Global Rice Market and Trade Summit Oct. 27-29, 2014, Bangkok, Thailand A Long-Term Perspective on Chinese Rice Imports Jun Yang University of International Trade and Business (UIBE) & Center for Chinese Agricultural Policy (CCAP) . Outline of presentation 1. Historical Change of China’s Agriculture 2. Main Challenges of Agr. Supply and Demand 3. China's rice production, demand and trade 4. Future perspective of China's rice trade 5. Main conclusion and policy implications China’s economy grows quickly in the past three decades. 3000 2000 Per capita GDP (1978=100) 1800 GDP (1978=100) 2500 1600 1400 2000 1200 1500 1000 800 1000 600 500 0 400 200 1978 1983 1988 1993 1998 2003 2008 2103 0 1978 1983 1988 1993 1998 2003 2008 China’s GDP in 2013 (at constant price) is more than 26 times of that in 1978, with average annual growth rate of 9.8%. Meanwhile, the per capita GDP increased by 18 times, with growth rate of 8.7% annually. 2013 3 Significant Changes in the structure of China’s Economy (%) 100% 100% 90% 90% 80% Service 100% Forestry 90% Fishery 80% 80% Cash crops 70% 70% 60% 60% 50% Industry 70% Livestock 50% 60% 50% Crop 40% 40% 40% 30% 30% 30% 20% 20% 10% 10% 10% 0% 0% 20% Agriculture Other cereal 1978 1983 1988 1993 1998 2003 2008 2013 Maize Wheat Rice 0% 1978 1983 1988 1993 1998 2003 2008 2013 1980 1992 1996 2000 2004 Agricultural GDP share: 30% in 1980 10.0% in 2013 Crop production-value share: 76% in 1980 55% in 2013 Cash crops sown area share: 32% in 1980 43.3% in 2012 2008 2012 4.6% of annual growth rate of agri GDP in past 35 years Annual growth rate of agri GDP in 1978-2013 (%) 8 7 6 5 4 3 2 1 0 1979-84 1985-95 1996-00 2001-05 2006-2010 2011-2013 More than 4.5 times of population growth rate Food consumption pattern changes remarkably 120 2nd stage 1st stage 80 2nd stage 1st stage 70 100 60 80 50 60 40 30 40 20 20 10 0 1980 1985 1990 Rice 1995 Wheat 2000 2005 Other grains 2010 0 1980 Edible oil 1985 1990 Fruits 1995 2000 Red meat and poultry 2005 2010 Milk Per capita consumption on high-value added food (e.g., fruits, meat, milk and fishery products etc.) increasing dramatically in the 2 cd stage Fish Rising production and notably structural change Grain (million tons) Oil crops (1000 tons) 571 600 500 33068 + 87% 35000 (2.0%) 30000 + 534% 25000 (5.8%) 400 305 20000 300 15000 200 10000 100 5218 5000 0 0 1978 1978 2011 Fruit outputs (million tons) Vegetable area (1000 ha) 19639 2011 228 250 20000 15000 + 490% (5.5%) 10000 5000 200 + 3365% 150 (11.3%) 100 50 3331 7 0 0 1978 Source: NSBC 2011 1978 2011 Meat production during 1980-2011 (1000 tons) Pork Poultry 20000 60000 +346% 50000 +1892% 15000 (4.6%) 40000 (9.5%) 10000 30000 20000 5000 10000 0 0 1980 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Beef 1985 1990 1995 2000 2005 2010 2005 2010 Mutton 7000 5000 6000 +2307% 5000 (10.1%) 4000 +783% 4000 (7.2%) 3000 3000 2000 2000 1000 1000 0 1980 1985 1990 1995 2000 2005 2010 0 1980 Source: NSBC 1985 1990 1995 2000 China converted into a net importer of agri. Commodities in 2004, and trade deficit kept rising afterward Agricultural trade: export and import in 1992-2013 (billion US$, 2000constant price) 100 90 Export 80 Import 70 2013,defit 38 billion 60 50 40 30 20 10 0 1992 1995 1998 2001 2004 2007 2010 2013 Net export of Agricultural commodities classified by Factor Intensity （billion US$ in 2000 constant price） 30 20 10 0 -10 1984 1987 1990 1993 1996 -20 -30 -40 -50 -60 Land intensive Labor intensive 1999 2002 2005 2008 2011 Outline of presentation 1. Historical Change of China’s Agriculture 2. Main Challenges of Agr. Supply and Demand 3. China's rice production, demand and trade 4. Future perspective of China's rice trade 5. Main conclusion and policy implications Population growth rate slows down gradually. Overall population is expected to decrease at around 2035. 