Practical Experience and Development Orientation of China’s

National Food Security: Investment Opportunities for Food Security

Partnerships

Investment Forum for Food Security in Asia and the Pacific, 7-9 July 2010
ADB Headquarters, Manila, Philippines

Distinguished Guests and colleagues:

It's a great pleasure for me to join you all at Manila, the beautiful capital of
Philippines, to exchange views on experiences of securing national food security,
the needs for investment and cooperation in the future, strengthening policy
coordination, and promoting cooperation between governments, international
development agencies, and private sector, on food security related issues in the
Asia-Pacific region. First of all, I’d like to, on behalf of the Ministry of Agriculture of
the People’s Republic of China, express our heartfelt gratitude to ADB, FAO,
IFAD and the Government of the Philippines for your thoughtful arrangements for
this forum.

Due to constrained resources, climate change, yield stagnation, population

growth and other factors, the world's food supply could not meet the general
demand, and regional imbalance becomes very common in terms of food supply.
Developing countries may face more pressing food security problems. As life
necessity and industrial raw material, food is an important commodity for both
national wellbeing and people's livelihood, and bears great strategic significance.
Ensuring food security is not only the focus for governments all over the world. It
is also a major development strategy adopted by China to promote economic
development, maintain social stability and achieve national self-sufficiency. At the
request of the forum, I will share with you China’s practical experience and
development orientation of securing national food security from four major
aspects:
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I. Current Status of China's Food Security

As the world's major grain producer and consumer, China feeds 22% of the
world’s population with only 9% arable land of the world. Its food self-sufficiency
rate has been kept above 95% of the country’s grains requirements for a long
time. Since 2000, the Chinese government has been attaching great importance
to agriculture and food production, has been issuing series of policy in favor of
farmers, and strengthening macroeconomic regulation to promote steady
development of food production. As a result of these coordinated actions, the
country realizes effective insurance of national food security.

Firstly, the grain production witnesses stable development. Since 2003,

China's grain output has enjoyed growth for 6 consecutive years, and maintained
above 500 billion kg for 3 consecutive years. In 2009, the grain sown area
reached 1.635 billion mu, with a total grain output of 530.8 billion kg and per unit
area yield of 324.7 kg/mu.

Secondly, food consumption witnesses continuous growth. The food

consumption demand in 2009 was 521 billion kg, 20 billion kg more than that of
2005, and increasing by about 5 billion kg per year. Rice consumption enjoyed
steady increase, at 0.4%; corn consumption enjoyed rapid growth, at 10%; and
soybean consumption enjoyed sharp growth, at 20%.

Thirdly, people's diet structure has improved. Chinese citizens’ per capita
share of agricultural products has improved significantly. In 2008, the per capita
share of grain was 399 kg, oil 22.3 kg, pork, beef, and mutton 40.3 kg, aquatic
food 37 kg, and milk 26.8 kg. As the diet structure becomes increasingly diverse
and the quality gets improvement, the capacity of ensuring balanced supply also
witnesses great enhancement, and the nutrition condition has been significantly
improved.

Overall, China has always adhered to the principle of domestic food

self-sufficiency, and under the policy supporting system, makes great efforts to
increase food production to meet food consumption growth and structural
adjustment of diet, so as to ensure national food security.

II. Government Support for Securing National Food Security

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In order to ensure food security through support for food production, China has
taken series of measures that are conducive for food development. These
included a range of policy and investment measures that boost productivity and
production such as research and development for improved technology, and
provision of support infrastructure, market facilities, equipment and extension
services.

The main lessons we’ve learned include the following aspects: Firstly, treat
farmland protection as a long-term basic national fundamental policy. 1.8
billion mu cultivated land is not only the bottom line for ensuring China's grain
self-sufficiency, but it is also the basic resource for food security. To this end,
China has established the basic farmland protection system and implemented the
most stringent farmland protection system, so as to ensure the quality of land
resources is sustained from the system perspective. At the same time, the quality
of cultivated land is improved as farmers and rural collectives are encouraged to
increase land enhancing inputs. Through these combined measures, soil fertility
is enhanced, and agricultural productivity has been improved.

