China s Role in the Future Food Security Situation of Asia: A Threat or An Ally Jikun Huang Center for Chinese Agricultural Policy Chinese Academy of Sciences Presented at International Conference on Asian Food Security 214, August 21-22, 214 in Singapore
Questions and concerns in early 199s In the early 199s - Who will feed China? - Will China starve the world? - When? by 21 or 22 What have happened since early 199s
Average 4% of annual growth rate of agricultural GDP in the past 2 decades: 5.4 times of population growth rate (.74%) Annual growth rate of agri. GDP in 1991-21 5 4.5 4 3.5 3 2.5 2 1.5 1.5 1991-5 1996-21-5 26-1
China food trade: export and import (bil. US$) in 1992-21 6 5 4 3 2 1 Export Import 1992 1994 1996 1998 2 22 24 26 28 21 In the past two decades, on average China was a net food exporter
China food trade: export and import (bil. US$) 6 5 4 3 2 1 Export Import 2 22 24 26 28 21 Net import of rice, wheat and maize (million tons) 1 5-5 -1-15 -2 2 22 24 26 28 21 212 Rice Wheat Maize With import > export in recent years, concerns on food security were raised again
Questions: How China has been able to meet its growing demand for foods (with 2% of world population but only 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, Asia and the rest of world?
The rest of presentation Major drivers of agricultural growth Prospects of 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) 2 Wheat Maize 15 Rice 1 5 1979 1981 1983 1985 1987 1989 1991 1993 1995 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., 22
Total Factor Productivity for rice, wheat and maize in China, 1979-95 2 Wheat Maize 15 Rice TFP growth at about 3% 1 5 1979 1981 1983 1985 1987 1989 1991 1993 1995 After middle 198s, technology has been major factor affecting productivity growth
-3 Total Factor Productivity for major crops, 1995-24 5 Total Factor Productivity Rises 4 3 2 TFP 1 Early Indica Late Indica Japonica Wheat Maize Soybean Cotton Mostly Technical Change 6 (rising of production frontier) China is already operating 2 efficiently (at frontier) 8 4 Early Indica Late Indica Japonica Wheat Maize Soybean Cotton TE TC -2-4 Source: Jin, Huang and Rozelle. 29
Major findings on Bt cotton impacts in 1999-21 (per hectare) Reduce pesticide use: 34 kg 923 yuan Increase yield: 9.6% 93 yuan Increase seed cost: 57 yuan Reduce labor input: 41days 574 yuan Increase net income: 1857 yuan (US$ 225) Huang et al., 22, Science; Huang et al., 23, Agricultural Economics
Major drivers of agricultural growth in the past -Institutional change -Technology -Market: infrastructure and reform -Investment -
Integration in China s Markets (% of market pairs that have integrated price series; Note: similar results for rice, wheat and other products) 1991-92 1997-21-23 Corn 46 93 1 Soybean 56 95 98 When using statistical tests (on more than 8 pairs of markets), almost all markets move together in an integrated way, up from only about ½ in the early 199s (when markets were NOT integrated)
Major drivers of agricultural growth in the past -Institutional change -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 28 prices) 1 9 8 7 6 5 4 3 2 1 199 1993 1996 1999 22 25 28 211
Agricultural subsidies (1 million yuan) 18 16 14 12 1 8 6 4 2 24 25 26 27 28 29 21 211 212 Aggregate inputs Machinery Seed Grain Total subsidy in 212 was 164.3 billion yuan (26.1 billion US$), about 3.13% of agricultural GDP. Most are income transfer as they are decoupled from production. Source: Ministry of Finance
The rest of presentation Major drivers of agricultural growth Prospects of food economy in the future Concluding remarks
million 1 9 Rural 8 7 6 5 4 3 2 Urban 1 198 Population in rural and urban 1985 199 1995 2 25 21 3 2.5 2 1.5 1.5 Although population will keep rising, its growth rate will fall significantly in the coming decades 197 198 199 2 21 22 23
