China: The Hungry Dragon Looks Outward (2)

Via Stratfor (subscription required), an interesting report on China’s food security, namely its heavy investment in foreign food sources and high likelihood of continuing to do so in the future.  As the article notes:

“…China has no intention of investing in African farmlands to secure its food supply, Chinese Deputy Agriculture Minister Niu Dun said at a three-day G-8 agricultural summit in Italy that concluded April 21. Citing Saudi Arabia and South Korea as countries that have gone to great lengths to outsource their food production, Niu said that China prefers to be self-sufficient and specifically to produce its own grain.

Contrary to Niu’s statement, China has emerged as a leader in the trend of land grabbing in recent years as many states have tried to cope with shortages of domestic food production and rising prices of food imports. (With over 1.5 million hectares of farmland leased abroad, China is second only to South Korea.) So far, China has invested in farmland in Kazakhstan, Laos, Australia, the Philippines, Mexico and the African countries of Mozambique, Zimbabwe and Tanzania.

Investment in arable land is already a significant part of China’s overseas acquisition strategy, and it will continue as economic and population growth amount to increasing weight on China’s already-overburdened farms and waterways.

Commodity price inflation has affected basic foodstuffs — as well as seed, fertilizers and fuels necessary for modern farming — for most of the past decade. It reached a high in the first half of 2008, when a “food crisis” struck the developing world as high prices began to exert unbearable pressure and create social and political instability. The solution, for those that could afford it, was to invest in farming and food production in poor countries that had the land or resources but lacked the means to develop it.

China is particularly susceptible to the problem of high-priced commodities. With 1.3 billion people, China holds about 20 percent of the world’s population, yet it has less than 10 percent of the world’s arable land. Moreover, China’s arable land is dwindling due to urbanization and desertification and soil erosion resulting from massive development projects. China’s agricultural sector remains relatively inefficient because of haphazard modernization and a lack of technology and expertise, combined with the historical legacy of the patchwork of small farms on the countryside that has not easily lent itself to wide-scale food production. At the same time, decades of rapid economic growth have led to greater domestic demand for food, as the lower classes become able to afford more than subsistence-level consumption and the middle classes demand more input-intensive foods, such as dairy products and meat, which require high volumes of grain to feed livestock.

Consumption has outpaced domestic food production, and for China this is not so much an issue of the well-being of citizens as it is one of national security and regime survival. While the global economic crisis has driven commodity prices down, the Chinese have not forgotten the lessons they learned when food prices were high and social unrest and instability became nearly insuppressible. Beijing also fears it will not always be able to manage the cost of subsidizing food production in order to alleviate the stress of high prices. By investing in food production and securing food supplies now, while asset prices are low across the globe, China can better prepare for the global economic recovery and the potential return of inflation. (Chinese experts fear inflation could spiral out of control due to the extensive easing of monetary policy around the world to fight the recession.)

Thus, the real reason China’s deputy agriculture minister said that China eschews food production outsourcing was to project a domestic and international image of China as a powerful country and friend to Africa, and to confuse China’s critics. Beijing’s hurry to obtain farmland and develop it, often staffing it with Chinese workers, has stirred a backlash in some host countries among locals who feel that they are not seeing the benefits of letting foreigners use their land. Because the Chinese often bring in their own agronomists and farm labor, local experts and workers can be left out of the equation, and few new jobs are created. (However, in some places, such as Australia, China lacks the needed skills and hopes to learn from its hosts.) Moreover, locals complain they are not seeing a large enough share of the profits or tax proceeds — or in some cases, the food — produced from their land. The backlash has targeted host governments as well, since it is local political leaders who have facilitated China’s investments. In short, China’s presence has led many countries to accuse Beijing of neocolonialism and exploitation along the 19th century European model.

China has attempted to appease these complaints. First, Beijing provides financial assistance, basic infrastructure improvements and development aid in return for its acquisitions of a country’s land or resources. Second, the Chinese make regular top-level diplomatic visits to even their smallest partners, presenting themselves as friends and defenders of the weak. This carries over into international events and organizations — such as the G-8 agriculture meeting that just concluded — where China presents itself as a champion of third-world causes. But just how long China’s efforts will succeed in muting the outcry against its “neocolonialist” acquisitions remains to be seen.”

This entry was posted on Tuesday, April 21st, 2009 at 6:34 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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About This Blog And Its Author
Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at and frontier investment markets at