February 12, 1997

Growth in China's Grain Imports an Opportunity for Exporting Countries, Not a Threat to World Food Supply, Says New Report

WASHINGTON, D.C.--A new study on the hotly debated topic of China's growing demand for grain sees economic opportunity on the horizon for grain-exporting nations like the United States as China's grain imports are projected to hit record highs over the next two decades. However, the report by a leading international agricultural research group said that China's increased imports pose no threat to world grain supplies or food prices.

Alarms have been sounded in recent years that China's population growth, rapid industrialization, and economic expansion would cause the demand for grain in the worlds most populous country to skyrocket beyond its capacity to grow its own food, draining international markets and inflating world food prices. However, a comprehensive study by the Washington, D.C.-based International Food Policy Research Institute (IFPRI) found that, although China's demand for grain will continue to grow and imports will rise to historic highs, increased domestic production will prevent China from bankrupting world food supplies. Exporting countries, especially those dealing in wheat and corn, stand to benefit from these trends. The United States produces almost half of the worlds grain exports.

"Increased demand for grain in China offers opportunity for major grain exporters such as the United States, Canada, and Australia, but it poses no threat to world food markets," said Mark Rosegrant, research fellow at IFPRI and coauthor of the report, entitled China's Food Economy to the Twenty-First Century: Supply, Demand, and Trade. Researchers Jikun Huang, director of the Center for Chinese Agricultural Policy, Beijing, and Scott Rozelle, assistant professor, Food Research Institute, Stanford University, also co-wrote the study as part of IFPRIs 2020 Vision initiative. The IFPRI 2020 Vision initiative seeks to develop an international consensus on meeting future world food needs while reducing poverty and protecting the environment.

The study concluded that China's imports will rise to record levels over the next decade before stabilizing by 2020. Baseline projections see China's total demand for grain at 450 million metric tons in 2000, rising to 513 million metric tons in 2010 and 594 million metric tons by 2020. Domestic production will rise as well, totaling 426 million metric tons in 2000, 486 million metric tons in 2010, and 570 million metric tons in 2020. As a result, grain imports will reach 24 million metric tons in 2000--a historic high--and increase to 27 million metric tons in 2010 but will level off at 25 million metric tons by 2020. Under a scenario of high population growth, imports would reach 52 million metric tons in 2020--more than twice the studys baseline projection but still not drastic enough to cause a global food shortage.

"It appears that China will neither empty the world grain markets nor become a major grain exporter," the report concludes. "It does seem likely, however, that China will become a more important player in world grain markets as an importer in the coming decades. Both potential exporters outside of China and those charged with managing China's food needs through domestic production and imports need to be ready. Exporting countries--especially those dealing with wheat and maize--will undoubtedly be the beneficiaries of these trends in the short run."

Meat Consumption Inflates Demand as Investment Boosts Production

Rising meat consumption in China will drive the increase in grain demand, as China's consumers more than double their consumption of meat, poultry, and fish from 17 kilograms per capita in 1991 to 43 kilograms per capita in 2020. Meanwhile, the amount of grain consumed directly as food will decrease, with per capita consumption of rice falling by more than 10 percent from now to 2020. By the authors calculations, feedgrain for animals will account for 38 percent of China's grain demand by 2020, up from 20 percent in 1991.

Grain production in China will lag behind demand through 2020, the study shows, but will improve as a result of investments in agricultural research and irrigation. China began reinvesting in agriculture in the early 1990s after investment declines in the 1980s. Earlier this month, the key lending institution for China's agriculture industry, the Agriculture Bank of China, announced it would increase loans to the agriculture sector by 24 percent in 1997 alone. Market development in China, particularly investment in facilities to handle the increased volume of imported grain, will also smooth the shock of production shortfalls and reduce the time and expense of importing grain, the IFPRI study notes.

"In recent years China has responded with investments in agriculture as they are needed to increase productivity," said Jikun Huang. "Our baseline projections of grain output are far below the more optimistic estimates given in recent years by Ministry of Agriculture officials, but the gap between production and demand wont be large enough to trigger the world food crisis that some observers fear. The net result will be a healthy increase in imports that offers opportunities for major grain producers, particularly the United States, which produces almost half the worlds grain exports."

Study Challenges Previous Projections

The results of IFPRIs study differ markedly from projections that China's growing demand for grain will bankrupt world food supplies--or that increased production in China will flood international markets with cheap grain. IFPRIs study seeks to form a more comprehensive view by accounting for important changes in Chinese policy, economy, and society that influence supply and demand. In reaching their conclusions, the researchers considered how changes in urbanization and market development will affect the demand and studied how changes in technology, agricultural investment, environmental trends, and institutional innovations will influence supply.

"This paper clearly accounts for the structural changes now taking place in China and thus offers a clearer picture of China's future," said Rozelle. "It suggests that China is not likely to become either an enormous importer or a large exporter of grain. Ultimately, though, China's grain balances will depend on decisions made by Chinese policymakers."

IFPRI was established in 1975 to identify and analyze policies for sustainably meeting the food needs of the developing world. IFPRI is a member of the Consultative Group on International Agricultural Research, an informal association of some 40 countries, international and regional organizations, and foundations that support sustainable improvements in agricultural productivity through research centers around the world.