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Cablegate: China's Food Security Challenges And

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FAS FOR OFSO/WAINIO

E.O. 12958: N/A
TAGS: EFIN ECON ETRD EAGR EAID PREL CH
SUBJECT: China's Food Security Challenges and
Opportunities for Engagement in APEC

REF: A. State 96050
B. 9/18/2009 Email from David Moore to Ryan
MacFarland and Ann Ryan
C. 08 Beijing 3598
D. 08 Beijing 4332
E. Beijing 1727

1. (SBU) Summary: Although China has eliminated
widespread hunger and malnutrition within its
borders, Beijing still faces challenges in ensuring
predictable, affordable domestic food supplies,
including: land and water constraints, ecological
problems, trade barriers, a poor regulatory and
investment climate, and misconceptions regarding the
causes of global food price spikes and shortages.
China is currently addressing its food security
concerns by focusing on domestic agricultural
production aimed at maintaining food self-
sufficiency.

Comment: China would mostly likely welcome APEC food
security discussions on topics -- such as
environmental degradation, climate change, and
biotechnology -- that match China's emphasis on
supporting domestic food production. China also
could benefit from conversations on how to achieve
food security thorough a shift to greater reliance
on agricultural trade, appropriate resource pricing
and commodity markets, as well as investment climate
and regulatory reforms. Chinese officials have
stated that China, as a "developing country," is not
interested in contributing financially to non-United
Nations multilateral food security initiatives, but
might be willing to make some bilateral commitments
within the APEC context. End Comment and Summary.

2. (U) This cable provides information in response
to Ref A and is a follow up to Ref B.

--------------------------------------------- -----
Focus on Self-sufficiency and Increasing Production
to Address Food Security
--------------------------------------------- -----

3. (SBU) China has mostly eliminated systemic
malnutrition following farm reforms introduced in
the mid-1980s. Grain production typically exceeds
domestic needs and China has been a net grain
exporter for more than 20 years. Ensuring food
security through self-sufficiency -- especially in
grains including corn -- remains a key feature of
Chinese Government policy and planning, considered
essential for continued social stability. This
focus was underscored in July 2008 when China
updated its food security goals in its Medium and
Long Term Plan for National Grain Security. The
Plan stated that China's grain supply should
continue to rely on domestic production and set a
grain and oilseeds self-sufficiency target of 95
percent or above (Ref C).

4. (SBU) China's approach to food self-sufficiency
relies heavily on farmers' ability to produce rising
quantities of food from less land at low prices. To
encourage grain production and maintain profit
margins for grain farmers, in recent years China has
eliminated taxes on agricultural land, increased
both direct payments and minimum farm prices, and
provided subsidies for inputs such as farm machinery,
fuel, seeds and fertilizers. In 2008, direct
payments to grain farmers and input subsidies
reached an estimated $15.1 billion (RMB 102.86
billion), nearly double levels from the previous
year. In an effort toward boosting output per
hectare, the leadership recently approved a $3
billion biotech research and development program
designed to expedite market introduction of higher
yielding/resource efficient grain varieties. Many
observers expect China's first biotech grain
varieties could be commercialized within the next

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few years.

--------------------------------------------- --
Challenges to Self-Sufficiency, and Rising Trade
--------------------------------------------- --

5. (SBU) Competition for natural resources from
residential and commercial users poses significant
challenges to China meeting its long-term self-
sufficiency goals. Arable land in China continues
to shrink, falling to just over 120 million hectares
in 2008 from nearly 130 million hectares in the late
1990s. Water supplies are also dwindling,
especially in the North, a major production area for
wheat and corn. Climate change, unsustainable
agricultural practices, deforestation, and
mismanagement of water resources have caused more
than 2.6 million square kilometers -- around 27
percent of the country -- to suffer from land
degradation. (Ref D).

6. (SBU) Market mechanisms and the private sector
clearly are playing an increasing role in developing
China's agriculture sector and meeting its food
security goals. International trading firms have
entered the feed sectors, importing soybeans for
example, and major international food companies are
active in China. However, China remains cautious
about allowing market mechanisms and foreign capital
an increasing role in food and others sectors seen
as key to social and economic stability. With food
items the second largest part of the Chinese CPI
after housing, authorities are also wary of the
vagaries of global commodity markets. State trading
enterprises or quasi-government organizations still
dominate soy bean and other sectors.

--------------------------------------------- -
Comment: Encouraging China to Embrace Markets and
Reform to Achieve Domestic Food Security
--------------------------------------------- -

7. (SBU) APEC food security discussions could
fruitfully address environmental degradation,
climate change, and biotechnology as areas of
cooperation that match China's current food security
strategy. APEC could also engage with China on
topics that move beyond its current reliance on
self-sufficiency, including agricultural trade,
resource pricing and commodity markets, as well as
investment climate and regulatory reforms. Engaging
China in discussions on these issues would help
China more effectively and efficiently promote its
long-term food security while also achieving its
broader market reform and economic growth goals.
Working to move China towards accepting that free
trade could play a key role in achieving food
security will also help progress in the Doha round.

8. (SBU) These discussions would complement ongoing
Mission China efforts to address specific market
liberalization and market access issues for
agricultural products in fora such as the Joint
Committee on Commerce and Trade (JCCT)and the U.S.-
China Joint Committee on Cooperation in Agriculture
(JCCA). APEC engagement could also help promote
related discussion in bilateral dialogues such as
the U.S.-China Strategic & Economic Dialogue.

--------------------------------------------- ---
Comment, cont'd: Partnering with China on Global
Food Security Initiatives
--------------------------------------------- ---

9. (SBU) China has for several years been a
contributor to the World Food Program and in recent
years has been the world's third largest food donor.
Although the bulk of China's food aid goes to North
Korea, China recently contributed $5 million for WFP
programs in Zimbabwe. At a 2008 FAO ministerial,

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Chinese Premier Wen Jiabao announced a $30 million
donation to the organization's world hunger campaign.
China has endorsed the G8/G20 L'Aquila Joint
Statement on Global Food Security.

10. (SBU) Chinese officials, however, have so far
has been cautious about making financial
contributions to multilateral food initiatives not
firmly under United Nations auspices (e.g., the
L'Aquila Food Security Initiative), preferring
instead to provide food assistance through United
Nations and bilateral channels (Ref E). While
continuing to encourage China to more actively
support multilateral initiatives, USAID is also
encouraging China's contributions to initiatives
such as the Comprehensive African Agriculture
Development Program (CAADP), an African Union
initiative under New Partnership for Africa's
Development that allows bilateral contributions,
which China may find more acceptable. Beijing might
be willing to make some bilateral commitments within
the APEC context.

HUNTSMAN

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