China’s Grain Policy and World

China’s Grain Policy and World

Jikun Huang

Center for Chinese Agricultural Policy

Chinese Academy of Sciences

Presented at Borlaug Summit on Wheat for Food Security,

March 25-28, 2014 in Ciudad Obregón, Sonora, México.

http://borlaug100.org/

Questions and concerns in early 1990s

• In the early 1990s

- “Who will feed China?”

- “Will China starve the world?”

- “When?” … by 2010 or 2020

What have happened since 1990s

Average 4% of annual growth rate of

agricultural GDP in the past 2 decades:

5.4 times of population growth rate (0.74%)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

1991-05 1996-00 2001-05 2006-10

Annual growth rate of agri. GDP in 1991-2010

0

10

20

30

40

50

60

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Export Import

In the past two decades, on average China was a net food exporter

China food trade: export and import (bil.

US$) in 1992-2010

0

10

20

30

40

50

60

2000 2002 2004 2006 2008 2010

Export Import

With export>import recently, concerns on food security were raised again…

China food trade: export

and import (bil. US$)

-20

-15

-10

-5

0

5

10

2000 2002 2004 2006 2008 2010 2012

Rice Wheat Maize

Net import of rice, wheat

and maize (million tons)

Questions:

• How China has been able to meet its

growing demand for foods of >1.3 billion

(20% of world population) with 8% of world

cultivated land in the past?

• If the dynamics of China’s economy will

continue, what will be implications for

grain and food security in China and

world?

The rest of presentation

Major drivers of agricultural growth

Prospects of grain and food

economy in the future

Concluding remarks

Major drivers of agricultural growth:

4 major policies

- Institutional change

-Technology

-Market

- Investment

-…

Total Factor Productivity for rice, wheat and maize

in China, 1979-95 (note: similar trends for other products)

50

100

150

200

1979 1981 1983 1985 1987 1989 1991 1993 1995

Rice

Wheat

Maize

Institutional change (decollectivization, allocated land equally to all households in each village) was a major source of growth in 1979-84

Huang and Rozelle, 1996; Jin et al., 2002

Total Factor Productivity for rice, wheat and

maize in China, 1979-95

50

100

150

200

1979 1981 1983 1985 1987 1989 1991 1993 1995

Rice

Wheat

Maize

TFP growth at about 3%

After middle 1980s, technology has been major factor affecting

productivity growth

-3

-2

-1

0

1

2

3

Early Indica Late Indica Japonica Wheat Maize Soybean Cotton

Output

Input

0

1

2

3

4

5


TFP

-4

-2

0

2

4

6

8


TE

TC

Source: Jin, Huang and Rozelle. 2009

Total Factor

Productivity Rises

Mostly Technical Change

(rising of production frontier)

… China is already operating

efficiently (at frontier)

Total Factor Productivity for major crops, 1995-2004

Major findings on Bt cotton impacts in 1999-2001 (per hectare)

• Reduce pesticide use: 34 kg 923 yuan

• Increase yield: 9.6% 930 yuan

• Increase seed cost: 570 yuan

• Reduce labor input: 41days 574 yuan

• Increase net income: 1857 yuan

(US$ 225)

Huang et al., 2002, Science; Huang et al., 2003, Agricultural Economics

GM Rice in Farmer Fields

Huang et al., Science, 29 April 2005: 688-690

Pesticides (kg/ha): Bt vs non-Bt

2.0

21.2

0

5

10

15

20

25

Bt rice Non-Bt rice

• Yield : + 6%

• Labor : - 5.5%

• Net income: 745 yuan /ha

( > US$ 100/ha)

Dr. Norman Borlaug’s effort to promote

GM technology in China

• At an age of 90, Dr. Norman

Borlaug visited Beijing in

July 2004. He submitted a

letter to China’s leader to

promote the

commercialization of GM

rice and enhance China and

global food security through

technology change.

Major drivers of agricultural growth in the past


-Technology

-Market: infrastructure and reform

- Investment

-…

Integration in China’s Markets (percent of market

pairs that have integrated price series; Note:

similar results for rice, wheat and other products)

1991-92 1997-00 2001-2003

Corn

46

93

100

Soybean

56

95

98

When using statistical tests (on more than 800 pairs of markets), almost

all markets move together in an integrated way, up from only about ½

in the early 1990s (when markets were NOT integrated)

Nominal protection rates (%) in China, 1980-2005

-80

-60

-40

-20

0

20

40

60

80

1980-1993 1994-2001 2002-2005

Rice Wheat Soybean Milk Pork Vegetable

… by the 2000s, the prices of most of China’s commodities were nearly equal to the prices of the same commodities on world markets …

Major drivers of agricultural growth in the past


-Technology

-Market: infrastructure and reform

• Facilitated agricultural structural change

• Helped farmers: cheaper inputs’ prices and

higher output prices

- Investment

-…

Investment into agricultural sector Government budget support

(billion yuan in 2008 prices)

0

100

200

300

400

500

600

700

800

900

1000

1990 1993 1996 1999 2002 2005 2008 2011

Agricultural subsidies (100 million yuan)

