SinoInsight 1
On April 2, Wang Bin, head of the consumption promotion division at the PRC’s Ministry of Commerce, said that China has sufficient grain supplies to meet domestic demand and will not see shortages even without imports. Other publicly available information, however, hints at food supply issues.
Recently, pages of the March 28 edition of the Linxia Information Bulletin Board, a secret-level local government internal reference report (neican, 內參), made the rounds on Chinese social media. According to the report, the Linxia Prefecture Party Committee held a “food security work” meeting on March 17, and it was decided at the meeting that county and city Party and government officials should conduct investigations to find out how much food the people had in storage. Party and government officials should also provide food storage facilities, guide the people in storing food, and ensure that each household has stored between three to six months worth of food. The meeting also decided that the government financial department and trade unions at all levels should make advanced welfare payments so that the various work units can purchase food to distribute to their employees and guarantee that cadres, workers, and their families have upwards of three months of living supplies in storage.
Videos circulating on the Chinese internet show people rushing to snap up rice in various parts of China, including Hubei’s Huanggang, Yichang, and Ezhou, as well as Chongqing City, Shandong Province, and Gansu Province.
Recently, local governments have been issuing notices that make it a mandatory requirement for farmers to grow rice instead of cash crops (including corn and vegetables).
OUR TAKE
1. We have written about China’s food crisis on a number of occasions and accurately predicted in the past two years that food prices in China would skyrocket. The above information confirms our previous analysis.
The coronavirus outbreak has hurt China’s economy, created material shortages, and will almost certainly exacerbate China’s food crisis. The PRC will find it harder to import food because many countries have begun restricting food exports as they deal with their respective local epidemic situation:
- Kazakhstan recently announced that it is restricting the export of 11 agricultural products as of March 22.
- Starting March 24, Vietnam suspended the export of various varieties of rice. Vietnam also plans to purchase 190,000 tons of rice and 80,000 tons of paddy to cope with its epidemic situation.
- Serbia stopped exporting foodstuff goods like sunflower oil and will review its export ban list on a weekly basis.
- Thailand, Russia, Turkey, Malaysia, and several other countries have issued regulations on restricting food exports.
2. According to official PRC data, the Chinese people consume about 430 kilograms of food per person each year, or over 600 million tons of food per year. Meanwhile, China’s total grain output in 2019 was 664 million tons and the PRC imported about 110 million tons of grain from elsewhere. Also, nongovernmental estimates place the amount of smuggled food into China at about 100 million tons. While the PRC seems to have more than enough food to feed the Chinese people on paper, the problem of data manipulation and corruption in the regime means that it is more likely that there is a severe shortage of food in China rather than a “sufficient” quantity of food as the CCP claims.
The CCP government uses state subsidies and guaranteed government food purchases to ensure a certain level of domestic food production. Otherwise, there would be less food produced domestically since food imports are relatively cheap. Many local officials, however, have taken advantage of food price discrepancies to profit from corrupt behavior. For instance, some officials pass off imported grain as reserve grain purchased by the state to profit off price discrepancies (after being held in storage for two or three years, reserve grain drops in quality and is then usually sold at a low price to feed mills or wineries). Other officials keep grain records purely for show with no physical grain in storage to back up the official numbers. Still other areas rent out their empty granaries. When central government inspectors come check, fires mysteriously break out at those granaries (see here and here).
China’s food shortages were compounded by the Sino-U.S. trade war. For instance, when the trade war first broke out in 2018, the PRC cut down some of its food imports from America as part of retaliatory measures. Concurrently, various foreign exchange controls, a near 10 percent devaluation in the renminbi, and other factors led to rising food import prices. Rising food prices led to fewer imports, a phenomenon that could be observed indirectly through the 31 percent drop in the purchase of summer grain from China’s major wheat producing areas (Henan and Anhui saw nearly 50 percent reduction in wheat purchases) and nearly 14 percent decrease in the purchase of paddy. The reduction in paddy and wheat purchases does not necessarily mean that China produced less grain, but rather, indicated that local governments were buying less imported food to make up their grain reserves. Based on our estimate, the CCP’s official grain numbers could be inflated by as much as 30 percent.
