INTERNATIONAL AGRICULTURE AND TRADE (CHINA)--SUMMARY June 14, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of INTERNATIONAL AGRICULTURE is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- U.S. agricultural exports to China are expected to increase in 1995 because of rising cotton, corn, soybean oil, and other agricultural product sales. U.S. exports for 1994 totaled more than $1 billion, up sharply from $376 million in 1993. China's 1994 agricultural trade (imports and exports) rose 34 percent to $31.8 billion. In fall 1994 and early 1995, China's buyers entered edible oil, cotton, wheat, rice, and sugar markets to purchase commodities. In the same period, authorities banned corn and rice exports. These actions stimulated great interest in world commodity markets. China was a major corn supplier in east Asian markets from 1991 through 1994, but with the banning of corn exports in 1995, other suppliers are watching eagerly to see if China will re-enter those markets. China's economy grew 11.8 percent in 1994 compared with 13.4 percent a year earlier. Authorities aim to slow the real economic growth rate in 1995 to under 10 percent. But it may be difficult for officials to pull off a soft landing for the economy--a myriad of institutional, political, economic, and social factors must be carefully balanced. During 1994, the general price level rose by 24 percent. For 1995, authorities aim to keep the rate of inflation below 15 percent. Officials allowed the money supply to expand by more than 34 percent in 1994, and as long as policy makers continue to shell out cash to keep failing government-owned enterprises afloat, it will be difficult to avoid inflationary pressures. Total grain output is projected by China's leaders to rise from 445 million tons in 1994 to 455 in 1995 because of increased acreage and heavier input use. Local cadres likely will use administrative means and political pressure to force farmers to expand area sown to grain. Grain prices rose in 1994 and have remained high through mid-1995. The cost situation is less clear so it is difficult to project if the higher grain prices will induce farmers to increase area sown to grains. Rising personal incomes and population growth will fuel increased domestic demand for food and feed grains. Rice, wheat, and corn production are projected to rise because of increases in area and yield. Rice imports for calendar 1995 will likely exceed 1994's 900,000 tons, and will include both lower quality rice for poorer urban residents and higher quality Thai rice for higher income residents. Wheat imports are projected to rise to 12 million tons, up from a year earlier. Corn imports are projected to decrease from 3.5 million tons in 1994/95 to 1.5 million tons in 1995/96 as authorities carry out self-sufficiency policies for feed grains. Grain output for 1994 decreased to 445 million tons, down 2.5 percent from a year earlier. A smaller summer grain crop (mostly winter wheat) and a decrease in area sown to spring wheat, yielded a wheat crop of 99.3 million tons, the smallest crop since 1992. A mid-season drought and lower area saw paddy rice output decrease by 1 percent to 175.9 million tons. While corn outturn rose in Heilongjiang, Jilin, and Hebei, production fell in Shaanxi, Henan, and Liaoning provinces so that total output decreased to 99.3 million tons, down 3.3 percent from 1993. Total oilseed output for 1994 reached a record 42.4 million tons, up 9 percent from a year earlier. But demand for edible oil outstripped supplies and imports soared to 2.5 million tons in 1993/94 and imports are projected to rise to 3.6 million in 1994/95. Cotton imports rose 377 percent to an estimated 838,000 tons for August/July 1994/95. Domestic production for 1994/95 rose 16 percent to 4.33 million tons but regional shortages and government procurement problems pushed China to import large quantities of cotton. Planners call for expanded area sown to cotton and a bigger crop for 1995/96, but import demand likely will remain high (imports in the first 4 months of 1995 totalled 320,000 tons). Meat output rose 15 percent in 1994 to a record 43.5 million tons. Pork output rose 12 percent while poultry meat production increased 15.7 percent. Rising feed prices could encourage higher slaughter rates in 1995 with a subsequent slowdown in meat output. Over the long term, however, meat output is likely to continue to grow. The slight decrease in grain production and inflationary pressures in 1994 pushed Party leaders in 1995 to focus attention on the agricultural sector. Most market reform initiatives were put on hold in late 1994 and early 1995, and the administration resurrected some old programs such as grain rations for the urban poor. Instead of efficiency, profits, and lower costs, Party authorities are again stressing the importance of provincial self-sufficiency. Marketing reforms have been put on hold. Nonetheless, market forces remain strong, and in the coming years marketing reforms likely will surge forward again. Government investment in the agricultural sector in nominal terms has risen in the past decade, but as a percent of total government expenditures, agriculture is getting less funding than a decade ago. Farmers cannot expand cultivated area very much. Factors affecting yield increases will be the prime mechanisms boosting production. But agricultural researchers are getting less funding at a time when they should be getting more. The shortage of investment funds for research and extension will hurt long-term growth efforts. Printed copies of the China Situation and Outlook report will be available in about 2 weeks. For more information contact Frederick Crook (202) 219-0030. The text of the report will also be available electronically. For details, call (202) 720-9045. END-END-END