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Policy Responses to Food Price Fluctuation in China
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Policy Responses to Food Price Fluctuation in China

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Board Policy Seminar presentation at IFPRI "Two Food Price Crises in Three Years' by Zhu Ling/Xiaobo Zhango December 5, 2011

Board Policy Seminar presentation at IFPRI "Two Food Price Crises in Three Years' by Zhu Ling/Xiaobo Zhango December 5, 2011

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  • 1. Policy Response to Rising Food Price in China Zhu Ling
  • 2. Outline
    • Observation on price changes of major food varieties in the Chinese diet
    • Policy responses
    • Research Issues to be studied
    12/06/11
  • 3.
    • 1. Steadily rising wheat and rice prices;
    • Major reason: sufficient supply
    • - Agricultural stimulus policies undertaken since 2004 due to decline in grain production during 2001-2003;
    • - Enlarged sown areas and higher yields;
    • - 8 years’ good harvest since 2004.
    12/06/11
  • 4. Increase in Rice Price since 2007 12/06/11
  • 5. Wheat Price Fluctuation since 2005 12/06/11
  • 6.
    • 2. Fluctuation of corn price is related to the period of pork production and its price circle
    • - Labor division of policy-making and responsibilities: the central and provincial governments are responsible for stability of rice and wheat (e.g. : protection on floor price of procurement); while municipal governments for livestock and vegetables .
    12/06/11
  • 7. Corn Price Hike during 2007 ~ 2011 12/06/11
  • 8. Price index of livestock, poultry and fishery products (price in the same quarter of preceding year = 100) 12/06/11
  • 9. Prices of Piglet, Pig and Pork 2009-2011 12/06/11
  • 10. 3. High vegetable price volatility (price in the same quarter of preceding year = 100) 12/06/11
  • 11.
    • 4. Food price surge is also a reflection of the escalation in money supply
    • According the observation of the CASS team: three quarters later food price is changing following the varying of M2 while four months after fluctuation of M1.
    • (Prior to 2009 around 80 ~90% of amount of the business financing depending on bank loans while the percentage has decline to 55% since 2010.)
    12/06/11
  • 12. Growth Rate of Money Supply 2007 ~ 2011 (Amount of Money Supply in the Same Month of Preceding Year = 100) 12/06/11
  • 13.
    • 5. Increase in food prices links to the rise of production costs, in particular, the cost of oil-related agricultural input
    12/06/11
  • 14. Price Indices of Means of Agricultural Production (The price at 2010-Jan=100 ) 12/06/11
  • 15. Average Cost of Staple Crops Production (Yuan/Mu by Current Price: rice, wheat, maize ) 12/06/11
  • 16. Policy responses (continue)
    • Increase import of soybean (around 40 mill ton) and cotton (about 25 mill tone) equivalent to yields from 6 million ha in China;
    • Use of 1 mill ton pork reserve and import 0.6 mill ton pork for large cities (Total annual pork consumption : 50-60 mill ton ) ;
    • Contracting major vegetable production between municipal governments and growers;
    • Exemption of tolls on food transportation;
    12/06/11
  • 17. Policy responses (continue)
    • Further promotion to agricultural and rural development and 30 policy measures have been undertaken in 2011, especially:
    • -investment in agricultural research, education and training, extension services, irrigation projects;
    • - raise minimum procurement price (rice and wheat)
    • - promote cooperatives and link farmers with super market
    12/06/11
  • 18. Policy responses (end)
    • Extending social protection system from urban to the rural: medical cooperative system, pension system, minimum living standard guarantee system;
    • Launching a new program for rural poverty reduction (2011-2020) : lift up poverty line to 2300 Yuan per capita annual net income (1.8 USD 2005 p.p.p) and increase investment in hard core poor areas.
    12/06/11
  • 19. Questions for further Research
    • 1. Impact of money supply on food price;
    • 2. Effects of rising price on farmers’ income.
    12/06/11
  • 20.
    • Thank you !
    12/06/11 谢谢!