Food Prices Rising in China

China would have to retain at least 120 million hectares of agricultural land, Prime Minister Wen Jiabao warned a year ago. Otherwise, most Chinese agriculture experts have warned, the country might face severe food shortages. Following the Prime Minister's statement, China has already shelved ambitious plans to use large agricultural areas for producing bio-fuel. And still, food prices have kept going up for the last year -- in most cities on average by 40 per cent, in some places by even more.

Dr. Zöbel, an expert on Chinese agriculture at Germany's Duisburg University, says food production is not the issue. He says that the area of agricultural land being used for producing grain has been growing, and so has the output. ``Food prices do rise, but not for all food items. It's mostly about pork and related products. But it's true that even now 12 per cent of the Chinese are under-nourished. And the reason for this is pricing!’’ he says.

Shortage of grain despite surplus production

But why do prices rise if there is more rice available every year? International NGOs claim that grain is being smuggled out of China, as Chinese traders want to profit from rising world market prices. Dr. Zöbel cites a lack of transparency in the Chinese grain market as a reason for high prices. Another factor is the influence of the international market. ‘’Since 2001 when China joined the WTO, it has become part of the international import and export regime. And so international market prices directly or indirectly influence the Chinese market," says Dr. Zöbel.

To some extent, food shortages are a regional problem in China, Zöbel adds. They have to do with the climate. For example, the peasants in Northwest China are facing acute water shortages, because of which they cannot cultivate anything. ‘’And because these are the regions where ethnic minorities live, their suffering can also bring about political instability," says Zöbel.

There are other regions as well, for which experts are predicting shortages. Central China, for example, where there are frequent earthquakes and landslides.

China must plan future course of action

Financial service providers such as the Dutch bank ABN-AMRO expect that China will have to import large amounts of rice in the near future, and they have even begun offering financial products such as funds which are based on this assumption to their customers on the Chinese market.

Dr. Zöbel thinks that China will have another five years to make structural adjustments and prevent a food crisis. But so far, nothing of the sort is planned.