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Food reserves also have regulatory functions
The discussion on food reserves has been ongoing since 1995, when a drop in grain production led to a sharp increase in prices, disrupting the national economy. Premier Zhu Rongji then introduced a low-protection policy for grain, aiming to open up surplus from farmers. Despite the central government allocating over 100 billion yuan, many state-owned grain enterprises received subsidies without actually acquiring the surplus from farmers.
In 1998, grain production rebounded to 490 million tons, but no one was able to purchase it. This caused a decline in farmers' enthusiasm, leading to reduced production for years. By 2003, China's grain output had dropped to 430 million tons, creating a significant food gap. In 2004, food prices began to rise sharply again.
After Premier Wen Jiabao took office, reforms were initiated, including restructuring state-owned grain enterprises and separating national and local grain depots. A new grain reserve system was implemented in 2004, with a centralized and decentralized approach. At last year’s “two sessions,†Yuan Longping raised concerns about empty grain depots. It was later found that these were not national depots but local ones, which do not handle national reserves. This is a result of reform: national depots are centrally funded, while some local ones operate as enterprises. When market demand is low or companies don’t rent the depots, they may remain empty—this is normal and doesn't indicate a lack of national stockpiles.
The government also set low purchase prices in major producing areas, allowing it to acquire most of the grain from farmers. As a result, the main grain supply is now under state control, and this reform has proven largely successful.
During emergencies like famine or war, the government must ensure that national grain reserves can be "adjusted and used." Historically, there have been cases where local reserves were not utilized during crises. Now, strategic reserves are stored in national depots, and the prime minister has direct authority to transfer them, ensuring flexibility. To guarantee usability, food stocks must not only be accounted for but also maintained in good quality. They serve both emergency and regulatory functions. To protect farmers’ interests, the government must regulate prices, using national reserves as a key tool.
Therefore, more food isn't always better. Excess stock can lead to price drops and waste. The best indicator of grain inventories is market price and trading behavior—objective and observable variables. Grain stock levels should be kept at a reasonable level, avoiding overstocking, which ties up resources and distorts market signals. Some scholars blame price fluctuations on poor regulation, and this is not entirely unreasonable. China needs more confidence and boldness in its regulatory approach. For example, during last year’s global food shortage, domestic supplies were sufficient, but exports were not pursued, missing a valuable opportunity.
This year, we cannot call for increased grain production; instead, the focus should be on stabilizing it. Global grain production has risen significantly, and prices are low. The Chinese government’s intervention in the market has kept domestic prices higher than international levels, putting pressure on the government. Some regions prefer to import grain, leading to high stocks in production areas like the northeast. Resolving this requires a coordinated national strategy and effective regulation.
Although food security is now a national responsibility, local governments in some sales areas have not been motivated to store grain. For instance, in Beijing, inventory levels are often just enough for two weeks, sometimes even less, falling short of the national requirement of three to six months.
China has seen five consecutive years of increased grain production, but the main sales areas need to boost their grain reserves. Otherwise, surplus in production areas could cause farmers to sell grain at low prices, affecting their motivation. In some parts of Northeast China, farmers struggle to sell their grain, sometimes waiting a week, which undermines their willingness to grow more.
Farmers play a crucial role in China’s food consumption and storage, with high self-sufficiency rates in rural areas. However, in some regions, the technical level of grain storage is low, and facilities are basic, leading to significant losses. The government has long recognized this issue and is working to provide better technology and subsidies to improve storage conditions. Encouraging scientific grain storage among farmers is vital for enhancing China’s food security.
Warehouse inspections are a regular task, but this year’s efforts have been particularly intense. The context is unique: the global economic crisis continues to spread, and its impact remains uncertain. Under such circumstances, the central government believes the situation could worsen. Ensuring sufficient national food supply is key to maintaining stability. Not only must short-term reserves be secure, but long-term farmer incentives must also be protected.
Additionally, as a member of the FAO, China has not publicly disclosed its grain stock data, unlike other countries. While part of the reason is the difficulty in obtaining precise figures due to the scale of inspections, transparency is essential in the long run. Only through thorough warehouse inspections can accurate data be ensured, and public disclosure of stock levels will enhance trust and stability.