3. China’s food shortages could worsen as local governments sell farmland to dig themselves out of financial trouble. In the March 16 edition of this newsletter, we noted that the PRC State Council’s March 12 decision on the authorization and entrusting of land use rights “will exacerbate China’s food shortage issue and could lead to another humanitarian crisis on top of the coronavirus epidemic.”
4. Before the outbreak of the “CCP virus,” China’s food crisis was still a price issue of how much more the Chinese people could be expected to pay for food items. With a pandemic, however, China’s food crisis becomes more a question of food availability rather than a price issue.
The international community must be alert to the emergence of a humanitarian crisis in China due to food shortages either in the second half of 2020 or in the next year.
SinoInsight 2
The PRC government continues to push the notion that it has the coronavirus under control. Xi Jinping’s recent trip to Zhejiang is part of that propaganda push. Recent signs, however, indicate that things are not quite what the PRC claims to be.
On March 25, the local government in Sichuan allowed movie theaters, bars, KTVs, internet cafes, and other entertainment venues to resume operations.
On March 26, PRC premier Li Keqiang said during a meeting of the leading small group for coronavirus epidemic prevention and control work that “great importance must be attached to the prevention and treatment of asymptomatic patients.”
On the evening of March 27, the PRC Film Administration issued an urgent notice requesting that all movie theaters close temporarily. Theaters that had recently reopened have to immediately suspend operations.
On March 29, mainland media outlets reported that the Oriental Pearl Tower, Jin Mao Tower, and Shanghai Tower—three famous sightseeing attractions in Shanghai—had been closed to the public. According to the reports, the business work unit at those buildings had received a notice from higher-ups stating that the buildings had to be closed “to further strengthen novel coronavirus epidemic prevention and control work requirements and ensure the health and safety of tourists.”
On March 30, Party mouthpiece People’s Daily published an article titled, “How Science Responds to Asymptomatic Patients is a Must-answer Question.” The article states that asymptomatic coronavirus cases should not go unreported for the sake of showing that there are zero new confirmed cases. The article also warns against allowing asymptomatic infections to become a “loophole” or even a “blackhole” in epidemic prevention and control.
On March 31, the PRC National Health Commission reported that China currently has 1,541 asymptomatic patients under observation. The Commission also said that it has decided to report asymptomatic infections daily starting from April 1.
OUR TAKE
1. According to a March 22 South China Morning Post report, classified PRC government data showed that over 43,000 people in China who had tested positive for the coronavirus by the end of February were asymptomatic cases. While these people were placed in quarantine and monitored, they were not included in the official number of confirmed cases, which tallied at around 80,000 at the time. Put another way, China should officially have had about 123,000 confirmed cases of COVID-19 at the time with an asymptomatic rate of 35 percent.
2. To jumpstart the economy, the CCP continues to encourage people to return to work and get businesses to reopen while covering up the true epidemic situation. Not all things, however, can be concealed using propaganda. The CCP’s own epidemic prevention and control measures (closing popular tourist sites in Shanghai, reporting on asymptomatic cases, etc.) suggest that it is still struggling to contain the spread of the coronavirus. The next epidemic wave in China could be very dire.
3. During a press conference on March 28, PRC commerce ministry consumption promotion division head Wang Bin said that 60 million Chinese small businesses are facing operational difficulties due to weak market sentiment, concerns about the coronavirus in the populace, and less than ideal business reopening rates. Wang added that there are 80 million operating entities and over 200 million employees involved in China’s so-called “circulation industry” (wholesale, retail, catering, lodging, residential services, logistics, tourism, culture, etc.)
On March 30, Dong Mingzhu, chairman and president of Gree Electric Appliances Inc., said on a financial show on state broadcaster CCTV that his company’s sales figures for February “is nearly zero” with losses of about 20 billion yuan. Gree Electric is a major appliance manufacturer in China and claims to be the world’s largest residential air-conditioner. The company’s abysmal February performance bodes ill for other Chinese companies, particularly the smaller ones.
It is clear that the Chinese economy has been badly impacted by the epidemic. In fact, the CCP feels threatened enough to risk sending people back to work even before it has the coronavirus under control. Subsequent outbreaks and their impact on the Chinese economy will inevitably exacerbate the factional struggle in the CCP elite.
