World Grain - January 2012 - 22

COUNTRYFOCUS

Focus on China
World’s most populous country demanding more oilseeds and meat
by Chris Lyddon

Key Facts
Capital: Beijing Population: 1,336,718,015 (July 2011 est.) Religions: Daoist (Taoist), Buddhist, Christian 3%-4%, Muslim 1%-2% note: officially atheist (2002 est.). Location: Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam. Government: Communist state. Chief of State: President Hu Jintao (since March 15, 2003); head of government: Premier Wen Jiabao (since March 16, 2003). Economy: Since the late 1970s, China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role — in 2010 China became the world’s largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In recent years, China has renewed its support for state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the U.S. dollar for years, in July 2005 China revalued its currency by 2.1% against the U.S. dollar and moved to an exchange rate system that references a basket of currencies. From mid 2005 to late 2008, cumulative appreciation of the renminbi against the U.S. dollar was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2010 stood as the second-largest economy in the world after the U.S., having surpassed Japan in 2001. The dollar values of China’s agricultural and industrial output each exceed those of the U.S.; China is second to the U.S. in the value of services it produces. Still, per capita income is below the world average. The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy’s rapid transformation. China continues to lose arable land because of erosion and economic development. GDP per capita: $7,600 (2010 est.); inflation: 3.2% (2010 est.); unemployment 6.1% (September 2009 est). Currency: Renminbi yuan (RMB): 6.32 Renminbi yuan equals per 1 U.S. dollar (Dec. 27, 2011). Exports: $1.581 trillion (2010 est.): electrical and other machinery, including data processing equipment, apparel, textiles, iron and steel, optical and medical equipment. Imports: $1.327 trillion (2010 est.): electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, plastics, organic chemicals. Major crops/agricultural products: Rice, wheat, potatoes, corn, peanuts, tea, millet, barley, cotton, oilseeds; pork, fish. Agriculture: 10.2% of GDP and 38.1% of the labor force. Internet: Code. .cn; 15.251 million (2010) hosts and 389 million (2009) users.
Source: CIA World Factbook

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The world has watched in awe as China has become the economic giant of the 21st century. Its large and growing population needs massive and increasing amounts of food, while afﬂuence is shifting consumption patterns to bring in more oilseeds and meat. However, China’s role in the price spikes of recent years is often overestimated. As a result of long-term policy, China is largely self-sufﬁcient in grains. Its stocks are unlikely to be exported, while it maintains stock levels designed to ensure that production shocks won’t mean food shortages. In a presentation given to the National Farm Management Conference in Central England recently, Brendan Bayley, head of the agricultural branch, European Economic Reform at HM Treasury, the British Finance Ministry, played down the effect of China on the market and its role in triggering volatility. “I think there is a case to be made that we are overplaying that a little bit,” he said. “It really matters where production takes place. If it’s in India and China, it might boost their stocks, but it is not going to be available for the world market.” He also expressed a concern that market management measures have limited China’s production response in 2008 when producers elsewhere were ramping up output. Interference by governments in trade ﬂows had also played a role in pushing it up. “We got a 12% increase in international production in 2008,” he said. However, that response had been limited in China and India because of action there to hold down price rises. CHINA “Why would you come through with a supply response as a Chinese producer of wheat if you are faced with ﬂat prices? Prices matter,” he said. “Price transmission matters.” The International Grains Council (IGC) predicts total Chinese grain production for 2011-12 at 306.7 million tonnes, up from 300.3 in 2010-11. Wheat production is put at 116 million tonnes, up from 115.2 million. Maize production is predicted at 183 million tonnes, up from 177.3 million. The IGC forecast 2011-12 rice production in China slightly higher than in the previous month’s report, at a record 140.4 million tonnes,
RUSSIA MONGOLIA NORTH KOREA SOUTH KOREA NEPAL BHUTAN BANGLADESH MYANMAR MY VIETNAM

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