3.0 Growth rate (%) 2.5 2.0 1.5 1.0 0.5 0.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: UN, 2013 However, urbanization will accelerate in the next several decades. 90 Urban population share (%) 80 70 70 2030 61 2020 60 50 40 30 20 10 0 2050 2045 2040 2035 2030 2025 2020 2015 2011 2010 2005 2000 1995 1990 1985 1980 1975 1970 1965 1960 1955 1950 Source: UN, 2010 Urban residents consume more vegetable, fruits, meats and dairy products, less grain. Urbanization will be one of the major driving forces to affect the food demand Per capita food consumption (kg) in 2012 200 Rural 180 Urban 160 140 120 100 80 60 40 20 0 Rice Wheat Vegetables Fruits Red meat and poultry Dairy products Economy is expected to maintain high growth rate in the coming decade (1978=100) 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 8% 7% 6% Impacts of rising income on food consumption Income elasticities on different food of rural and urban residents 1.2 Rural Urban 1.0 0.8 0.6 0.4 0.2 0.0 Fish Milk Poultry Beef Pork Fruit Vegetable Sugar Edible Oil Coarse Grain Wheat -0.4 Rice -0.2 Comparison of Calorie intake by food sources between China, Korea and Japan China Korea Korea in middle of 1990s Japan Japan in end of 1960s Comparison of protein intake by food sources between China, Korea and Japan China Korea Korea in end of 1980s Japan Japan in 1960s Comparison of fat intake by food sources between China, Korea and Japan China Korea Korea in end of 1980s Japan Japan in 1960s China will continue to experience fast structural change of food consumption in next 15-20 years. 70 60 1st Stage 2nd Stage 2nd Stage 50 40 30 20 10 0 1980 Edible oil 1985 Fruits 1990 1995 2000 Red meat and poultry 2005 Milk 2009 Fish 2030 Agricultural Production It is well-known that China is one of the most land-scarce and water stressed countries in the world in term of per capita availability. Moreover… Furious challenges come from the quick urbanization and industrialization. More water shifts from agriculture to industry and life Share of water usage (%) 1 100% 2 1 11 80% 13 24 60% 97 40% Agriculture 88 61 20% 0% 1949 1978 Domestic water Industry 2012 Annual wage (1978 real yuan) Since 2000 3500 3000 2500 Skilled / managerial wage 2000 Unskilled wage 1500 1000 500 0 1978 1983 1988 1993 1998 Wage of unskilled labor rose quickly after 2000 Source: CCAP’s surveys 2003 2007 Change of production cost of fruits and vegetables during 1999-2010 (RMB/kg) 3.5 3.0 2.5 2.0 79% 1.5 1.0 0.5 0.0 67% 1999 2000 2001 2002 Land rents and labor wage 2003 Seeds 2004 2005 Fertilizers 2006 2007 Mechinery 2008 2009 2010 Other cost Cost share of labor and land increases remarkably, and reached 79% in 2010. Comparison of inputs of maize production between China, USA and Brazil 100% 100% 90% Others 90% 80% Seeds 80% 100% Others 90% 80% Others Seeds 70% 70% Machinary 70% 60% 60% 60% Machinary Fert.&Pest. 50% 50% 40% Land rent 30% Labor cost 50% Fert.&Pest. 40% 40% 30% 20% 20% 10% 10% Machinary Fert.&Pest. 30% Land rent 20% Land rent 10% Labor cost Labor cost 0% 0% Seeds 0% 2011 2009 2007 2005 2003 2001 1999 1997 2011 2009 2007 2005 2003 2001 1999 1997 2011 2009 2007 2005 2003 2001 1999 1997 Cost of labor and land keeps rising in China and accounts for 60% in 2012. On the contrary, the cost share declines in USA and maintain almost constant in Brazil. Outline of presentation 1. Historical Change of China’s Agriculture 2. Main Challenges of Agr. Supply and Demand 3. China's rice production, demand and trade 4. Future perspective of China's rice