China is a powerful force in global grain prices, particularly oilseeds, and analysts are mixed on whether the slowdown in that nation’s economy will impact its import of U.S. grain and oilseeds.
“I do not expect the slowdown in China’s economic growth to slow down its imports of corn and soybeans,” says Bob Thompson, University of Illinois professor emeritus of economics.
First, he says, the slowdown is unlikely to be significant, certainly not below 6% economic growth per year, and probably higher. Second, what really matters is who is getting the increases in incomes. Poor people spend most of the increments to their incomes on food—first to get enough calories and then to upgrade their diets, including more animal protein, fruits, vegetables and edible oil, Thompson states.
“The government in Beijing is very concerned about the widening gap between incomes of people in the cities of the coastal provinces and the incomes of people in the rural interior, the latter which have lagged badly. Great emphasis is being put on stimulating job creation in the rural interior to help narrow the gap.”
The people benefitting from this economic development stimulus in the rural interior are at income levels where high growth in animal protein consumption occurs. He adds that Chinese industry is also relocating production facilities and jobs to interior provinces because labor in the coastal provinces is getting so expensive that they are losing their competitiveness in producing the most labor intensive manufactured goods.
Having a different view is Ohio State University economist Carl Zulauf. He says that slower economic growth means slower growth in per capital income and thus a slower increase in disposable income to spend on food, in particular food with higher income elasticity, such as meat.
He adds that slower economic growth may bring about increased food assistance from the government in order to minimize the impact upon the poor in China. “This policy would mitigate, but is unlikely to offset, the economic impact of slower growth on the demand for food by China.”
Lastly, he says, there is a notable difference between a slowing economic growth and a recession, the latter which means that the economy contracts. The former still results in increasing demand for food, just at a slower rate of increase. The latter could result in decreasing demand for food.
“Both are likely to negatively impact the future amount of imports from the U.S. of grain and oilseeds, but the impact will be more pronounced if China slips into a recession.”