Straight From D.C: China's Mixed Messages on U.S. Corn Imports

November 5, 2016 02:11 AM

For several decades, China has been the market all agricultural exporters yearn for. That’s no surprise, given their No. 1 ranking in global population at an estimated 1.4 billion and No. 2 for GDP at $11.38 trillion. However, more than almost any other country, China has historically made its trade policy decisions based more on geopolitical considerations than economic ones, which often makes it a difficult place to do business.

China has been a major destination for bulk commodity exports for many years, even with a policy of national food self-sufficiency in place until 2014. According to United Nations data, China was the top agricultural importer (as an individual country) globally by value in 2013, the most recent year available, at $151 billion, although the European Union collectively imported more to its then-28 member countries.

China purchased one-fifth of all soybeans shipped in the world market in 2013, and in recent years it has bought more U.S. soybeans than all other customers combined. Other significant import categories in 2013 included raw cotton and rubber, vegetable oil, beef, poultry, wine, distilled beverages, bulk wheat and corn.

As recently as 2015, China was importing several million tons of corn, but it appears the government is significantly revamping its policy. In March 2016, the government announced it was terminating price support for Chinese corn production. In order to protect its corn producers against foreign competition, it launched anti-dumping and other trade investigations against distillers dried grains (DDGs) from the U.S., and began “discouraging” sorghum imports by ratcheting up custom delays for such shipments.

On Sept. 13, the U.S. initiated a World Trade Organization (WTO) dispute settlement case against China for its use of unlawfully high domestic support for agricultural commodities. Within a few weeks, China announced it would impose stiff levies on U.S. DDG imports, a move seen as retaliation for the U.S. WTO filing. 

A week later, it was disclosed three Chinese companies had received permission to export up to 2 million 
tons of Chinese corn for the first time in a decade.

The Chinese have sent mixed messages on agricultural biotechnology, too. In 2014, China President Xi 
Jinping reaffirmed official government support for agricultural biotech research, which has been underway there since 1997, almost as far back as the technology itself goes. In July 2008, China approved a $3.5 billion research program to develop new biotech varieties through its public research institutions and universities. 

According to the International Service for the Acquisition of Agri-biotech Applications, farmers in China grew more than 9 million acres of biotech crops in 2015. However, all those acres were used to raise biotech cotton; through 2016, there have been no biotech food or feed crops legally grown in China. Public opposition to such crops has arisen in recent years, pushing the fear that such technology is a foreign plot against the Chinese food supply. 

Despite these concerns, USDA reported in late 2015 China is pushing forward with its plan to commercialize sales of biotech corn seed for use by its farmers, and several domestic companies are preparing to submit varieties in that process. These approvals could take three to five years to complete, so access to GMO corn seeds for planting is a ways away. It is widely believed the pending purchase of Swiss biotech giant Syngenta by the state-owned ChemChina is part of the effort to move China into a leadership position in this area.

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