Total subsidy in 2012 was 164.3 billion yuan (26.1 billion US$),

about 3.13% of agricultural GDP. Most are “income transfer”

as they are decoupled from production. Source: Ministry of Finance

0

200

400

600

800

1000

1200

1400

1600

1800

2004 2005 2006 2007 2008 2009 2010 2011 2012

Aggregate inputs

Machinery

Seed

Grain

The rest of presentation

Major drivers of agricultural growth

Prospects of grain and food

economy in the future

Concluding remarks

0

100

200

300

400

500

600

700

800

900

1000

1980

1985

1990

1995

2000

2005

2010

Population in rural

and urban

0

0.5

1

1.5

2

2.5

3

1970 1980 1990 2000 2010 2020 2030

million

Although population will

keep rising, its growth rate

will fall significantly in the

coming decades

Rural

Urban

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

GDP

GDP/Capita

Slow growth in 1950s-1970s Income/capita: 4%

Rapid growth in 1980s-2000s Income/capita: ~10%

Double in 2010-2020 Income/capita: ~7%

Income elasticities of demand for various foods in rural and urban in

2010, China

Rice

Wheat

Coarse Grain

Edible Oil

Sugar

Vegetable

Fruit

Pork

Beef

Sheep

Poultry

Egg

Milk

Fish

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

Rice

Wheat

Coarse Grain

Edible Oil

Sugar

Vegetable

Fruit

Pork

Beef

Sheep

Poultry

Egg

Milk

Fish

Rural Urban

Prospects of food security and trade in the future

• Major challenges and policy responses:

– Demand

• Income growth; Urbanization

– Production:

• Land:

– Redline (120 million ha)

– Quality

• Water scarcity

• Technology

• …

Expansion of irrigated land in China

0

10

20

30

40

50

60

70

1950 1960 1970 1980 1990 2000 2010

Million ha About 50% of cultivated land

Policy response: invest in water

• In the past: invested in water has been the largest component of public investment in agriculture

• 2011:

- Double investment in water conservancy:

invest 4000 billion yuan (630 billion US$) in

next 10 years;

National Policy: “Promoting Agriculture by

Applying Scientific and Technological Advances”

• Annual growth rate in agri. R&D (public):

– 2000-2010: 16% in real term

• China’s #1 policy document in 2012:

- New political commitment to invest in R&D and

reforming public R&D system


- Modernizing agriculture: increase productivity

through investment and changing farming

operation mode (e.g., increasing operation size…)

National Food Security Goals


- Rice and wheat: self-sufficiency in long run

- Improve food quality and food safety

- Reliable supply: domestic and international

- Sustainable agricultural growth

Prospects of food security and trade in the future

• Major challenges and policy responses:

– Demand

• Income growth; Urbanization

– Production:

• Land and water scarcity; Technology; …

• Prospects of food supply, demand and trade

China’s net export of cereals (million tons) under

baseline in 2001-2025

-25

-20

-15

-10

-5

0

5

Rice

Wheat

Maize

2001 2010 2025

Source: Huang et al. (2013)

Pork production, demand and net import in 2001-2025

(million tons)

-10

0

10

20

30

40

50

60

70

2001

2010

2025

Production

Total demand

Net import


Maize production, demand and net import in

2001-2025 (million tons)

-50

0

50

100

150

200

250

300

2001

2010

2025

Production

Total demand

Net import


Soybean production, food consumption, total

demand and net import in 2001-2025 (million tons)

0

20

40

60

80

100

120

2001

2010

2025

Production

Total demand

Net import


China’s net export of agriculture and food (million

tons) under baseline in 2010-2025

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10

Rice

Wheat

Maize

SoybeanSugar

Cotton

Vegetab

leF

ruit

Pork

Poultry

Beef

Milk

Fish

2010 2025


Scenario: Impacts of biotech maize Maize self-sufficiency (%) in 2009 and 2025

80

90

100

2009 2025

GMO maize Baseline

Huang et al., 2011

Concluding Remarks

China’s experience shows that incentives to farmers (land & market), technology and investment are crucial to agricultural growth and ensuring food security

However, given its resource constraints (e.g., land and water per capita) and rising demand, China is expected to increase its dependence on world agricultural market (maize, soybean, cotton, sugar, dairy, etc.)

Concluding Remarks

While the self-sufficiency of wheat and rice will be achieved, it is expected that imports of maize, soybean, oil, sugar and dairies will rise in the future.

Given the challenges, China will continue to heavily invest in technology and rural infrastructure to ensure its household and national food security.

Concluding Remarks

The global implications:

• China’s ability to achieve rice and wheat self-

sufficiency will contribute to global food security.

• China’s growing demand for other foods will be

good for exporters, but will not have much of a

negative impact on other food importers

- Soybean and maize imports: well within the

capacity of China’s existing trade partners in North

and South America, and Eastern Europe.

• China is likely to actively participate in global food

governance and invest in agri. technology in

developing countries (e.g., Africa)

Thanks!

China’s Grain Policy and World

Science

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