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29 June 2009

Food security and sustainable livelihood in China

Lau Kin Chi

In 2007 and early 2008, the global food crisis and inflation hit most countries with varying degrees of severity. China, being largely self-sufficient in grain production, was nevertheless not immune to the problem of food security in relation to people’s livelihood.

In 2007, China produced 501.5 million tons of grain, meeting the food security bottom line of 95% self-sufficiency set by the state in 1996. Imported grain was 22.45 million tons, constituting 4.29% of China’s domestic consumption. 60% of China’s grain is produced by 200 million small peasant households which are self-sufficient in grain consumption, but the per capita grain output has steadily decreased from 412 kg in 1996 to 378 kg in 2006. After 2002 when grain prices began to be determined by the market, price fluctuations of the commodified grain have affected the 40% urban population.

Wen Tiejun, Liu Huaiyu, Li Chenjie: “Grain issues and inflation in modern China”, The China Monitor, June 2008, 7-9; Wen Tiejun: “China’s grain output and grain policy”, China and World Economy, Vol.11, No.6, Nov-Dec 2003, pp. 26-31. The CPI in 2007 rose by 4.8%, with food prices rising by 12.3%. With increased grievances over the soaring prices of pork and cooking oil, the state was pressurized to resort to measures of supply control. On 1 Jan 2008, China set tariffs on export of food items to discourage exports and increase domestic supply. The state also tries to regulate prices through the operation of grain stockpiling. While the state keeps a stockpile of 40-50 million tons of rice, and 150-200 million tons of grain in total,
Associated Press, 28 March 2008. from 2007 to early 2008, in order to quench inflation, the state has released into the market 1.5 m tons of corn, 450,000 tons of cooking oil, and 70 m tons of wheat and rice.
Interview with Bao Kexin, Lifeweek, 15 April 2008. (in Chinese) However, the capacity of the Chinese state in such regulatory efforts is increasingly compromised.

With the WTO agreement compelling China to open up its market for agricultural products beginning in 2001, a new round of liberalization of the service and distribution sector began in December 2004, with further lifting of restrictions in December 2006. Foreign invested commercial enterprises are entering the arena of food circulation in China. While the state’s regulation is exercised through stockpiling, there is little control over processing and distribution. It is feared that the disaster of China’s loss of control over soybean and cooking oil in the last few years may be repeated in the arena of rice and wheat.

Before 1995, China was exporter of soybean. Since 1996, China has been importing soybean. After China’s accession to the WTO, the first product fully open to foreign trade was soybean. By 2006, China became the biggest importer in the world, importing 30 million tons annually. With the manipulation of futures soybean prices in 2004 in Chicago, when prices rose sharply just before the Chinese acquisition team made big purchases, and then dropped sharply by almost half a month later, China’s soybean industry suffered huge losses, and 70% corporations stopped operation. Through merger and acquisition, the four major food MNCs — ADM (Archer Daniels Midland), Bunge, Cargill and Louis Dreyfus — controlled 66% of Chinese soybean processing corporations and 85% of the production capacity.
Daily Economic News, 5 September 2008. (in Chinese)

The next case of China’s loss of control to MNCs was with cooking oil. In China, the per capita consumption of grain fell from 195.5kg in 1978 to 163.6 kg in 2006, but the consumption of cooking oil rose from 1.6 kg to 6.7 kg.
China Economic Weekly, 12 September 2008. (in Chinese) The dependency on imported cooking oil raw materials and products is 60%; for instance, palm oil is 100% reliant on imports. MNCs hold 66% of the shares of 64 Chinese corporations among a total of 97 corporations. MNCs control 60-70% of the domestic cooking oil market; ADM alone dominates 50% of the market share. With their capital and experience, MNCs have asserted control over raw materials, futures market, processing, brands, market channels and supplies, and pricing. In the second half of 2007, a serious shortage and price hike of cooking oil spread throughout China. In September, the government released 200,000 tons of cooking oil reserve to the market, but this had little effect because 70% was bought up by ADM for hoarding.
Lookout News Weekly, 17 June 2008. (in Chinese) The tragic stampede on 10 Nov 2007 in Chongqing is a footnote to the popular anxiety over the oil shortage.
A stampede incident left 3 persons dead and dozens injured in Chongqing city on 10 Nov 2007 when Carrefour offered discounted cooking oil, and a huge crowd rushed for the item.

