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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

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Policy Responses to Food Price Fluctuation in China

  1. 1. Policy Response to Rising Food Price in China Zhu Ling
  2. 2. Outline <ul><li>Observation on price changes of major food varieties in the Chinese diet </li></ul><ul><li>Policy responses </li></ul><ul><li>Research Issues to be studied </li></ul>12/06/11
  3. 3. <ul><li>1. Steadily rising wheat and rice prices; </li></ul><ul><li>Major reason: sufficient supply </li></ul><ul><li>- Agricultural stimulus policies undertaken since 2004 due to decline in grain production during 2001-2003; </li></ul><ul><li>- Enlarged sown areas and higher yields; </li></ul><ul><li>- 8 years’ good harvest since 2004. </li></ul>12/06/11
  4. 4. Increase in Rice Price since 2007 12/06/11
  5. 5. Wheat Price Fluctuation since 2005 12/06/11
  6. 6. <ul><li>2. Fluctuation of corn price is related to the period of pork production and its price circle </li></ul><ul><li>- 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 . </li></ul>12/06/11
  7. 7. Corn Price Hike during 2007 ~ 2011 12/06/11
  8. 8. Price index of livestock, poultry and fishery products (price in the same quarter of preceding year = 100) 12/06/11
  9. 9. Prices of Piglet, Pig and Pork 2009-2011 12/06/11
  10. 10. 3. High vegetable price volatility (price in the same quarter of preceding year = 100) 12/06/11
  11. 11. <ul><li>4. Food price surge is also a reflection of the escalation in money supply </li></ul><ul><li>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. </li></ul><ul><li>(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.) </li></ul>12/06/11
  12. 12. Growth Rate of Money Supply 2007 ~ 2011 (Amount of Money Supply in the Same Month of Preceding Year = 100) 12/06/11
  13. 13. <ul><li>5. Increase in food prices links to the rise of production costs, in particular, the cost of oil-related agricultural input </li></ul>12/06/11
  14. 14. Price Indices of Means of Agricultural Production (The price at 2010-Jan=100 ) 12/06/11
  15. 15. Average Cost of Staple Crops Production (Yuan/Mu by Current Price: rice, wheat, maize ) 12/06/11
  16. 16. Policy responses (continue) <ul><li>Increase import of soybean (around 40 mill ton) and cotton (about 25 mill tone) equivalent to yields from 6 million ha in China; </li></ul><ul><li>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 ) ; </li></ul><ul><li>Contracting major vegetable production between municipal governments and growers; </li></ul><ul><li>Exemption of tolls on food transportation; </li></ul>12/06/11
  17. 17. Policy responses (continue) <ul><li>Further promotion to agricultural and rural development and 30 policy measures have been undertaken in 2011, especially: </li></ul><ul><li>-investment in agricultural research, education and training, extension services, irrigation projects; </li></ul><ul><li>- raise minimum procurement price (rice and wheat) </li></ul><ul><li>- promote cooperatives and link farmers with super market </li></ul>12/06/11
  18. 18. Policy responses (end) <ul><li>Extending social protection system from urban to the rural: medical cooperative system, pension system, minimum living standard guarantee system; </li></ul><ul><li>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. </li></ul>12/06/11
  19. 19. Questions for further Research <ul><li>1. Impact of money supply on food price; </li></ul><ul><li>2. Effects of rising price on farmers’ income. </li></ul>12/06/11
  20. 20. <ul><li>Thank you ! </li></ul>12/06/11 谢谢!