China's Place in Global Agricultural Markets
Oct 19, 2016
For several decades, China has been the market that all agricultural exporters yearn to sell their goods in. That’s no surprise, given their ranking in global population (number one, at an estimated 1.384 billion in 2016) and GDP (number two at $11.38 trillion in 2016). 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. Strategic disagreements within the Chinese government also complicate the trade policy picture.
Although the government of China formally abandoned its policy of national food self-sufficiency in 2014, it had been a major destination for bulk commodity exports for many years previously. The change in strategy appears to have occurred in conjunction with China’s accession to the World Trade Organization (WRO), in 2001. According to FAO data, China was the top agricultural importer globally by value in 2013 (the most recent year available) at $151 billion as an individual country, although the European Union collectively had more imports to its then-28 member countries.
Soybeans top the list of China’s agricultural imports, accounting for a quarter of the value of all of the country’s purchases from abroad in that year. In fact, China purchased one-fifth of all soybeans shipped in the world market in 2013, and in recent years they have bought more U.S. soybeans than all other customers combined.
Other significant import categories for China in 2013 included raw cotton and rubber, vegetable oil, beef, poultry, wine and distilled beverages, as well as bulk wheat and corn.
Trade Policy Developments
While as recently as 2015, China was importing several million tons of corn, it now appears that the government is significantly revamping its policy on corn trade. In March 2016, the government announced that it was terminating price support for Chinese corn production. In order to protect its corn producers against foreign competition, it launched anti-dumping and CVD investigations against distillers dried grains (DDG’s), a corn byproduct, from the United States, and began ‘discouraging’ sorghum imports by ratcheting up custom delays for such shipments.
On September 13, 2016, the U.S. government initiated a WTO dispute settlement case against China for its use of domestic support for agricultural commodities above the de minimis levels allowed under WTO accession agreement. Within a few weeks, China announced it would impose stiff levies on U.S. DDG imports, a move seen by many as retaliation for the U.S. WTO filing. A week later, it was disclosed that three Chinese companies had received permission to export up to two million tons of Chinese corn, for the first time in a decade.
In recent years, the government of China has sent somewhat mixed messages on agricultural biotechnology. In 2014, China’s president, Xi Jinping, reaffirmed official government support for research in agricultural biotechnology in the country, which has been underway since almost the beginning of the biotech era, in 1997. In July 2008, China approved a $3.5 billion special research program to develop new biotech varieties over a 15-year period through its public research institutes and universities.
According to data collected by the International Service for the Acquisition of Agri-biotech Applications (ISAAA), farmers in China grew more than nine million acres of biotech crops in 2015, ranking them as the sixth largest user of such crops. However, all those acres were raising biotech cotton--through 2016, there have been no biotech food or feed crops legally grown in China. Significant public opposition to such crops has arisen in recent years, pushing the fear that such technology represents a foreign plot against the Chinese food supply. In 2013, a major general in the PLA published an Op-ed in the daily English language newspaper Global Times, comparing GMO crops to biological weapons. Another reason for the public unease with the technology stems from serious problems in the Chinese food safety system in recent years.
Despite these concerns, USDA’s Foreign Agricultural Service reported in late 2015 that China is pushing forward with its plan to commercialize sales of biotech corn seed for use by its farmers, and several domestic companies are readying materials for submitting varieties in that process. It is anticipated that such an approval process could take three to five years, so access to GMO corn seeds for planting is at least several years away. It is widely believed that the pending purchase of Swiss biotech giant Syngenta by the state-owned ChemChina company is part of the official effort to move China into a leadership position in this area.