China’s Food Security and the Russo-Ukrainian War. The Russo-Ukrainian war complicates China’s food security strategy
Food security in China has been a real problem since the communists collectivized agriculture upon consolidating control over the country in 1949. The lessons of communist-run agriculture include low productivity due to the lack of market incentives since all agricultural land is state-owned. Domestic agricultural production has never met demand under the Chinese Communist Party. As one result, the Chinese communist leadership has devoted much attention to propagandizing about “food security” in both official announcements and through Chinese-run state media, as well as in securing foreign food sources to ensure “stability” in the country over the years.
The Russo-Ukrainian war is complicating China’s food security in several ways. Let us examine the issue.
CHINESE AGRICULTURE
China is the world’s largest producer, consumer, and importer of agricultural products. For example, China imports 60% of the total amount of soybeans available from the global market in any given year. From a research paper at Southern Illinois University: “In 2015, China was the world’s largest importer of vegetables (with 15% of the market share), the seventh largest importer of food products (with 5% of the market share) and the fourth largest importer of animals (with 7% of the market share).”
China has 22% of the world’s population while relying on 10% of the world’s arable land for its food supply. China’s arable land totals about 120 million hectares, at 0.083 hectares per capita, which ranks China well below the world average at #140, according to Nation Master. [Note: one hectare is equal to 10,000 square meters or 2.471 acres of land.]
Even worse, with just 6% of the world’s water resources, China’s per capita water availability at one-fourth of the world average.
The CCP has competing national agricultural objectives, according to a food security briefing given at McGill University in Canada by specialists from two agricultural universities in China. The first is to secure a growing food supply at low cost in order to mobilize and transfer resources from the agricultural to urban industrial sector. The second is to reach 95% self-sufficiency in meeting Chinese food requirements. These two objectives conflict due to a number of inherent problems:
- Reduction of arable land due to urbanization and commercialization
- Degradation of land quality due to industrial pollution
- Shortage of irrigation water
- Rising production costs (labor, fertilizers, power, equipment, other material costs)
- Declining yield improvements over time
Then there are the self-imposed problems imposed on the agricultural sector, courtesy of the CCP: the lack of land ownership, limited land utilization rights, low productivity due to lack of incentives, and low profitability of farming compared to other sectors of the Chinese economy. It is axiomatic that communist state-run agriculture leads to food shortages.
To try to address these problems, the CCP has been “nibbling around the edges” through policies such as these:
- Continued massive subsidies to the agricultural sector to incentivize production and create a highly-subsidized (artificial) profitability for farm workers
- The development of biofuels plants in China has been prohibited by law since 2007 (just think about all the ethanol plants that exist in the US Midwest!]
- The focus on developing disease and pest resistant genetic strains of rice, maize, and other grains
- Experimentation leading to the development of salt-tolerant superhigh-yield hybrid rice by the Qingdao Sea Rice R&D Center, which makes otherwise useless land available for rice production
- The increased importation of land-intensive commodities such as seed oils and wheat [Note: this conflicts with the increasing westernization of the Chinese diet toward meat consumption. Meat production reduces land available for producing direct human foodstuffs while increasing demand for Chinese importation of feed grains.]
FOREIGN AGRIBUSINESSES AND OVERSEAS FARMS
The above measures have had marginal impact on improving China’s food security problem. The real focus on augmenting domestic food production has been on acquiring foreign agribusiness and overseas farms. In recent years, China has been acquiring established agribusiness companies based in Europe, North America, and Oceania, as reported by the US Dept of Agriculture’s Economic Research Service: “These include ChemChina’s $43-billion acquisition of Syngenta, a Swiss farm chemical and seed company, Shuanghui International’s purchase of U.S.-based Smithfield Foods, and China National Cereals, Oils and Foodstuffs Corporation’s (COFCO) purchase of two major agricultural trading companies—Noble Agri and Nidera.” Additionally, as of February 2022, China has acquired approximately 190,000 acres of farmland in the US, as reported here.
With respect to overseas farms, China has made substantial agricultural investments in South America. For example, Beidahuang Group, China’s largest agribusiness, acquired 234,000 hectares to grow soy beans and corn in Argentina, and Chongqing Grain Group paid US$1.575 billion land in Brazil and Argentina to grow soy beans, corn and cotton, as reported here.
But the “big eggroll” of China’s overseas farms is Ukraine.
OVERSEA FARMS IN UKRAINE
Ukraine has been referred to as the breadbasket of Europe – and also of the world. For example, the country ranks fourth in the world in corn exports, fourth in barley exports, and eighth in wheat exports. As reported by Epoch Times, China imports 30% of its corn exports and 28% of its barley exports from Ukraine. Ukraine replaced the US as China’s top supplier of corn in 2021, according to CNBC.
China has been investing in Ukraine for years, with twin goals of using the country as an overland gateway to Europe for its Belt-Road Initiative and also gaining access to Ukrainian agricultural exports and other abundant natural resources in the country, including iron ore, titanium, coal, and uranium. As reported by ViewsWeek, Xinjiang Production and Construction Corps is renting 100K hectares of Ukrainian land for China’s “overseas farms.” Under the 50-year plan signed in 2014 with KSG Agro, the country’s largest agribusiness, “Ukraine will initially provide China with at least 100,000 hectares – an area almost the size of Hong Kong – of high-quality farmland in the eastern Dnipropetrovsk region, mainly for growing crops and raising pigs.” The deal will expand to 3 million hectares over time, which will more than double the number of hectares controlled by China abroad.
ENTER THE RUSSIANS
The Chinese were wise in making those investments, as Ukraine has over one-fourth of the world’s chernozem or “black earth,” which is perhaps the most fertile soil in the world, as reported here. And thus, Ukraine became central to the CCP’s long-term food security strategy – at least until the Russians came along with a better deal.
While China was Ukraine’s largest trading partner at US$19 billion per year in 2019, the Russians have apparently offered much, much more – and probably at a discount since Russian exports to other countries are subject to sanctions these days. Russia recently concluded 15 trade-related agreements with China under the umbrella of the joint statement the two countries made on 4 February. Many of those deals focused on Russian exports of hydrocarbons (oil, gas, and coal) to China – tens of billions of dollars-worth of commitments over the next 25 or more years that will dwarf China-Ukraine trade.
In addition, Reuters reported that China had lifted the restrictions on Russian wheat and barley imports as that joint statement was announced. That was yet another red flag that Ukrainian trade would likely be sacrificed on the altar of a much bigger Russo-Chinese partnership. The Russians are doubtless happy to be able to make up the difference for Ukrainian agricultural exports to China while the Chinese are happy to secure alternate sources for those in Ukraine placed at risk by the Russo-Ukrainian war.
And after the dust settles in Ukraine (which may take years), the CCP can restart its overseas farms there, too.
CONCLUSION
Food security remains a top priority for the communist Chinese government. The Russo-Ukrainian war is complicating the CCP’s food security strategy. Trade with Russian may well replace China’s trade with Ukraine, at least in the near term – and very likely on more favorable terms than would be otherwise possible. The CCP always seeks to profit at the expense of others!
The end.
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