Secondly, policy support for self-sufficiency has been intensified. Since

2004, China has abolished all the agricultural taxes and increased "Four
Subsidies" (Grain Direct Subsidy, Varieties Subsidy, Farm Machinery Purchase
Subsidy, General Subsidies for Agricultural Production Supplies) funds year by
year. Subsidy support was increased to nearly 140 billion yuan in 2010 from 14.5
billion yuan in 2004, and the national average subsidies for per mu grain field
increased to more than 70 yuan from less than 10 yuan. Meanwhile, under the
minimum grain purchase price system, the purchase price has witnessed
continuous increase. Since 2005, the minimum purchase price of various major
grains has increased by 25% - 40%, and interim storage measures have been
taken for corn, soybean so as to stabilize their prices.

Thirdly, strengthen infrastructure construction. In 2008, central government

spent more than 120 billion yuan in strengthening rural infrastructure construction.
This included 2.4 billion yuan for High Quality Food Industry Project and Large
Merchandise Grain Base Construction Project. Under the High Quality Food
Industry Project launched in 2004, great importance has been attached to
development of high-quality and special seeds breeding, grain pest prevention,
standard grain field construction and modern farm machinery & equipments. By
the end of 2008, 6.35 billion yuan has been invested, 1,502 construction projects

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finished, and more than 1,600 mu standard grain field cultivated. Under the Large
Merchandise Grain Base Construction Project, by the end of 2008, Central
government has invested 4.3 billion yuan and constructed more than 70 large
merchandise grain bases in 12 provinces, such as Hebei, Inner Mogolia, Liaoning,
Heilongjiang, Jilin, .etc.

Fourthly, strengthen scientific and technological support capability. In 2009,

China’s Super Rice area reached more than 8,500 mu, with the average yield per
mu increasing by more than 5%. High yielding and density tolerant corn varieties
were planted on more than 100 million mu land, accounting for 25% of the total
corn land. Expert recommended wheat varieties were planted on 110 million mu
land, accounting for 33.3% of the total wheat land. Great efforts have been taken
to promote drought breeding and rarefaction plant, seedlings tossing, super
high-yielding cultivation of rice, precise and semi-precise wheat sowing, later
application of nitrogen fertilizer, density increasing of corn, plastic membrane
mulching, sub-soiling tillage, sowing with water in big-ridge and double-row mode,
as well as a number of high yielding cultivation techniques so as to increase grain
production.

Fifthly, speed up agricultural mechanization. In 2008, the national gross

agricultural machinery power reached 820 million kilowatts, and the
comprehensive mechanization level of main crops, such as mechanical ploughing,
sowing and harvesting has reached 45.9%, of which the gross agricultural
machinery power of farming cultivation system was 18 million kilowatts. The total
agricultural machinery and equipment has maintained continuous growth.
Additionally, the agricultural machinery socialization service has also witnessed
further development, and has become an important material support for national
food security.

Sixthly, improve storage and logistics system. Cross-regional grain logistics

channels should be transformed. National important food logistics nodes and
food logistics base should be constructed, and large-scale cross-regional grain
logistics enterprises fostered. The grain and oil reserve & control system
integrating central strategic & special reserves with reserves for circulation
adjusting central reserves with local reserves, the government reserves with
minimum inventory of enterprises and businesses are being continually improved,
so as to strengthen the country's grains reserve management capacity.

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III. Challenges Confronting the Food Security of China

The accelerating pace of industrialization and urbanization coupled with greater

access to information technology in China are presenting more factors that may
endanger food security, as the food security situation becomes more complicated,
which in turn puts a heavy responsibility to ascertaining that food security is
guaranteed. The food security situation concerns “three irreversible situations”
and “two increasing trends”. Those have implications on ensuring sustainable
food security. Firstly, with the rise in income, increasing demand for diverse
food choices and improved food quality is irreversible. It is predicted that the
food demand in China will amount to 525 billion kg and 572.5 billion kg in 2010
and 202, respectively. In terms of usage, the demand for ration and seed is
relatively stable while the demand for feed and industrial use shows an
irreversible upward trend, In terms of food crops, the demand for paddy and
wheat hardly increases while the demand for corn and soybean grows rapidly.