The alarming trend is that the MNCs, through control over soybean and cooking oil, have established networks and channels for purchase, storage, processing, and marketing; such networks and channels then facilitate their entry into the arena of rice and wheat. The ADM’s subsidiary has begun its entry into the rice market since 2005, and takes full advantage of existing facilities and resources. For example, in Yanzhou City, Shandong Province, where quality wheat is produced, the MNC offers capital to the local government grain management office to acquire about 20,000 tons every year, of which 70% is wheat and 30% is corn; the volume is about 5% of the total grain production of Yanzhou City. The MNC has a joint venture with the Yanzhou City government grain office to build a granary of 26,400 sq.m. with a 25,000-ton capacity, as a circulation centre for grain.
Lookout News Weekly, 1 September 2008. (in Chinese) It has also built a flour factory in Yanzhou City that can process 300,000 tons of wheat per year. Working through the government offices and networks, it has access to individual producers and private agents. In short, the empire is expanding into acquisition, storage, processing, and marketing.
Fortnightly Discourse, 14 August 2008. (in Chinese) It is reported that in September 2008, fearing the loss of control, the Chinese government ordered a temporary closure of the grain market in China.
Economic Observation Journal, 6 September 2008. (in Chinese)

The penetration of foreign capital undermining the government’s control over pricing and the entire chain of production from storage to processing to marketing is surely cause for worry. The shift of regulation from the state to the market is by no means a simple question of countering the autocratic will of the bureaucrats. The market is not a neutral force to regulate supply and demand. The manipulation and domination of MNCs in collusion with powerful corporate capital in China are working against the livelihood security of the majority population of consumers and producers in China.

Another major issue of concern is the question of bio-fuel. The Chinese government has an explicit policy of developing biodiesel and ethanol without affecting food security. The slogan is: there should not be usurpation of arable land or competition with grain production. Yet, due to the rapid modernization and the ever increasing demand for fuel, the government plan for renewable energy (including ethanol) by 2020 is to be 16% of all energy. The ethanol planned to be produced in 2006-2010 is 1 million tons a year, and by 2020, 15 million tons of ethanol and 5 million tons of biodiesel. Officially, only “outdated” and “excessive” grain would be allowed to convert to biofuel, and only four ethanol corporations were licensed for operation in 2001-2005. The four corporations had a capacity of producing 1.02 m tons per year, with consumption of ethanol being 20% of total fuel consumption.
China Bio-technology Information web, 28 December 2006. However, extra-legal activities are rampant, and it was reported that of the four corporations, one used wheat while the other three used corn as raw material. The production capacity of ethanol of newly constructed or expanded factories already exceeded 1.6 million tons per year by 2005.
China Information Daily, 31 December 2006 (in Chinese). This caused the government to issue a directive in December 2006 to call a halt to grain-based ethanol. The National Development and Reform Commission directed the suspension of all new grain-based biofuel projects except a long planned, cassava-based ethanol plant in Guangxi Province.
Jia Heping: “Biofuel Investment on the Rise”, Chemistry World, April 2007. The directive pointed out that processed corn rose from 12.5 m tons in 2001 to 23 m tons in 2005, at the expense of fodder for animal husbandry.
National Development and Reform Commission, Directive on Industries [2006] #2781. With this directive, the conglomerate COFOC which holds substantial shares of the four corporations suffered some setback, but continued with major new biofuel projects, setting up big ethanol factories in southwest China. Among the new projects was the development of cellulosic ethanol. MNCs are playing an active role. British Petroleum out-rivalled Shell in a 15 million-ton-per-annum refinery project in Guangzhou in 2006. It has invested over US$ 4.3 billion in commercial projects in China and has accelerated its investments in biofuels research and business after 2007.
As one of China’s largest foreign investors, British Petroleum employs about 4000 staff and has more than 30 joint ventures and wholly owned companies. In 2007, it began massive investments in biofuels research. Its share in the global biofuels market is about 10%, blending and distributing 800 m gallons of ethanol in 2006. See and

