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Annex 3: Agricultural Policy and Food Security in China中国农业政策与食品安全--------------------------------------------------------------------------------IntroductionFood security and the performance of the agricultural sectorAgricultural development strategy, policies and food securityChina's food economy prospectsIssues and challengesConcluding RemarksReferences--------------------------------------------------------------------------------IntroductionChina's effort to produce enough to feed its growing population has long been recognized. It feeds over one-fifth of the world's population with only one-fifteenth of the world's arable land. In recent history, China has either exported food or imported relatively little. China was a net exporter of food, even of grain, in the 1950s. Although China became a net importer of grain in the 1960s, the share of net imports to total domestic consumption was marginal. Net import shares reached approximately three percent in the early reform period (1978-84), then declined to approximately one percent in the following period (1985-90). China has since become a net grain exporter, except in 1995 when it had a record level grain imports of nearly 20 million tons. Net exports between 1992 and 1994 were over 5 million tons annually.While China's grain imports may grow slightly in the coming decades, the nation has developed a strong position as a net exporter of food (both grain and non grain) in value terms by exporting high value-added foodstuff including livestock products and other processed foods during the reform period. Net food exports grew to 2.3 billion US dollars in 1985 and peaked at 6.3 billion dollars in 1993, from a state of balanced trade (in value terms) in 1980 (China Customs Statistics).China's future food security, however, is a subject of growing concern. First, although China's food production has grown over the last several decades, year-to-year fluctuations of food supply and prices are significant. Market stabilization and food price inflation have been among the major targets of government policy since the late 1980s. The Chinese government considers maintaining a comparatively high level of food self-sufficiency, avoiding supply shocks, and stabilizing consumer prices, a matter of national security and stability:Only when the Chinese people are free from food availability and stability of food supply worries can they concentrate on and support the current reform, thus ensuring a sustained, rapid and healthy development of the economy (The State Council, 1996).To this end, the government recently adopted measures to stabilize domestic food supply and stabilize the market - these measures include administrative and economic intervention in food distribution and marketing systems, national and local food reserve schemes, price regulations, international trade, factor markets, and rural infrastructure development.Secondly, food security and access to food are mainly poverty issues. Although national economic growth is strong, it is uneven across regions. Farmer's incomes in the central and eastern regions of China continue to grow more rapidly than those in the west and southwest. Income inequality among regions, between rural and urban areas, and within regions continues to grow (MOA, 1997). In the early 1980s, tremendous progress was made in addressing China's poverty problem, mainly due to the government's rural reform program. However, this progress has slowed down over the past ten years.Finally, China's food supply availability could be a major food security issue in the coming decades if policies were not formulated in the right directions. Worldwide, food production growth rates have outpaced population growth in recent decades, implying increased food availability per capita. Furthermore, the decline of real food and feed grain prices internationally over the same period implies that supply increases have exceeded increased demand. However, the situation differs from country to country.China faces the great challenge of feeding its growing population with declining land, water, and other food production resources, and increasing opportunity cost of labor and domestic food production cost. Food supply availability in China is important not only because it concerns a large proportion of the world's population and consumption, but also because rapid industrialization has led to competition for resources between agricultural and non-agricultural sectors, strong income growth, rapid urbanization, and population growth. All of these stimulate demand for agricultural products.Government officials and scholars have focused food economy and food security concerns on the grain economy because grain (both food and feedgrain) is a major component of China's food supply. Historically, grain fundamentalism, the provision of adequate cereal grain supplies at low stable prices to urban residents, has been an overriding government concern. Recurring food shortages, particularly the famine of the early 1960s, increased the official desire for assured and secure grain supplies. This concern, coupled with rapidly increasing urbanization, domestic infrastructure and transport constraints, domestic grain price spikes in 1994/1995, Brown's 1995 prediction that China will become an importer of massive amounts of grain in the next few decades, the weaknesses of the fiscal system in the provision of public goods (particular agricultural research and extension), has attracted worldwide attention in the past 4 years.A number of recent studies conducted by both domestic and international organizations have led to a consensus that while the increases in China's grain imports will be marginal and the nation will remain at a high level of food self-sufficiency in the coming decades, China's long-term food security is an issue of both national and international significance. The sheer size of China's economy and its rapid growth will make China a crucial influence in the future development of world markets for inputs and outputs of food and agricultural products, agribusiness, and industry. Along with this growth is its gradual progress toward market-orientation and global integration, urbanization, the