Free China: why Russia should study agricultural policy neighbor

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China is moving away from the policy of food self-sufficiency and simplifies the regulation of agriculture. Against this background, the Russian agricultural policy is looking increasingly archaic

In early February, Beijing issued “Document No. 1”, the first in a series of policy documents prepared by the Communist party of China during the year. Document No. 1, as the previous 13 years, was devoted to agriculture. It should be mentioned that if in Russia, many policy documents remain unfulfilled, the realization of similar programs in China is much higher. Study paper No. 1 and five-year plans of China gives an idea about where is going and where it will move to the second economy in the world.

International expansion

Course on international cooperation and expansion in agriculture, Beijing announced in previous years, has led to active investment by Chinese companies abroad. The Chinese are investing around the world in plant and animal company, in trading companies, in businesses developing technology for agriculture. By September 2015, when I wrote about this trend, China in particular, acquired for $4.7 billion, the largest pork producer in USA — Smithfield Group, as well as large multinational trading company specializing in agricultural products, — Nidera and Nobel.

In 2016 expansion, continued: Chinese company ChemChina agreed to buy Swiss Syngenta, one of the world leaders in the production of plant protection means and seeds. Currently the deal is worth $43 billion approved by the US authorities, where a part of Syngenta plants, and is considered by the European regulators. After the closing of the transaction is the largest foreign investment of China.

The policy of liberalizing

The main theme of the paper No. 1 — the rejection of the idea of unconditional growth in gross indicators in favor of a more modern agriculture, quality of food and high income for farmers and rural population.

But equally important is what the Document No. 1 almost never speaks. The topic of food security, which were for Chinese agricultural policy key for decades, this time is almost not affected. The issue of self-sufficiency China’s food is clearly relegated to the background.

Still, food security remains a special theme for China due to historical reasons. Many, including senior management, remember the Great famine that struck the country in the late 1950’s — early 1960-ies of the last century and claimed 15 million, according to official estimates, up to 45 million, according to unofficial, lives.

Document No. 1 — the next step from a planned economy to a more free market. Beijing gradually gives more freedom for their farmers intend to reduce intervention in the market.

Very indicative of the actions of Beijing on the market of maize — the primary grain crop for the country. For a long time, China sought at all costs to increase its production. The main way was to support the inflated prices of grain purchases into the state Fund. This program started in 2007, and since then fees of maize has increased by half. However, a side effect was the accumulation of huge reserves, estimated in the 100-200 MT or 10-20% of the total world production. Only the storage of this volume at a cost of several billion dollars per year. In 2016, Beijing announced the completion of the pricing policy.

In fairness, we note that the prices of other grains — wheat and rice — are still supported, however, announced that they will be closer to market levels.

Food imports and the chances for Russia

For Russian farmers most importantly, China will remain large and in some areas growing importer of food. Beijing is increasingly willing to trade food with the rest of the world.

However, to idealize the situation, of course, not worth it. A quick breakthrough in the Chinese market is still unlikely. As practice shows the negotiations China with Russia and other countries, Beijing is extremely slowly opens its markets, often making excessive demands to their partners.

In the case of Russia, despite years of negotiations on access to the Chinese market until real results are extremely modest. Russia supplies China with about half a million tons of soybeans, 200 tons of vegetable oil, 100 thousand tons of corn and tens of thousands of tons of chicken offal. In monetary terms it is less than 3% of the total Russian agricultural exports and less than 0.5% of Chinese food imports.

I assume that the successful increase in supply of the Chinese market will largely depend on the degree of integration of Russia into the strategic transport and infrastructure project of Beijing’s “New silk road” (NSHP), which connects China with Europe. Russia’s role in it is still not determined. Moscow can be a bystander, if the primary route passes by its territory, and active participant in the project, if the main will be the so-called Northern route, which can pass through the Russian territory. It should be noted that the NSHP is not only a new logistics supply opportunities in China, but probably a large Chinese investments in the agricultural business. Perhaps the extent of Russia’s participation in the NSHP will become clearer after the may visit to China of President Putin, which will go to international forum devoted to the silk road project.

Russia and China: opposite vectors

Document No. 1, as other taken in China program, including in the field of agricultural policy, largely following the experience of developed countries. In General it is the policy of developing international trade, lowering the level of government intervention in markets, support for farmers ‘ incomes. The last major case for deregulation of markets — is a rejection of the EU country quota for milk production in 2015.

Against this background, the Russian agricultural policy is looking increasingly archaic. Still one of the main strategic objectives is the food self-sufficiency. It is clear that the issue price of achieving this utopian point of reference for consumers are rising. Bypassing the fact that a significant portion of agricultural technologies and material and technical resources imported into Russia, and in the foreseeable future, this situation will not change.

The government actively intervenes in the functioning of the grain market, the issue of regulating the prices of dairy products. In all seriousness discusses rigid planning of agricultural production. Officials of different levels according to Soviet tradition, is still primarily think about the numbers of gross harvests and yields, and not the income of the producers. The constant pursuit of gross figures often leads to a monstrous distortion of statistics.

The state program of agriculture, which should give investors long-term objectives, conceptual did not take place. Dozens of routines for specific areas merged together, and the decision to support this or any other project given to the officials of different levels, and that’s not counting what the budget of the program, such as in 2017, cut 30% from originally planned.

Access to the Chinese market, which is widely considered as a determining factor for the further development of Russian agriculture, of course, important. But more important is building long-term transparent agricultural policies that will create conditions for sustainable development of agriculture. Landmarks well enough for her not only in the West but in the East.

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.

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