Why feeding China’s 1.3 billion people could leave the rest of the world hungry.
On Aug. 20, the Australian mining giant BHP Billiton announced that it will pump nearly $3 billion into developing a deposit of Canadian potash, a mineral used in the manufacture of fertilizer destined for farms fields across the world. And in late September, Chinese pork producer Shuanghui officially purchased Smithfield Foods in the largest Chinese acquisition ever made in the United States. The companies’ investments are both decisions that speak to a vote of confidence in global food consumption growth over the next decade — and nowhere will bellies be filling up faster than in China.
For three decades, resource-intensive manufacturing fueled China’s spectacular economic rise. By 2012, the country was consuming nearly half of the world’s coal and producing 46 percent of its steel, 43 percent of its aluminum, and about 60 percent of its cement. The Chinese economy has slowed in 2013 in part because of the government’s recognition that such a resource-intensive growth model has become unsustainable.
As a result, Beijing is trying to rebalance away from exports and investments and toward domestic consumption. Companies like BHP Billiton are betting that China’s rebalancing will spur rapid growth in demand for food and the inputs needed to produce it. The underlying economic logic — China as demand driver — is the same, but it reflects the resource scarcity that is starting to replace maintenance of rapid growth as China’s foremost economic challenge.
An ironic legacy of economic success, China’s resource scarcity is worsening as its GDP grows, incomes rise, and standards of living improve, placing new, daunting pressures on the domestic food supply. This is not necessarily because the Chinese agricultural industry is underperforming. The sector has long faced a daunting task: filling the stomachs of 20 percent of humanity with just 8 percent of the world’s arable land and only about 30 percent of the world’s per capita availability of fresh water. But the task is further complicated by Beijing’s grain security policy, which insists on near self-sufficiency of production in spite of a scarce resource base, preventing imports from playing the same role as domestically produced food.
Beijing’s food security policy is an uncharacteristically impractical choice from a usually pragmatic government. It is motivated by the psychological legacy of repeated, disastrous famines that scarred the Chinese public over the last 150 years, the most recent being the policy-induced famine during the Great Leap Forward that led to tens of millions of deaths in the late 1950s and early 1960s. Food is central to the national mindset, especially for the many Chinese alive today who have personally experienced crippling scarcity.
Food became more plentiful in the decades following Mao Zedong’s death in 1976, when the Chinese government adopted liberal agricultural policies that allowed farmers to sell their products into the market. Called the “household responsibility system,” this reform, as well as sustained investments in agricultural sciences and technology, prevented China from descending into the Malthusian nightmare of finite resources outstripped by exploding population growth that seemed to threaten the developing world in the 1970s.
Since the early 1980s, China has been able to produce most of the meat needed for domestic consumption; the government also maintains a strategic pork reserve that it occasionally taps to lower pork prices. Over the last few years, the Chinese government has even achieved its goal of near self-sufficiency in rice, wheat, and other staple grains that form the basis of the Chinese diet.
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