shift of comparative advantage from agriculture to other sectors, and dietary diversification. Small adjustments to China's food supply and demand, agricultural input demand shifts, and the Chinese government's selection of food security policy will each have large effects on world agricultural trade.This paper evaluates China's food security situation, reviews the performance of the food and agricultural sector, considers the role of food policies, particularly the most recent price and marketing reform policies, in improving the food situation, and identifies key issues related to food security which require further intervention. The next section reviews previous achievements and sources of growth in agricultural production and food security. The third section analyzes current government policies and programmes and their impacts on agricultural production and food security. The fourth section predicts the shape of China's food economy over the next three decades; while the fifth section discusses the major challenges and constraints to agricultural production and food security. Concrete measures and options towards sustainable agricultural growth and food production are suggested in the final section.Food security and the performance of the agricultural sector--------------------------------------------------------------------------------Food security: an overviewSummary of China's approaches to improved food securityOther issuesChanging role of agriculture in the economyAgricultural production growth--------------------------------------------------------------------------------Food security: an overviewChina's ability to feed over one-fifth of the world's population with only seven percent of the world's arable land is widely acclaimed. China, with more than 1.23 billion people in 1997, is the world's most populous nation. Its experience demonstrates the importance of technological development, institutional change, improved incentives, and rural development among other policies in improving food security with limited natural resources.Availability of foodChina's per capita food availability and consumption have increased over the last several decades. Average per capita food availability has grown from less than 1700 kcal in 1960 to 2570 kcal per day in 1995 (Table 1)[19]. Increased domestic production is almost solely responsible for increased food availability. Protein intake and fat consumption per capita per day increased over the same period, from 42 grams to 70 grams, and 17 grams to 45 grams, respectively. Both figures exceed average nutrient availability in countries with comparable per capita GNP levels.Nutritional composition changes of Chinese diets are consistent with growing income (Table 1). Nutrient sources are a powerful indicator of the population's economic wellbeing. In low income countries, the average diet includes a high percentage of nutrients from crops, while a typical developed country diet includes a relatively high percentage of nutrients from animal sources. In China, traditional diets were typically based on cereals, vegetables, and small quantities of meat and fish. Consumption of relatively expensive non-cereal food items, particularly livestock products and fish, have increased with rapid increases in per capita income, urbanization, and market expansion (Huang and Bouis, 1996).Aggregate household food securityAggregate household food security has improved significantly. According to the FAO's WFS (1996), Chinese household food security, as measured by the aggregate household food security index (AHFSI) and the level of food inadequacy, follow overall national averages. The AHFSI increased from a low level of 70 percent in 1969-71 to a relatively high level of nearly 80 percent in 1990-92, while food inadequacy declined from slightly over 14 percent to approximately 3 percent in the same period.Table 1. Nutrient availabilityYearEnergy(kcal)Protein(grams)Fat(grams)Crop ProductsAnimal ProductsEnergy(%)Protein(%)Fat(%)Energy(%)Protein(%)Fat(%)196016764217979376372419702087532396936747331980247064329490606104019902505683791865591445199525707045888151121949Table 2. Per capita daily nutrient intake by income group in sample provinces, 1990.Income groupSichuanNingxiaHebeiZhejiangGuangdongBeijingEnergy intake (kcal)Average233524022227246024252309Poorest 10%18891819197019712129196010% - 25%20682142209322172174185525% - 50%22712319220123142191209150% - 75%24852480225625592583237175% - 90%260626422284271125322605Richest 10%285230742559298327972972Protein intake (g)Average59.668.569.163.960.769.1Poorest 10%48.154.959.451.051.957.910% - 25%52.564.664.757.053.055.025% - 50%55.465.467.959.658.462.050% - 75%61.168.770.265.664.570.375% - 90%66.672.571.470.764.779.2Richest 10%73.684.580.879.271.890.5Fat intake (g)Average36.033.734.033.139.145.5Poorest 10%25.521.527.420.228.935.510% - 25%27.725.629.226.432.735.425% - 50%31.331.131.930.336.841.150% - 75%37.035.635.035.142.548.575% - 90%43.441.037.139.842.052.6Richest 10%57.048.946.147.650.663.9Annual per capita income (yuan)Average55864365899110271270Poorest 10%25123020429943348810% - 25%34732134950862470525% - 50%443457499739809101250% - 75%57968669210581075134675% - 90%756975948145714331748Richest 10%111513951453216320332633Household food security by income groupTables 2, 3, and 4 show household nutrient intake and source by income group based on a food and nutrition survey conducted by the Chinese Academy of Preventative Medicine (CAPM) and the State Statistical Bureau (SSB) in 1990,. Tables 5 and 6 show the physical development of children and equity as well as poverty in the rural China based on a food consumption and expenditure survey conducted by the SSB for the years 1978- 95.Nutrient intake varies greatly across income groups, although average per capita energy intake in all sample provinces topped 2200 kcal (Table 2). Daily energy intake of the 25% of the population with annual per capita income less than 500- 700 yuan (level varies by province) was below 2200 kcal. Energy intake of the poorest 10 percent was only 82 percent of the sample average. Protein and fat intakes decline as income falls in a similar pattern.Table 3. Sources of energy by income group in China's sample provinces, 1990.