Secondly, the tightening constraints on resources such as farmland are

irreversible. Statistics from the Ministry of Land and Resources show that there
are 1.826 billion mu of farmland in China in 2008, which is 120 million mu less
than that in 1996, and with annual reduction of 12 million on average. At present,
the farmland per capita in China is 1.38 mu, only 40% of the world average. The
water resource per capita is 2,200 m3, which is a quarter of the world average.
China is one of the top 13 countries that are extremely short of water, with a
projected 30 billion m3 of water demand-supply gap in agricultural production
each year.

Thirdly, global warming trend is irreversible. In the past century, the global

average surface air temperature (SAT) rised by 0.74 ℃, while the average SAT in

China rised by 1.1 ℃. Global warming brings adverse effects on agricultural

production, resulting in more frequent extreme weather and irregular pest

occurrence, and greatly sabotaging the farming system. In addition, global
warming will aggravate soil fertility degradation, and increase the use of pesticide
and fertilizer.

Fourthly, the impact of economic globalization on agriculture is increasing.

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Economic globalization enhances the links between agriculture and international

market, and strengthens the connections among different industries. These
induce more price transmission channels to the domestic economy, thus
subsequently generating greater impact. More specifically, the impact of imported
international farm products such as soybean and grain/oil production increases;
the entry of foreign investment into agriculture and its penetration into the areas,
such as staple crop processing, storage, and transportation, have generated
more and more concerns; and some inputs are highly dependent on foreign
sources.

Fifthly, the expanding economic uses of grains add pressure on food

security is increasing. With the fossil fuels drying up, grain-based ethanol
becomes the new trend. Bio-fuel yield tripled from 2000 to 2008. Between 2007
and 2008, 10% of coarse grain in the world, about 110 billion kg, is used to
produce ethanol. The rapid growth in bio-fuels boosts the demand for coarse
grain as well as other raw materials for bio-fuels, resulting in the shrink of
resources for grain production and becoming a menace to grain supply.

IV. Road Ahead: Aims and Guarantees for the Food Security of China

With the increasingly complex food security situations at both domestic and
international front, the long-term priority of agriculture development in China will
be toward “improving the comprehensive capacity of agricultural production,
guaranteeing the effective supply of major agricultural products and ensuring the
national food security”. According to the Long-Term Planning Overview for
National Food security (2008-2020), the specific goals for food security of China
are as follows: (1) maintain a minimum 1.8 billion mu of farmland and at least 1.26
billion mu of grain farms nationwide by 2015; (2) maintain a minimum grain
self-sufficiency rate of 95%, and enable the comprehensive grain production
capacity of beyond 530 billion kg by 2015; (3) maintain reasonable amount of
grain reserve; and (4) ensure at least 40% of the grain logistics to adopt the “4 in-
bulk” process including grain loaded, unloaded, stored and transported in bulk
manner. To realize the above goals, China will further upgrade the irrigation
systems and improve medium/low-yielding fields; promote improved varieties and
high-yielding cultivation techniques; modify the farming systems to develop and
make full use of limited resources; promote advanced and applicable agricultural

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machineries and the supporting technologies to expedite the mechanization

process of grain production; and pay attention to the pest prevention and control
to minimize the loss.

