are no doubt breathing sigh of relief.

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Happy Individuals, Weeping Land

 

Huaxi Village, from Wang Zhiming’s blog

In this village, people live in multi-storey villas with two-car garages and nicely trimmed gardens. The K-12 education is free to all residents. Men over 55 years old and women over 50 receive pensions every month from the local government. The healthcare system is so developed that residents’ medical costs are 100 percent covered.

 

Not in Norway or in Sweden, the village is in China. Take a two-hour drive from Shanghai into southeastern Jiangsu Province, and search for a small town called Huaxi Village, you will find it, whose well-known name is “the richest village in China”.

Surprise? Believe it or not, wealthy villagers in Huaxi Village are not alone in China. They are in Shaanxi Province, in Shanxi Province, in Sichuan Province, in Yunnan Province, you list.

That’s a pretty happy story, isn’t it? But the story hasn’t finished yet. If you look closely to these people, you will find out that no matter where they are, they often have a same characteristic: their wealth has nothing to do with agriculture. Some open clothing factories, others exploit coal mine. In Huaxi’s case, villagers operate 12 main factories covering textile, clothing, steel and non-ferrous metal industries, with a total turnover of 40 billion Yuan (6 billion USD) in 2006.

In other word, the only way for Chinese villagers to get rich is not to be peasants any more. The sooner they escape from agriculture, the richer they could possibly get. What an irony.

Pressured by the central government’s “GDP-lism”, those local governments are eager to maximize their economic income from the land to compete with their counterparts in the government performance measurement. Driven by the greediness for money, individual peasants, businessmen and official authorities have the same motive of turning the arable land into something else more profitable. As a result, the worst-case scenario for agriculture is happening in China: the expropriation of farmland has increased 15-fold over the past decade. Until the end of 2008, the total amount of arable land in China is 1.82574 billion acre, accounting for 12.68 percent of China’s total land area, a per-capita average of less than 1.4 acres.

It is so close to 1.8 billion acre, officially called the “bottom red line” for China’s agriculture, a goal set by Chinese central government in 2006 and highlighted in the Outline of China’s the Eleventh Five-year Plan, which is almost the most important and practical governing guideline of Beijing government.

Beijing government may not be the one to blame for the problem. Having been trying to solve the problem, the Central Committee repealed agriculture tax in 2006. The Ministry of Land and Resources also supervised the local governments not to seize the cultivable land in many ways. But after years’ endeavor, the Ministry of Land and Resources still discovered 8514 cases of illegally using land in 2009, 33. 7 percent of which was happened in cultivable land.

The problem is not coming from the policy. The problem is coming from the pocket of every individual: the peasant who is desperate to get out of the poverty, the businessman who greedily stares at the underground coal mine, and the official authority who want to build more factories, develop more industries, and in turn, have a great governing reputation of high economic growth, of course, and get more tax.

Can you change any of these people’s minds? Do you dare to draw any money out of their pocket?

I am afraid no one can.

That comes to the end of the story: a bunch of happy individuals, and a weeping land.

Agriculture and Economy

By Thomas Fisher Rare Book Library (Flickr.com)

I am going to write blogs on agriculture and economy in China and the world in this semester.

I am really excited about it! Agriculture is an industry so important for the world economy and for China, but it never comes to my mind before. A totally new topic for me. I love the feeling of exploring a new field that I never know.

I am going to focus on the undeveloped agriculture in China and its counterpart in the United State. Why does China still need to import wheat, rice, corns from the United States and other countries, while there are nine hundred millions farmers and plenty of farming lands in China? why the rural area in China is so undeveloped while the big cities like Beijing and Shanghai are rich enough to complete with New York?

Another issue I am interested in is open market’s impacts on Chinese agriculture after China joining  WTO in 2001. What are the trends of  food export and import during the nine years? What role does Chinese agriculture play in the international market?

So many issues come to my mind, I just can not wait to know everything.

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