Contributions and Challenges

of Agro-trade to Food Security in China

Jing ZHU College of Economics & Management

Nanjing Agricultural University , P.R.China

Prepared for the WTO Agricultural Policy Landscape Symposium, Geneva, Switzerland, June.13-14, 2018

Outline

China’s Food Security Status and Progress

China’s Agricultural Trade Development

Contributions of Agro-trade to China’s Food Security

Challenges of Agro-trade to China’s Food Security

Ways Forward

2

Per Capita Consumption of Major Food Items in China ,1960s-2010s

Note: Cereals excludes beer, fruits excludes wine, milk excludes butter, aquatic Products include aquatic animals & plants. Sources: FAOSTAT “Food Balance Sheets”

Improvement in Food Consumptions in China

0.4

1.2

4.8

2.5

2.1

3.8

4.3

79.7

91.2

10

7

35

33

19

62

94

348

150

0 50 100 150 200 250 300 350 400

Aquatic Products

Vegetable Oils

Fish, Seafood

Milk

Eggs

Meat

Fruits

Vegetables

Cereals

kg/capita/yr

2013 1961

3

GFSI Scores Comparison between China and Other Countries (2012-2017)

Notes: score 0-100 where 100=best. Sources: EUI(2017) “Global Food Security Index 2017”.

China Ranked 45th among 113 Countries in the 2017 GFSI Ranking

4

China’s Grain Output Growth,1952-2016

Year Meat Fruits Vegetables 1980 12 7 1985 19 12 1990 29 19 1995 41 42 2000 60 62 2001 61 67 484 2002 62 70 529 2003 64 145 540 2004 66 153 551 2005 69 161 565 2006 71 171 540 2007 69 181 565 2008 73 192 592 2009 76 204 618 2010 79 214 651 2011 80 228 679 2012 84 241 709 2013 85 251 735 2014 87 261 760 2015 86 274 785 2016 85 284 798

China’s Other Major Food Products output growth,1980-2016 (Million tones)

Sources: NBSC “China Statistics Yearbook”(various years)

Domestic Food Production Growth

0

100

200

300

400

500

600

700

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

2012

2016

Million tones

1958

1978

1984

1996

2013

2015

Source: China Customs data

China’s Cereals Trade, 1949-1978

0

1

2

3

4

5

6

7Billion $ Export Import

0

2

4

6

8

10

1949 1954 1958 1962 1966 1970 1974 1978

Million MT Export Import

– Low level – Net exporter foreign exchange earner

China’s Agricultural Trade, 1949-1978

6

Phase I: 1949-1978

Source: China Customs

China’s Agricultural Trade Balance,1979-1993

1980 1985 1990

Export Live Animals and Meat 0.8 0.8 1.2

Aquatic products 0.4 0.3 1.4 Cereals, Oilseeds and Vegetable Oil 0.5 1.3 1.2

Vegetable and Fruits 1.1 1.3 2.3

Import Live Animals and Meat 0.0 0.0 0.1

Aquatic products 0.0 0.0 0.1 Cereals, Oilseeds and Vegetable Oil 2.5 1.1 2.5

Vegetable and Fruits 0.1 0.1 0.1

China’s Trade of Selected products, 1980-1990

Billion $

-4

-2

0

2

4

6

8

0

2

4

6

8

10

12

14Billion $

Export Import Balance

Phase II: 1979-1993 – Growing in volume – Comparative advantage – Net exporter

7

Source: China Customs

China’s Agricultural Trade Net Import of China’s Cereals (Million MT)

Phase III: 1994-2000 – Fluctuation – Adjusting to domestic production-consumption – Soybean imports growing Preparing to join WTO

