China: Food first, not fuel
A customary Chinese greeting from the years of rations and shortages — “have you eaten yet” — is being jokingly resurrected as the public watches the prices of key staples, particularly pork, soaring by the day. Chinese economic minders, however, are not amused. Worried about social instability fuelled by inflation, they have been mulling over whether to steady prices by using the state strategic reserve of hundreds of thousands of live pigs kept at special farms for contingencies.
Disturbingly, this is the second time in six months that the Chinese leadership has had to resort to the country’s strategic reserves to stave off politically dangerous increases in food prices. In December, Beijing ordered the auctioning of some of the state wheat reserves to halt the rise in crops prices and prevent panic among the public. “Almost every inflationary crisis in the last twenty years has begun with an increase in food prices,” notes Xia Yeliang, professor of economics at Beijing University. “Chinese people have always regarded food as their first necessity. For people of middle age and elderly the memories of most recent times when food was lacking still endure.”
The last big famine China experienced — arguably the greatest in human history — during the disastrous Great Leap Forward experiment with communist industrialisation in late 1950s, killed up to 30 million people. Since then, ensuring food sufficiency for the country’s population of 1.3 billion has been regarded by Chinese leaders as a matter of national security. Current hikes in grain and pork prices are blamed on the same culprit — the ethanol industry, whose explosive growth has been gobbling up a growing share of China’s corn harvest traditionally preserved for food and animal feed.
The National Development and Reform Commission (NDRC), China’s top planning body, reported in December that the country’s ethanol capacity has reached 10 million tons, or ten times the amount approved for the four government facilities in Jilin, Heilongjiang, Anhui and Henan provinces. The excess amount has been coming from a cluster of small, unlicensed producers, who sell their production to officially approved mills or oil refineries. Industry insiders say that just Jilin, one of the nine designated provinces where ethanol is sold, has more than 400 ethanol mills, all of them producing the fuel from corn.
Fearing the explosive growth of ethanol industry was making a serious dent in the country’s grain reserves, the central government stopped approving new corn-based ethanol plants in December. Xiong Bilin, senior official with NDRC said that the State Council, China’s cabinet, has decided ethanol should be developed without occupying arable land, large-scale consumption of grain or damage to environment.
Arable land is said to have shrunk by 8 million hectares between 1999 and 2005. “The country will not approve new projects of food-based ethanol,” Xiong said in Beijing last week. “The current four (state) plants engaged in making ethanol from corn are urged to switch to new sources”. This however might not see the end of corn-based ethanol production. Chinese press reports say domestic corn processors are expanding their capacities to resume ethanol production when the government relaxes its stance. — IPS