All these developments of the biofuels industry have put much stress on the supply of grain and cooking oil, resulting in the soaring prices and the social unrest. This certainly has a direct connection with the shift of grain and vegetable oil both within China and globally from consumption as food to consumption as fuel. What aggravates the situation is the pressure on arable land which is already reaching the alarm level. China’s arable land is only 7% of the world’s arable land, but China’s population is 22% of the world population. Per capita arable land in China is only half of the world average. The stress on land resources is acute. In 2007, China lost almost a quarter of a million hectares of arable land to urbanization, reforestation for conservation, natural disasters, and agricultural restructuring. Even though restoration and new land development projects added almost 200,000 hectares of arable land, the net loss was 40,673 hectares. Arable land has been steadily on the decrease, from 130.08 m ha in 1996, to 127.6 m ha in 2001, to 121.73 m ha in 2007.
Statistics released by Chinese Ministry of Land and Resources on 16 April 2008. With fewer land for new development, with factors of change in land use such as urbanization without any sign of reversal, and with population continuing on the increase, the prospects are grim. The government’s bottom line of maintaining 120.6 million hectares of arable land by the year 2020 seems a mission impossible.
In 2006, the government’s monitoring offices uncovered 131,077 cases of illegal use of land, involving almost 100,000 hectares, of which arable land was 43,000 hectares. See Sun Rongfei’s article, First Financial and Economic Daily, 14 May 2007. (in Chinese) If we also take into account the overseas arable land used for the agricultural products that China imported in 2006, the land would amount to 18.76 m ha, equivalent to 15.3% of total arable land in China.
Zhang Xiaoshan: “China’s grain security and responses”, Agro Economics, 24 July 2008. (in Chinese) China’s self-sufficiency level is coming down with the increased reliance on food imports.

Apart from the question of land, the question of water resources is also acute. China’s per capita water resources is about 2,200 cu.m., which is only one quarter of the world average. Water for agricultural use in China is about 370 billion cu.m, with an efficacy of only 30-40%, not to say the uneven distribution of water in the north and the south, and the crisis of water pollution.
Lifeweek, 17 April 2008. (in Chinese) These are the physical constraints in grain production, and there is also the human factor: peasants are increasingly reluctant to farm due to the rising costs of agricultural means of production and the sharp drop in actual proceeds, coupled with difficulties in selling grain with the price fluctuations and speculations of the market.
Actual proceeds for peasants dropped from 382 yuan to 320 yuan between 2004 and 2006 for growing each mu (a fifteenth of a hectare) of grain, dampening peasants’ enthusiasm for raising grain production, according to vice agricultural minister Yin Chengjie. China Daily, 5 April 2008.

The Chinese state is certainly concerned with the issue of food security as a national strategy of sovereignty, but it has other competing security concerns such as energy, finance, military security, and others. Hence, the national strategy on food sovereignty, even with the best intentions, is at odds with the interests of sustainable livelihood for the population in general, and for the subaltern classes in particular. Furthermore, with global and domestic capital penetrating all dimensions of social and economic life, and with international agreements such as WTO relegating disadvantaged sectors to further disadvantage, the focus should not only be demanding that the state protect national wealth and resources from plunder by global capital and by a small minority of established interests, the focus should also be the strengthening of local people’s efforts in assuring and defending their livelihood in order to counter forces of globalization and expropriation.

With the force of the market taking more and more over the control of production and distribution from the state, agricultural production is more and more measured by the values and norms set up by the markets which in turn are priced in monetary terms. Hence agricultural production is turning fast from feeding the nation and supporting its projects of modernization into a question of making money and becoming rich for individual peasants. The forces of the market not only demand unsustainable exploitation of soil and water, they also shape the desires and aspirations of peasants, turning them into their complicits in falling prey to the markets through becoming more and more dependent upon them for the means and knowledge of production.

In this regard, the concern is how food production and circulation can be, as much as possible, freed from the dictate of the market and go towards self reliance, and how self-management can meet the priority of local needs for food production and consumption, taking into consideration the interconnectedness of biodiversity, ecology and social justice. Such efforts may not necessarily be clearly delineated along the lines of governmental or non-governmental operation, but they may contribute to creating pockets of resistance against the torrential force of the dominant logic.