8

Cereals Rice Wheat Maize Soybean

1994 2.6 -1.0 7.2 8.7 -0.8

1995 19.8 1.6 11.4 5.1 -0.1

1996 9.6 0.5 7.7 0.2 0.9

1997 -4.2 -0.6 1.5 -6.7 2.7

1998 -5.0 -3.5 1.3 -4.4 3.0

1999 -4.0 -2.5 0.3 -4.3 4.1

2000 -10.7 -2.7 0.7 -10.5 10.2

Notes: “+” means net import, while “-” means net export

0

1

2

3

4

5

6

7

0

2

4

6

8

10

12

14

16

18

1994 1995 1996 1997 1998 1999 2000

Billion $

Export Import Balance

Phase IV: 2001-- - Joined WTO

• Tariff cuts

17.9% in 2001 to 15.2% in 2016

• Establish a Tariff Rate Quota (TRQ) import system

wheat, corn, rice, sugar, cotton, wool

• Reduce the export subsidies and state trading

• Cap domestic agricultural support

– 8.5% AMS

9

• Increasing Trade Volume

Source: China Customs

China Agricultural Trade, 2001-2016

Billion $

10

Source: China Customs

• Growing Net Importer

China Agricultural Trade Balance, 2001-2016

11

• Increasingly Revealed Comparative Advantage/Disadvantage

• Import land-intensive products – cereal, oilseeds (soybeans),

vegetable oil, cotton

• Export labor-intensive products – vegetables，fruits，

aquatic products 12

1996-2000 2001-2010 2011-2016

Soybean

Cotton

Meat

China’s Share of Global Agricultural Import Market

Source: UN Comtrade

• Growing Imports: China vs the World

13

Rank 2000 2005 2010 2012 2014 2016

1 EU EU EU EU EU EU

2 USA USA USA China China USA

3 Japan Japan China USA USA China

4 China China Japan Japan Japan Japan

5 Canada Canada Russia Russia Russia Canada

Changes of Top 5 Importers of Agro-products in the World

Source: UN Comtrade

China’s Share of Global Agricultural Export Market 1996-2000 2001-2010 2011-2016

Vegetables

Fruits

Aquatic Products

14

Changes of Top 5 Exporters of Agro-products in the World • Growing Exports: China vs the World

Rank 2000 2005 2010 2012 2014 2016

1 EU EU EU EU EU EU

2 USA USA USA USA USA USA

3 Canada Canada Brazil Brazil Brazil Brazil

4 China Brazil China China China China

5 Australia China Canada Canada Canada Indonesia

0.08

0.48 0.39

0.86

1.99

1.29

0.12

0.00

0.50

1.00

1.50

2.00

2.50Ha

Land

2.1 8.8

27.5 30.0

21.0

80.2

1.1 0

20

40

60

80

100Km3

Water

Per Capita Land & Water Endowment in China and Selected Countries（2014）

Sources: FAOSTAT

Land and Water Resources: China vs Other Countries

15

Food Supply Quantity Per Capita Year in China & World, 1960s-2010s (kg/capita/yr)

Sources: FAOSTAT “Food Balance Sheets”

Consumption of Food: China vs the World

16

0

10

20

Vegetable Oils

China World Japan

0

20

40

60Sugar & Sweeteners

Korea China World

0

20

40

60

80

Fish, Seafood

China World Japan

0

100

200

300

Milk

China USA World

0

30

60

90

Meat

China World EU

0

40

80

120

Fruits

China World EU

Daily Energy Intake: China vs World

Sources: FAOSTAT “Food Balance Sheets”

17

0

1000

2000

3000

4000

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013

China World USA EU

Daily Energy Intake Per Capita in China & World, 1960s-2010s (kcal/capita/day)

Source: UN Comtrade

Agro-trade: Increasingly Important Supplement

18

0

20

40

60

80

100

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Soybean

Million MT

Import Food: Import Virtual Land & Water China’s Net VL& VW Imports via Major Food Products (2000-2015)

(a) VL (b) VW

19 Source: Ali, Huang, Wang & Xie. (2017)

Imports of Virtual Land & Water: Resources Saving Domestically and Globally

Source: Ali, Huang, Wang & Xie. (2017)

Year

Domestic savings

Global savings

Water (km3)

Land (Mha)

Water (km3)

Land (Mha)

2000 18.3 3.6 11.4 1.9

2005 61.4 14.1 28.8 4.9

2010 140.1 31.0 62.0 11.7

2015 215.5 46.7 95.4 15.2

20

China’s Net VL& VW Imports via Major Food Products (2000-2015)