trade 5. Main conclusion and policy implications Change of rice production, sown area and yield (converted into milled rice) China’s rice production: — Increasing in 1980-1997 (140 million tons in 1997). — Decreasing notably to 112 million tons in 2003. — Rebounding and growing steadily to 143 million in 2012. Yield (tons/ha) Average annual growth (%) Spatial distribution of China’s rice production by province (Paddy, 10 thousand tons) 1978 2010 1990 2012 Japonica Indica rice Changing trend of per capita rice consumption in China (kg/person/year) 160 140 120 100 80 60 40 20 0 Korea Japan Taiwan China Source: Data on Korea and Japan from FAO, Taiwan from Institution for Economic Research, China from CCAP. China’s rice balance sheet Unit 1980 1990 2000 2010 1000 Ha 33879 2.9 97934 34277 2857 -982 129 1111 33064 4 132532 49872 4038 -342 63 405 29962 4.4 131537 56473 1245 -2713 249 2962 29873 4.6 137033 123793 21319 -232 388 620 1000 Tons 94095 77965 14095 63870 5720 3138 1829 128152 109143 20030 89113 7457 2770 2122 127579 109100 26950 82150 7767 2270 2463 115482 93923 34800 59122 6617 2200 6848 1000 Tons 5443 6661 5979 5894 Household Demand share % 83 85 86 81 Self-sufficiency % 101.0 100.3 102.1 100.2 Area Harvested Yield Production Stock level (estimated) Stock Change (Estimated) Net Import Import Export Consumption Demand Household Demand Urban Rural Feed Demand Seed Demand Industry Demand Waste Tons/Ha 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons 1000 Tons China’s rice import policy after WTO accession -Tariff Rate Quota (TRQ) • Quota: 5.32 million tons: – 2.66 million tons of long-grain rice, 2.66 million tons of medium-and-short-grain rice). – Share of quota allocated to state trading enterprises 50%. • Import tariff: – In-quota: 1% – Out-quota:65% China’s rice import and export (1000 tons) WTO accession 5000 4000 Net Import Import Export 3000 2000 1000 0 -1000 -2000 -3000 -4000 China was a net rice exporter in many years during 1980-2013. Only 6 times to be net importer in past 35 years. Meanwhile, the import accounts a small share of the consumption. Main regions of China’s rice import 100% 90% 80% 70% Others 60% Cambodia 50% Lao PDR Pakistan 40% Vietnam 30% Thailand 20% 10% 0% 1996 1998 2000 2002 2004 2006 2008 2010 2012 China’s rice import is usually dominated by Thailand. However, Vietnam exceeded Thailand to be largest exporters in 2012 and 2013. Change of minimal procurement price in China during 2004-2014 (Yuan/50kg) 180 160 140 120 100 80 60 40 Japonica rice Early indica rice Middle-late Indica rice 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 China’s rice production cost and its composition Production cost (RMB/kg) 2.5 2.0 •China’s rice production cost rose quickly, specially after 1990. Labor cost Land rent Intermediate cost •The cost per unit had increased from 0.4 RMB/kg in 1990 to 2.2 RMB/kg in 2012, which drove the market price rising. 1.5 1.0 0.5 Share of different cost (%) 0.0 1978 1995 1990 1995 2000 2005 2010 2012 100 80 •Currently, the labor cost and land rent are main driving forces to push the production cost. •Their share increased from 41.7% in 1990 to 57.0% in 2012. 