Take one example. While MNCs are extending their tentacles into the chain of purchasing, pricing, processing and selling of grain, an innovative project has been developed at the grassroots level to retain grain in the hands of the peasants. The first “grain bank” in China was officially set up in late 2006 in Taicang Municipality (with a population of 450,000), Jiangsu Province. The initiator Zhou Yuanxun has worked in the government grain acquisition department for 20 years, and has often heard peasants complain of grain wastage due to improper local storage methods. Still, it was a shock for him to read the State Grain Bureau’s survey report of 2006 that the wastage of grain stored in peasants’ home was 8-10%, with the wastage volume amounting to 15-20 million tons per year across China, equivalent to RMB 18-24 billion yuan. At the same time, after the market forces came into play, small and medium local government granaries had been seriously under-used. Thus he started his project of setting up a “grain bank”, and within just over a year, he has over 2,000 clients, and a storage of 446 tons of grain. The grain bank accepts deposits of quality-classified grain from individual producers. Paying a minimal fee, the producers can wait till a later time to withdraw raw or processed grain, exchange for other cereals or cooking oil, or to sell the grain to the bank at the current market price. The experience being positive, the Taicang municipal government promoted this practice, and by the end of 2007, 6 grain banks were operating in Taicang, covering 45% of the villages.

Learning from this experience, 24 grain banks are now operating in the nearby Suzhou Municipality of Jiangsu Province.
Guangzhou Daily, 15 January 2008. (in Chinese) In Pingdu Municipality of Shandong Province, a grain-bank project was launched in October 2007 by the only state-owned Qingdao Dadu Grain Corporation in the municipality. Yang Wenzheng, general manager of the grain corporation, is at the same time director of the grain bank and president of the Pingdu Wheat Producers’ Association. By making use of government-managed granaries, the grain bank has about 550 producer clients and a deposit of about 1,500 tons of wheat.
Xinhua News, from Jinan, 6 August 2008. (in Chinese)

In the above example of the grain banks, the significance of the effort is precisely in its small scale, serving the needs of the local peasants. Such local initiatives are encouraging in the way efforts are made to solve problems affecting the community among themselves, by setting up support networks that promote associative and cooperative relations among the people. In July 2007, an act on Peasants Economic and Technological Cooperatives was promulgated. This can be regarded as the state’s accommodation to the demands and needs of the peasants for self organization and collective activities. Despite the limitations of these cooperatives which legally only allow for restricted aspects of organizing, they are a means for peasants to connect and articulate their interests.

Resistance should not be conceived only as direct confrontational opposition, or as radical revolutionary breaks. We need to come away from the mainstream media approach of focusing on street protests or dramatic revolts. There is not one single, external enemy to which the problem can be ascribed, and forces hostile to the people’s cause work at subtle and intricate levels. Hence, resistance in the complex web of relations of forces need to be multi-faceted, not necessarily aiming at reversing the aggressive forces in a comprehensive or abrupt go, but at cumulative effects through diverse efforts, that is, by working through problems embedded in the daily life of a community that disrupt collectivity, processes are set into motion for the evolving of organic relations among the people that enhance the interdependence among themselves while subverting the control of and hence their dependency on markets dictated by anonymous forces from afar.

Thus, it is important to slow down the speed of development, which is the driving force of capitalism and modernization, and to facilitate the convergence of forces that will frustrate the rapid and strengthened control by the forces of capital.
See Isabelle Stengers: “A ‘Cosmo-politics’ – Risk, Hope, Change”, in Hope: Philosophies for Change, by Mary Zournazi, New York: Routledge, 2003, pp. 250, 254. On the question of food security and sustainable livelihood in China, the arenas of struggle would be multi-faceted. With the basic approach of assuring peasants’ control over the means of production and the products, the struggle against the mounting pressure by powerful lobby groups to reverse a major national policy on the ownership and use of arable land is paramount; the project of privatising arable land would mean taking away the land now assuring subsistence to the substantial peasant population and going for so-called economy of scale which is supposed to give efficiency and higher yield. Resisting the conversion of crops for food to crops for biofuels, striving for enhancing organic production which would reduce the dependence of peasants on increasingly costly chemical fertilizers and pesticides and also improve the fertility of the soil, strengthening local facilities and networks for controlling the storing, processing and marketing of grain and other food products – all these efforts would help counter control by big capital and market, and strengthen local self sufficiency and biodiversity.

The cultural dimension of China’s fast-track modernization is the destruction of the collective mentality of interdependence by the life-and-death, winner-take-all grudging mentality for the pursuit of money and greed. Hence it is essential to initiate cultural efforts for the opening up of spaces in which a shift can take place for the positive development of a mentality of attending to organic relations between cooperative relations and diversity and ecology in the difficult task of striving towards sustainable livelihood for the people.


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