As a major importer of the world's grains, China's dependence on grain imports continues to increase. Since the outbreak of COVID-19 at the end of 2019, agricultural production has been severely hindered, and many international ports have been affected. At the beginning of 2022, the world's two major granaries, conflicts between Russia and Ukraine, rising food prices, and blockades of multiple ports. These events have had a severe impact on the global grain trade pattern and exacerbated the uncertainty and complexity of China's future grain trade pattern.
According to the General Administration of Customs of China data, China imported 147 million tons of grain in 2022. Although it is 10.7% lower than in 2021, imports still account for more than 20% of the total domestic grain output. In the context of economic globalization, China has a large number of grain imports and a high degree of dependence on foreign countries.
The Global Food Crisis Will Drive Up Import Prices
International conflicts, extreme weather, and the rise of grain trade protectionism have led to tight global grain supply and demand. The overall situation in the international grain market is not optimistic. China must always be vigilant about possible risks brought about by the global grain crisis.
In 2022, global food import prices will remain high. According to the Food Outlook report released by the Food and Agriculture Organization of the United Nations (FAO), the global food import bill will rise to 1.94 trillion US dollars in 2022, of which the "price factor" will cause import costs an increase of about $157 billion.
China's domestic imported grain prices are highly correlated with international grain prices. In March 2022, Ukraine, Russia, and other countries successively introduced grain export restriction policies, which led to an increase in the cost of China's imported grain, especially soybeans, corn, and other varieties that are highly dependent on foreign countries.
The Risk of the ‘Weaponization’ of the Food Trade
The political relationship between China's food import source countries and China is highly unstable, which puts food security in the vortex of geopolitical competition.
The Russia-Ukraine conflict exposed the security logic in international trade against increasingly fierce strategic competition among major powers.
China's food imports are more restricted by a few countries with unstable geographical relations with China, which will make China involved in the "storm" of global food security.
On the one hand, the Russia-Ukraine conflict has deepened the economic and security dislocation between the United States and China. China's dependence on the United States for food imports will bring enormous pressure on China's food security.
After the conflict broke out, China expanded its food imports from the United States, especially in key crops such as corn and soybeans. The United States has become China's most important source of imports. Because of this, the changes in the political relations between China and the United States and the resulting economic and trade policy adjustments will definitely weaken China's food security.
On the other hand, the scale of Russia's grain exports to China will continue to increase after the conflict, but Russia's relatively limited strength in grain exports to China will complicate China's situation in ensuring food security.
After the conflict broke out, China quickly opened its grain market to Russia, sending a signal of the close geographical relationship between China and Russia.
However, due to the differences in industrial structure and economic model between China and Russia, China needs to make long-term agricultural investments in Russia in order to effectively improve the level of agricultural cooperation between China and Russia. In the short term, it is difficult for Russia's export supply to replace China's existing sources of grain imports, but the close relationship between China and Russia in grain trade will increase the possibility of China being subject to economic sanctions from Western countries, which makes China's food security environment more complicated.
Improving Resilience: Food Security in China
In the face of fluctuations in the global grain market, China, as the most important grain importer, needs to "plan ahead" and improve China's "resilience" in the global grain market.
China should take the initiative to expand the scale of trade with the world's major grain-exporting countries and expand the scope of China's grain import options. Among the countries that already have an advantage in grain export scale, except for a few countries such as the United States and Brazil, which have already launched close grain trade exchanges with China, the grain export scale of other countries to China is still very limited. They are all expected to become substitute countries for China's grain imports.
Take the corn trade directly affected by this geopolitical conflict as an example. The United States, Argentina, Brazil, and Ukraine are the top four corn exporters in the world. However, the export volume of Argentina and Brazil to China in 2020 is almost negligible. After excluding the Chinese market, Argentina and Brazil's global corn export scale has far exceeded that of the United States and Uruguay.
It can be seen that Argentina, Brazil, Romania, and other countries already have strong grain export capabilities, capable of meeting China's grain import gap, and are expected to further expand their advantages in the global grain market through closer grain ties with China.
On the other hand, China should actively develop the grain industry of countries with resource endowments, and increase overseas guarantees for China's grain imports.
In the international grain market, the agricultural development of a large number of countries is constrained by insufficient national policy support and obvious shortcomings in agricultural infrastructure. As a result, their advantages in production factors have not been fully utilized. All countries are "overseas arable land" to be developed by China, which is expected to become a potential source of China's grain imports by increasing investment in agriculture.
Many countries have abundant arable land resources in sub-Saharan Africa, Eastern Europe, Southeast Asia, and Latin America. The per capita arable land area is more than that of China. Based on this, China can continue developing Thailand, Cambodia, Kazakhstan, and other countries along the “Belt and Road” in Southeast Asia and Central Asia, further expanding the food industry in sub-Saharan Africa and Latin America.
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