21

Concerns on SSR of Grains

Painful MeMory of Great faMines in China

• Famine in 1942–43 Mainly occurred in Henan province 2 to 3 million people died

• Famine in 1959–61 Claimed the lives of 17~30 million,

the highest number of fatalities of any single historical event ( Qian, Meng & Yared, 2015)

-1.2% -0.8% -0.4% 0.0% 0.4% 0.8% 1.2%0

10

20

30

40

50

60

70

80

90

100+Female Male

Population Pyramid in China (2010)

Groups Items Endowments of Agri. Land

(ha/capita)

Population (1000

person)

% of world population

（%）

Cereal Self- sufficiency

（%）

Net Import

Quantity (1000 ton)

% of world

market （%）

Group A

CHN 0.37 1375157 19.3 98.1 9193 2.5

USA 1.30 313308 4.4 119.5 -62541 -17.0

BRA 1.38 200552 2.8 115.6 -11746 -3.2

Group B

JPN 0.04 128415 1.8 24.2 25718 7.0

KOR 0.04 49955 0.7 21.7 14089 3.8

TPE 0.03 23263 0.3 17.1 5995 1.6

Group C

IND 0.14 1262955 17.7 108.3 -18311.7 -5.0

INA 0.23 248874 3.5 85.2 11503 3.1

PAK 0.20 177936 2.5 118.5 -5480 -1.5

Cereal SSR: China vs Other Economies (2011-2013 average)

Source: calculated from data in FAOSTAT.

What if China’s cereal SSR equivalent to JPN, KOR and Chinese TPE?

Items Cereal

Self- sufficiency （%）

Import Quantity

(1000 ton)

% of world market

(%)

JPN 24.2 25718 7.0

KOR 21.7 14292 3.9

TPE 17.1 6070 1.7

CHN 98.1 11504 3.1

— at JPN’s level 24.2 363326 98.8

— at KOR’s level 21.7 375309 102.0

— at TPE’s level 17.1 397358 108.0

Source: calculated from data in FAOSTAT.

What if China’s cereal import quantity equivalent to JPN, KOR and Chinese TPE?

Items Import Quantity

(1000 ton)

% of world market

(%)

Cereal Self- sufficiency

（%）

JPN 25718 7.0 24.2

KOR 14292 3.9 21.7

TPE 6070 1.7 17.1

CHN 11504 3.1 98.1

— at JPN’s level 25718 7.0 95.3

— at KOR’s level 14292 3.9 97.5

— at TPE’s level 6070 1.7 99.2

Source: calculated from data in FAOSTAT.

Rice Wheat

Source: USDA

SSRs of Selected Food Products in China, 2001-2016

Maize Soybean

China’s SSRs of major food products have been declining since the WTO accession

26

Changes of China’s rural population and agricultural employment

(1991-2015)

Source: World Bank

Concerns on Farm Employment & Rural Livings

0

200

400

600

800

1000Million people

Rural Population

Agricultural Employment

Source: NBSC and USDA

2010 2011 2012 2013 2014 2015 Growth Rate （2010-2015）

Rice CHN 1.68 1.90 2.17 2.41 2.40 2.41 43.5%

USA 1.75 1.86 1.76 1.75 1.72 1.64 -6.3%

Wheat CHN 1.63 1.78 2.11 2.39 2.21 2.29 40.5%

USA 1.42 1.79 1.57 1.82 1.93 1.76 23.9%

Maize CHN 1.36 1.58 1.83 2.02 2.08 2.15 58.1%

USA 1.00 1.10 1.35 1.06 0.98 0.99 -1.0%

Soybean CHN 2.85 3.27 3.87 4.45 4.56 4.78 67.7%

USA 2.02 2.18 2.33 2.48 2.24 2.27 12.4%

Cotton CHN 14.21 16.00 18.01 20.72 19.07 19.93 40.3%

USA 11.65 18.78 14.71 16.50 14.06 13.37 14.8%

Cost Changes of Selected Crops, China vs. US, 2010-2015 (RMB/kg)

27

28

What if China’s rural population (%) equivalent to EU or USA ?

