One of the most interesting developments in the first year of Xi Jinping’s tenure was his iconoclastic approach to farm policy. He gave a major speech on agriculture in December 2013, in which he outlined a relaxation of China’s policy of maintaining 95% self-sufficiency in grains. As usual for speeches announcing a change in policy, there was much fiery rhetoric about why the old policy was correct: “We cannot look at grain security only from an economic perspective, we must also look at the political perspective,” he said. But in substance what Xi proposed was allowing a higher level of food imports, and focusing efforts at self-sufficiency on only a few crops with sustainable levels of domestic production. (The full text of the speech is not online, but is available in a book of Xi’s speeches, which I’m sure you own.) The new grain security slogans, with included a prominent mention of “appropriate imports,” then made their way into numerous government policy documents.
And then things stopped. As the new line started to get more publicity and public discussion, media coverage and criticism started to mount. The furor got so intense that in February 2014, the Ministry of Agriculture ended up publicly denying that the new slogans meant that China was softening its commitment to grain security. Since relaxing the grain security standard was the whole point of adopting the new slogans, this of course was not really true. But it was significant that the government did not reinforce Xi’s decision to break with past policy, but rather reaffirmed the existing policy. Possibly as a result, there have been no specific measures that actually put into practice the new grain security policy: more than a year and half after the new framework was finalized, there is still no clarity on exactly what level of imports of what products are officially considered acceptable. There have also been possibly retrograde developments, like the new national security law that names grain security as one the key parts of national security. Agricultural economist Cheng Guoqiang summarized the situation in a recent presentation: policymakers remain divided, with some emphasizing the traditional approach to self-sufficiency while others urge change, and there is no consensus on how to move forward.
Why is it important for China to change its approach to grain security? The most obvious reason is that the old one isn’t working: China imports much of its soybean supply, and recently became a net importer of corn (the concept of grain used in China is really a broad category of staples, including beans and potatoes as well as cereals). But as the excellent and indefatigable Dim Sums blog has repeatedly documented, Chinese bureaucrats’ obsession with maintaining high levels of domestic grain output has led to many other problems, like the stockpiling of grain on a vast and wasteful scale, as well as huge overuse of fertilizers and increasing degradation of land. It has also required increasing levels of government subsidy and market intervention to maintain. As the OECD has documented, China has been steadily ramping up subsidies and other farm supports at a time when many other governments have been scaling them back (in absolute terms, China is both the world’s largest agricultural producer and the largest disburser of agriculture subsidies). So in environmental and financial terms, maintaining a high level of self-sufficiency looks increasingly unsustainable–and is only likely to become more so. The chart below shows some model results from Kym Anderson (from an online presentation; here is an ungated version of the supporting paper), arguing that maintaining self-sufficiency in key products will require implausible, and WTO-illegal, levels of tariffs and trade restrictions by 2030.
Grain security is probably not the most urgent short-term issue Xi Jinping has to deal with right now, so it’s understandable that he may not want to spend much political capital to push through this particular change. But many reformist figures in China view the overhaul of grain security as a key market of progress on Xi’s pledge to give market forces a “decisive role” in the economy. Since Chinese prices for grain are higher than world prices, if market forces play a greater role, then more market forces means more grain imports. Finance minister Lou Jiwei himself, in a now-famous rant about how China can avoid the middle-income trap, named agricultural reform as one of the top economic priorities. “From seed to table, the whole chain has subsidies and interference in resource allocation,” he said at an April forum at Tsinghua University (the Chinese transcript is online; here’s an English write-up). “What should we do? Liberalize prices, preserve crop rotation, give subsidies for fallow land, and import.” Such matter-of-fact acceptance of large food imports breaks is clearly still rare in China. The desire for self-reliance, and the related tendency to see their country as alone in an uncaring world, have deep roots.
How exactly did Xi Jinping propose relaxing the grain security policy? This is a bit hard to explain without resorting to some Chinese terms. The original self-sufficiency policy (laid out in a 1996 white paper) was that net imports of grain were not to exceed 5% of domestic demand. But grain is not just grain; the Chinese term liangshi also includes soybeans and potatoes, among other things. Since China is now a huge importer of soybeans, mostly to make animal feed, this is clearly a big problem for the old policy. Corn (maize) imports are also now growing, and also go mainly into animal feed.
One of the new slogans (谷物基本自给、口粮绝对安全) therefore does away with liangshi, and in its place introduces two new terms: guwu, or cereals, and kouliang, or food grains. There must be “basic self-sufficiency” in cereals (rice, wheat, corn), and “absolute security” in food grains (rice, wheat). Because liangshi is no longer the operative term, the requirement to maintain self-sufficiency in soybeans (and potatoes, for that matter) has been quietly jettisoned. And since corn is subject to the looser “basic” standard, the new policy also means greater tolerance for corn imports. The problem is that there is not yet a definition of what “basic” or “absolute” self-sufficiency might mean in numerical terms, and without that clarity it is hard for officials to know how to actually implement the new policy. The text of the new national security law also refers to the old formulation of grain security in terms of liangshi, further muddying the issue.
|Term||liangshi (粮食)||guwu (谷物)||kouliang (口粮)|
|Usual translation||grain||cereals||food grains (i.e., not feed)|
|Technical meaning||rice, wheat, corn, beans, tubers||rice, wheat, corn||rice, wheat|
|Old policy||95% self-sufficiency|
|New policy||“basic self-sufficiency”||“absolute security”|