By Ye Xingqing
Research Report Vol.19 No.4, 2017
Due to the large population and limited land and water resources, and with the advances of industrialization and urbanization and the increase in agricultural production costs, China will see a continued increase in its dependence on imports of some important agricultural products, especially land-intensive products. In response to such a trend, it is necessary to devise a plan for the future global agricultural product supply system of China. The No. 1 document of the central government in 2014 proposes to “strengthen planning and guidance for the import of agricultural products and improve the structure of sources”. The No. 1 document of the central government in 2016 reiterates that “we should improve the global import pattern of important agricultural products, and diversify the sources of import”. The Outline of the 13th Five-Year Plan for Economic and Social Development also proposes to “improve the structure of the sources of import, expand the export of advantageous agricultural products under the premise of ensuring supply security, and appropriately increase the import of agricultural products that are in short supply in the domestic market”. I think that promoting the diversification of sources of import should take into account not only the production and trade growth potential of the countries of origin of imported agricultural products, but also factors such as trade balance, transport channels, and geopolitics. Some of the countries along the Belt and Road Initiative enjoy advantages in these aspects, and are expected to play an important role in the diversification of China’s global agricultural product supply system.
I. China should establish a Diversified Global Agricultural Product Supply System
China has had an agricultural product trade deficit for 13 consecutive years since 2004. Though having narrowed in the past two years, the deficit will expand again in the future and China’s dependence on imports of agricultural products will continue to grow. That is because the decrease in deficits in the past two years is associated with the reform of the domestic agricultural product pricing mechanism and purchase and storage systems, and increased efforts in reducing the stock of cotton and corn, as well as external factors including the decline in prices of imported agricultural products. Yet these factors are temporary and unsustainable, and the trend of widening gaps in agricultural production costs between China and other countries has not changed. With the advances of industrialization and urbanization, China’s disadvantage in resource endowments will become more prominent. Border protection and domestic support measures agreed when joining the WTO will gradually be no longer applicable to domestic agricultural production protection, and the time when domestic agricultural products enters China without paying high out-of-quota tariffs is approaching.
As long as China sticks to the direction of “promoting orderly and free flow of domestic and international factors, efficient allocation of resources, and profound integration of the market” to build a new system of open economy as set at the 3rd Plenary Session of the 18th CPC National Congress, China’s long-term and growing dependence on agricultural imports, due to the combined role of resource endowments and market mechanisms, will become a normal. That will pose serious challenges to the development of small-scale agriculture and the livelihood of many farmers in China. However, it can also help to reduce the pressure on domestic resources and environment, improve consumer welfare, and hedge against industrial trade surplus. Overall, the benefits outweigh the disadvantages, and the trend of increasing dependence on imports is in alignment with the national long-term strategic interests. The key question is how to draw on advantages and avoid disadvantages, especially how to improve the stability and reliability of agricultural imports.
Currently, China’s agricultural imports have four prominent features. First, the sources of imports are highly concentrated in the new continent. In 2015, 63.2% of China’s agricultural imports were from South America, North America and Oceania, and only 19.2%, 15% and 2.6% came from Asia, Europe and Africa. By country, the top five sources of China’s imported agricultural products were the United States, Brazil, Australia, Canada, and Argentina, which together accounted for 53.9% of total imports. Second, the varieties of imports are highly concentrated in land-intensive agricultural products. In 2015, edible oilseeds accounted for 32.9% of China’s agricultural imports, grain 8%, edible vegetable oil 6%, cotton, linen and silk and sugar crop and sugar 4.8%, and animal products (equivalent to import of feed grain) 17.5%. These land-intensive agricultural products together made up 69.2% of the total agricultural imports. Third, the import of land-intensive agricultural products is highly concentrated in a few countries. Compared with the overall trade volume of agricultural products, the sources of main land-intensive agricultural products are even more concentrated – imports from the top five sources accounted for more than 90% of the total (see Table 1). Fourth, shipping is the primary means of transportation of imported agricultural products, the ports of import are highly concentrated in the southeast coastal areas, and the import channels are highly concentrated in a few large multinational companies.
The highly concentrated trade pattern is mainly determined by the market and has economic rationality. But it also involves great risks considering the enormous market, huge growth potential of imports, long distance between ports and inland regions, and the importance of stable and reliable agricultural product supply to national interests and people’s livelihood. Instead of putting all eggs in one basket, it is advisable to diversity the sources, transport channels, ports and trade channels of imported agricultural products from the strategic perspective of maintaining agricultural product supply security and even national economic security.
II. Countries along the Belt and Road should play a Greater Role
Agricultural exchanges and trade have been an important area of cooperation between China and other countries along the Belt and Road (Ministry of Agriculture et al., 2017). The rapid development of China’s agricultural trade has driven the growth of trade of countries along the Belt and Road. From 2011 to 2015, the average annual growth rate of these countries saw their agricultural product exports to China, imports from China, and total trade volume with China increase 7%, 11% and 8% annually, while the average annual growth of global agricultural product exports, imports and total trade volume was only 4.21%, 3.16% and 3.67% respectively①. Some countries have become important sources of China’s imports of rice, corn, cotton, edible vegetable oil, and natural rubber②.
But overall, there is still plenty of room for development of trade in agricultural products between China and countries along the Belt and Road. From 2011 to 2015, trade with these countries accounted for 24.6%, 24.8%, 25%, 26.1% and 25.3% of China’s foreign trade, while the figures for trade in agricultural products were 25%, 23.6%, 22.6%, 23% and 24.05% respectively. This indicates that China’s trade in agricultural products with along the Belt and Road was not as close as the overall trade. From 2011 to 2015, China’s total trade volume, exports and imports of agricultural products posted an average annual growth rate of 9%, 7% and 10%, while the rates for countries along the Belt and Road were 8%, 11% and 7%, suggesting that the growth of trade in agricultural products with countries along the Belt and Road, was slower than that of China’s total trade in this regard. In particular, the growth of imports from these countries was much slower than that of China’s total imports. The proportion of imports from countries along the Belt and Road in China’s total imports of agricultural products declined to 20% in 2015 from 23% in 2011.
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