Items % rural population Rural population (million)

Rural population to migrate （million）

EU 25.2% 128.4 n.a

USA 18.4% 59.0 n.a

CHN 44.4% 608.6 n.a

— at EU’s level 25.2% 345.5 263.1

— at USA’s level 18.4% 252.1 356.6

Source: calculated from data in World Bank Database (2015).

29

Items Agro-land /rural

population (sq. km)

Rural population (million)

Rural population to migrate （million）

EU 0.014 128.4 n.a

USA 0.069 59.0 n.a

CHN 0.009 608.6 n.a

— at EU’s level 0.014 367.4 241.3

— at USA’s level 0.069 76.7 531.9

What if China’s agro-land/rural population labor equivalent to…..

Source: calculated from data in World Bank Database (2015).

Overall Net Effects of Agricultural Trade on Farm Employment in China, 2000-2015

-400

-300

-200

-100

0

100

200

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Job Creation（10,000 labor）

Job Substitution（10,000 labor）

-264.7

Labor-intensive

Land-intensive

Overall net effects

30 Source: calculated from data in NBSC.

Marginal Nationwide Welfare Effects on Farmers, 1% Reduction in Tariffs

Year Agri. Inc. (1)

Wage Inc. (2)

Agri. Cons.

(3)

Manuf. Cons.

(4)

Agri. Welfare

(5)=(1)-(3)

Total Welfare

(6)=(1)+(2)-(3)-(4)

1997 -0.57 -0.07 -0.44 -0.80 -0.13 0.61

1998 -0.54 -0.07 -0.43 -0.83 -0.11 0.65

1999 -0.53 -0.08 -0.42 -0.85 -0.11 0.67

2000 -0.51 -0.08 -0.39 -0.91 -0.12 0.71

2001 -0.49 -0.09 -0.38 -0.93 -0.11 0.73

2002 -0.48 -0.09 -0.37 -0.96 -0.11 0.76

2003 -0.47 -0.09 -0.37 -0.97 -0.1 0.77

2004 -0.48 -0.09 -0.38 -0.94 -0.1 0.75

2005 -0.45 -0.10 -0.36 -0.97 -0.09 0.79

2006 -0.43 -0.10 -0.35 -1.02 -0.08 0.83

2007 -0.42 -0.10 -0.35 -1.02 -0.07 0.83

2008 -0.41 -0.10 -0.35 -1.00 -0.06 0.84

2009 -0.39 -0.11 -0.33 -1.05 -0.06 0.88

2010 -0.38 -0.11 -0.33 -1.05 -0.05 0.89

Source: Zhu et al. (2015) 31

[6, 9)

[3, 6)

[0, 3)

[9, 12)

Unit: 10000 yuan

The Yangtze River Delta Region

The Pearl River Delta Region

GDP Per Capita: Provinces

Source: NBSC

Concerns on Farm Land Resource Conservation

32

Grain Production: Provinces

Source: You et al. (2011)

1980-82 average The Northeast Area

The Yangtze River Delta Region

The Pearl River Delta Region

2001-2003 average

33

Concerns on Possible Trade Disputes

Average of WTO members 62%

China 15.2%

Brazil 36%

Egypt 95.6%

India 113.1%

Kingdom of Lesotho 199%

Tariffs

Average Agriculture Tariff Rate of WTO Members

Source: WTO 34

Tariff Rates of Major Developing and Developed Countries

Source: WTO 35

China’s Food Security Status and Progress

China’s Agricultural Trade Development

Contributions of Agro-trade to China’s Food Security

Challenges of Agro-trade to China’s Food Security

Ways Forward

36

China’s Food Demand : Still Growing • Rising population & incomes, urbanization, and diet changes

Rising GDP per capita Changing Consumption Pattern, 2009/11 to 2021 (%)

Source: OECD Source: FAO 37

38

Moving Towards Sustainable Agriculture

“Cang-liang-yu-di”: storage food in land

“Cang-liang-yu-ji ”: storage food in technology

Environment friendly: reduce fertilizer &

pesticide use; control soil & water pollution

39

Improving Agricultural Competitiveness

Cut down production cost : foster land rental market and land consolidation; provide social service for agricultural production operations

Reform domestic support policy: separate income support from pricing policy

Open-door Policy

40