Policy Responses to Food Price Fluctuation in China

Policy Response to Rising Food Price in China Zhu Ling

Outline
Observation on price changes of major food varieties in the Chinese diet
Policy responses
Research Issues to be studied
12/06/11

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.
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Increase in Rice Price since 2007 12/06/11

Wheat Price Fluctuation since 2005 12/06/11

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 .
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Corn Price Hike during 2007 ~ 2011 12/06/11

Price index of livestock, poultry and fishery products (price in the same quarter of preceding year = 100) 12/06/11

Prices of Piglet, Pig and Pork 2009-2011 12/06/11

3. High vegetable price volatility (price in the same quarter of preceding year = 100) 12/06/11

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.)
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Growth Rate of Money Supply 2007 ~ 2011 (Amount of Money Supply in the Same Month of Preceding Year = 100) 12/06/11

5. Increase in food prices links to the rise of production costs, in particular, the cost of oil-related agricultural input
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Price Indices of Means of Agricultural Production (The price at 2010-Jan=100 ) 12/06/11

Average Cost of Staple Crops Production (Yuan/Mu by Current Price: rice, wheat, maize ) 12/06/11

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;
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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
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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

Questions for further Research
1. Impact of money supply on food price;
2. Effects of rising price on farmers’ income.
12/06/11

Thank you !
12/06/11 谢谢！

Policy Responses to Food Price Fluctuation in China

by International Food Policy Research Institute (IFPRI) on Dec 06, 2011

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Policy Responses to Food Price Fluctuation in China Presentation Transcript