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China: are changes afoot for cereals?

Briefing/policy papers

Written by Steve Wiggins, Sharada Keats

Since its economic reforms began in 1978, China has seen rapid economic growth, alongside remarkable growth in agricultural production and exceptional progress on poverty and malnutrition. The country’s policy-makers have long been determined that the country must grow sufficient staple foods to meet its domestic needs, with enough in store to cover any unforeseen harvest failures.

China has, therefore, been reluctant to import cereals from the world market. Given the vast size of the country, the risks of not being able to procure enough cereals, or having to pay a very high price for them, are too great. For some time, then, those analysing world cereals markets have been able to leave China out of their considerations. China has not been expected to import grain or to offload its large stocks on the world market. Within the
country, there has been an expectation that domestic prices would not necessarily vary in step with often volatile world prices.

This Project Briefing provides an overview of China's impact on the world cereals market and examines whether recent changes will impact on current Chinese production.

Key points:

  • Since the late 1970s, China has increased its cereals production to keep pace with domestic demand, build large stocks and keep prices stable, with little impact on world prices.
  • 2011, however, saw two surprises: increased maize imports in response to growing demand for animal feed, and domestic price rises that reflect increased costs of domestic production.
  • Policy-makers have responded by trying to stimulate domestic production of cereals, and seem to be using social protection to offset price rises for the poor.

Steve Wiggins and Sharada Keats