45 4 Slow growth in 195s-197s Income/capita: 4% Rapid growth in 198s-2s Income/capita: ~1% Double in 21-22 Income/capita: ~7% 35 3 25 GDP GDP/Capita 2 15 1 5 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22
Fish Milk Egg Poultry Sheep Beef Pork Fruit Vegetable Sugar Edible Oil Coarse Grain Wheat Rice 1.2 1 Income elasticities of demand for various foods in rural and urban in 21, China.8.6.4.2 Rural Urban -.2 -.4
Prospects of food security and trade in the future Major challenges and policy responses: Demand Income growth; Urbanization Production: Land: Red line (12 million ha) Quality Water scarcity Technology Small farm
Expansion of irrigated land in China Million ha 7 About 5% of cultivated land 6 5 4 3 2 1 195 196 197 198 199 2 21
Policy response: invest in water In the past: invested in water has been the largest component of public investment in agriculture 211: - Double investment in water conservancy: invest 4 billion yuan (63 billion US$) in next 1 years;
National Policy: Promoting Agriculture by Applying Scientific and Technological Advances Annual growth rate in agri. R&D (public): 2-21: 16% in real term China s #1 policy document in 212: - New political commitment to invest in R&D and reforming public R&D system China s #1 policy document in 213: - Modernizing agriculture: increase productivity through investment and changing farming operation mode (e.g., increasing operation size )
Rapid farming transformation in China: Based on CCAP s survey in Northeast and North China Plain % of cultivated land 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 23 28 213 Land cooperation: share profit 1-1 ha Land cooperation: rent 1-1 ha 14-1 ha 3-14 ha 2-3 ha.7-2 ha <.7 ha Source: CCAP, 213
Prospects of food security and trade in the future Major challenges and policy responses: Demand Income growth; Urbanization Production: Land and water scarcity; Technology; small farm Prospects of food supply, demand and trade
China s net export of cereals (million tons) under baseline in 21-225 5 21 21 225-5 -1-15 -2-25 Rice Wheat Maize Source: Huang et al. (213)
Pork production, demand and net import in 21-225 (million tons) 7 6 5 Production Total de mand Net import 4 3 2 1-1 21 21 225 Source: Huang et al. (213)
Maize production, demand and net import in 21-225 (million tons) 3 25 Production Total de mand Net import 2 15 1 5 21 225-5 21 Source: Huang et al. (213)
Soybean production, food consumption, total demand and net import in 21-225 (million tons) 12 1 8 Production Total de mand Net import 6 4 2 21 21 225 Source: Huang et al. (213)
China s net export of agriculture and food (million tons) under baseline in 21-225 1-1 -2-3 -4-5 -6-7 -8-9 Rice Wheat Maize Soybean Sugar Cotton Vegetable Fruit 21 225 Pork Poultry Beef Milk Fish Source: Huang et al. (213)
Scenario: Impacts of biotech maize Maize self-sufficiency (%) in 29 and 225 1 9 GMO maize Baseline 8 29 225 Huang et al., 211
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 The implications to Asia and the ROW: Achieving China s rice/wheat self-sufficiency will contribute to Asian and 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 Asia, particular the SE Asia, can gain more from China s rise in demand for palm oils and tropic crops/products
Agri. Trade: China vs SE Asia (billion US$, in 2 price) Product shares of imports from SE Asia in 212 14 12 1 Import from SE Aisa Export to SE Asia Cereal+oilseed, 11 8 Processed Products, 15 6 Palm oil, 4 4 Animal, 8 2 212 21 28 26 24 22 2 1998 1996 1994 1992 Horticulture, 26
16 14 12 1 8 6 4 2 Agricultural Trade: China vs SE Asia (billion US$, in 2 price) Import from SE Asia Export to SE Aisa Agricultural trade: China and the rest of Asia (million US$, in 2 price) 16 14 12 1 8 6 4 2 Import from ROA Export to ROA 212 21 28 26 24 22 2 1998 1996 1994 1992 1992 1994 1996 1998 2 22 24 26 28 21 212
Thanks!