On the institutional and policy levels, the government will implement the following
measures. Firstly, implement the most rigorous farmland protection system.
The bottom line of 1.8 billion mu of farmland shall be firmly held and efforts will be
made to continuously improve the soil fertility; protection and compensation
mechanism shall be established to ensure that the basic farmlands will not be
reduced, their uses will not be changed and their quality will be improved.
Secondly, strengthen the construction of agriculture infrastructure. The
National Plan of Additional 50 Billion kg Grain Project will be accelerated. The
input on grain production will increase substantially, through enhanced
investments in the Seed Project and the Plan Protection Project. Current projects
such as the Comprehensive Agriculture Development Project and the Land
Consolidation Project will favor the major grain producing areas, with improved
construction standards. Thirdly, improve the system of subsidy and reward
for food production. The comprehensive agricultural direct subsidy and price
dynamic adjustment mechanism will be improved. The coverage of “subsidy for
improved varieties” will be increased and standards will be improved; the subsidy
for purchasing agricultural machinery will be further scaled up; more subsidies
and fiscal reward will be given to large grain-producing farmers and counties,
respectively. The unified professional service in purchasing, supplying,
distributing and spraying pesticides will be actively explored. Fourthly, improve
the adjustment mechanism of the food market. The minimum purchase price
for grain will be steadily increased; a subsidy system for target food price will be
explored and built to combines the price support policy with the income subsidy
policy. Further, the monitoring on grain production, consumption, import/export
and storage/transportation will be enhanced by establishing an early-warning and
monitoring system. The supervision on foreign investment in grain circulation and
processing will be strengthened. Fifthly, increase the input on agricultural
technology. The focus will be put on addressing the technical problems that
potentially reduce grain production, such as breeding and pest control. More
efforts will be made to enhance the innovation capability of agricultural research
bases and regional research centers. Institutional innovation and capacity
building in the promotion of agricultural technology will also be accelerated. And
the subsidy fund for high-yielding grain/oil will be scaled up to promote

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concentrated roll-out of technologies and increase the technology adoption rate.

V. Conclusion – Moving Forward

China's development is closely tied up with the global development. The food
security of China is also increasingly relevant to the food security of Asia-Pacific
region and even that of the world. China’s achievement in a sustaining its food
security situation may be attributed to the long-term support from international
financial institutions such as ADB, FAO and IFAD as well as our own efforts.

Based on different multilateral and bilateral cooperation frameworks, such as the

China-ASEAN, GMS, APEC .etc, by using the Special Fund for Asian Regional
Cooperation, China-ASEAN Cooperation Fund, Special Fund for International
Communication and Cooperation in Agriculture, China has successfully
implemented several food security related technical assistance support, including
Cross Rice Planting, Livestock Breeding, Economic Grain Extension and New
Rural Energy Exploration. In the last decade, Ministry of Agriculture has provided
more than 100 million yuan and implemented more than 150 projects with ASEAN
countries for human resources development, technology demonstration and
extension, academic and technology communication, and economic and trade
promotion. Two successful cases are worth highlighting: The first is the bilateral
cooperation between China and the Philippines. Their respective Agriculture
Technology Centers collaborated in Cross-Rice breeding and small agricultural
machinery extension. The second case is the investments of the Longping High
Technology Company in the Philippines, which is a showcase for a successful
experience from the enterprise overseas development perspective.

To foster stronger regional food security, the envisaged partnership with

development agencies like ADB, FAO, and IFAD as well as other stakeholders
will be needed. We suggest some areas for starting this partnership for regional
food security. Firstly, Special studies financed by ADB or other development
agencies would be needed and encouraged. Secondly, under the current
multilateral cooperation framework, actions on regional cooperation would be
promoted, such as the ‘Integrated ASEAN Food Security Framework’. Thirdly,
bilateral cooperation in Asia-Pacific region is the foundation for China’s
development in food security; hence, the south-south cooperation is necessary
for China and its Asian neighbors to work together to improve the system of

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production. Fourthly, several of ways could be encouraged to support the food

security investment, such as the Loan Project, TA, Demonstration, and Enterprise
Oversea Development, .etc. Finally, with the cooperation and support from
different stakeholders, there are some priorities should be concerned, such as the
exchange of technology and science in Asia-Pacific region, land investments,
animal and plant disease prevention and control, agricultural disaster prevention
and reduction, capacity building in food security management, clean energy
development and agricultural wastes efficient utilization, agricultural machinery
development and extension, sustainable natural resources management, and
grains stocking reserve management.

By following the open strategy of mutual benefits and win-win outcomes, China is
ready to partner with governments in the Asia-Pacific region, international
development agencies and private sector, to achieve the goal of regional food
security development. China will cooperate actively, share experiences and
develop in scientific ways, facilitate the construction of the Country Partnership
Framework for Food Security in Asia-Pacific region, promote food production and
guarantee sustainable food security.

We wish the Forum a complete success!

Thank you!