60 40 20 0 1978 1995 Labor cost 1990 1995 Land rent 2000 2005 2010 2012 Intermediate cost Comparison of China’s domestic rice price and Thailand export rice price (RMB/tons) 8000 7000 Enlarged price gap 6000 5000 Rice, 5 percent broken milled white rice, Thailand nominal price 4000 Early indica rice 3000 2000 1000 2008M01 2008M04 2008M07 2008M10 2009M01 2009M04 2009M07 2009M10 2010M01 2010M04 2010M07 2010M10 2011M01 2011M04 2011M07 2011M10 2012M01 2012M04 2012M07 2012M10 2013M01 2013M04 2013M07 2013M10 2014M01 2014M04 2014M07 0 Outline of presentation 1. Historical Change of China’s Agriculture 2. Main Challenges of Agr. Supply and Demand 3. China's rice production, demand and trade 4. Future perspective of China's rice trade 5. Main conclusion and policy implications Methodology and Scenarios China’s Agricultural Policy Simulation and Projection Model (CAPSiM) – Partial equilibrium model – Commodities: 22 agricultural products – 31 provinces and 11 farmer groups • Baseline scenario – GDP growth rate: 7.5% annually in 2012-2015, 7.0% in 2015-2020, 5.9% in 2020-2025 and 5.0% in 2025-2030. – Rural and urban income: 8.33% annually for rural and 6.83% for urban. – Population : 0.61% in 2012-2015, 0.44% in 2016-2020, 0.22% in 2021-2025 and 0.06% in 2026-2030. – Urbanization rate: 56% in 2015, 64% in 2025% and 67% in 2030. – Rural labor cost and land rent: 6% annually for labor cost, 2.5% for land rent. – Agricultural R&D: Investment keeps rising in the future. – Global food price: Long-term agricultural global food price is assumed based OECD-FAO agricultural outlook 2013-2020 and USDA's agricultural projections to 2022. Change of self-sufficiency of Food Commodities(%) 120 2012 Maize, soybean, Oils, sugar and dairy 2020 2030 100 80 60 40 20 0 Fishery Dairy Eggs Poultry Mutton Beef Pork Friuts Vegetable Sugar Oilseeds Soybean Maize Wheat Rice Net import of agricultural commodities (1000 tons) 100000 80000 60000 40000 2012 20000 0 -20000 2020 2030 China’s rice balance sheets in future (thousand tons) Area Harvested Production Stock Change (Estimated) Import Export Net Import 2012 30244 142965 27683 2369 279 2090 2020 24953 120449 1244 531 712 2030 21874 109314 1079 613 466 Total Demand Household Demand Per capita consumption (Kg) Feed demand Seed demand Industrial demand Waste Self-sufficient ratio (%) 117372 95727 70.9 6283 2219 7055 6088 98.6 121161 99656 70.9 5525 2184 7947 5849 99.4 109781 88844 62.3 4010 2140 9223 5563 99.6 Outline of presentation 1. Historical Change of China’s Agriculture 2. Main Challenges of Agr. Supply and Demand 3. China's rice production, demand and trade 4. Future perspective of China's rice trade 5. Main conclusion and policy implications China’s food consumption pattern is expected to undergo the quick transition with its high economic growth and fast urbanization. — Per capita consumption on rice, wheat will decline gradually, following the similar pathway experienced in Japan, Korea and Taiwan. — However, per capita consumption on high-value added food (e.g., fruits, meat, diary and fishery products) will continue to rise in next 2 decades. — China’s feed demand will increase dramatically due to the quick growth of livestock sectors. While China’s rice production confronts furious challenges of rising cost, the decreasing per capita demand and increasing yield will alleviate the pressure remarkably. Our results indicates that China could maintain the high self-sufficient ration in the future. — Consumer’s demand on rice will shift to highquality rice (i.e., good taste, safe and nutritional). So the key of rice production in China is not to promote the output, but enhance the quality. — It is also full of policy implication for regions to export rice to China. More attentions should be paid to reducing production cost and sustainable development, instead of increasing supply. — Institutional innovations (including policy reform) are critical to reduce the cost of labor and land rent. — Technology improvement will play a rising important role to promote China’s agricultural production and secure food security. Thanks for your attention! email: [email protected]
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