INTERNATIONAL AGRICULTURE AND TRADE (CHINA)--SUMMARY June 19, 1996 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 (CHINA) is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- U.S. agricultural exports to China for FY 1995/96 are expected to reach $2.5 billion, about the same as in calendar 1995 because of continued shipments of wheat, corn, soybeans, cotton, and other agricultural products. U.S. exports for 1995 totaled $2.6 billion, up sharply from $1 billion in 1994. Important changes have been taking place in China's agricultural trade because it is beginning to export more processed and high-value products and import more land-intensive and semi-processed goods. China shifted from a net grain exporter in 1994 to a net grain importer in 1995. China's economy grew 10.2 percent in 1995 compared with 13.4 percent a year earlier. Authorities aim to slow the real economic growth rate in 1996 to less than 10 percent. Inflation during the year was limited to 14.8 percent compared with 21 percent in 1994. China's leaders project total grain output will rise from 466 million tons in 1995 because of increased acreage and heavier input use. Local cadres likely will use administrative means and political pressure to encourage farmers to expand area sown to grain. Grain prices rose in 1995 and the government raised its fixed quota price again in 1996. Rice, wheat, and corn production are projected to rise because of increases in area. Net grain imports for 1996 likely will be below the record 19.6 million tons imported in 1995 because of China's record crop in 1995 and because of expanding production and high world grain prices in 1996. Rice imports for calendar 1996 will likely exceed 1995's 750,000 tons, and will include both lower quality rice for poorer urban residents and higher quality Thai rice for higher income residents. Wheat imports for 1996/97 are projected to decrease to 10 million tons, down 2 million from a year earlier. Corn imports are projected to be the same as 1995/96 at 2 million tons. Total oilseed output for 1995 reached a record 43.4 million tons, up 2.4 percent from a year earlier. Demand for edible oil outstripped supplies and imports totaled 3 million tons in 1995/96, down from 4.2 million tons a year earlier. Cotton imports fell 31 percent in 1995 to an estimated 610,000 tons for August/July 1995/96. Domestic production for 1995/96 rose 9.8 percent to 4.77 million tons. Planners believe area sown to cotton for 1996 will be lower than in 1995. Meat output rose 15 percent in 1995 to a record 42.5 million tons even though grain production in the previous year fell by 2.5 percent. Year-end hog numbers for 1995 rose 6.5 percent to 441 million. Pork, poultry, eggs, and milk output expanded in 1995. Domestic sugar supply is expected to exceed demand in 1995/96, prompting a significant decline in sugar imports but little change in exports from the previous year. The long-term trend in China is for growing imports of raw sugar to meet income-driven increases in consumption. China's leaders have begun to debate the benefits and costs of their long-held "grain self-sufficiency" strategy. In 1995, central leaders promoted the "grain bag" and "market basket" policies to boost urban food supplies. The year 1996 begins the first year in the ninth 5-year plan (1996-2000). Preliminary texts of the plan indicate that authorities intend to increase investments in the agricultural sector, food processing, and transportation. Chemical fertilizer, pesticide, and plastic sheeting supplies increased in 1995. Government investment in the agricultural sector hit a low point in 1993 but rose in 1994 and 1995. China's Ministry of Agriculture published its first outlook and situation report in 1995. This was a first step toward providing producers and consumers with basic information about China's rural economy. During the eighth 5-year plan (1991-95), China added 112,000 kilometers of highway and constructed more than 100 deep water berths. Still, transportation remains a bottleneck for development, and authorities plan to expand road, rail, and port capacity to the year 2000. Contemporary grain storage programs rest on 2,000 years of tradition. China's grain stocks are very large but are not likely to affect international grain trade in the short run as long as stock policies remain stable. Changes in stock policies probably affected wheat imports and corn exports during 1991-1993. Growth of on-farm stocks slowed in 1994 because of the decrease in overall grain production. Farmers hold large on-farm stocks because of fear of crop failures, a hedge against inflation, and as insuranc against illness, disability, and market disruptions. An increasing portion of China's vegetables are sold through open market channels, while government procurement channels play a limited role in vegetable marketing. In 1995, China's vegetable exports reached a record US$2.4 billion, making it one of the largest vegetable exporting countries in the world. U. S. vegetable exports to China increased from US$3 million in 1994 to US$5 million in 1995. China's vegetable exports to the United States increased from US$107 million in 1994 to US$ 136 million in 1995. In 1997, China regains sovereignty over Hong Kong, and the territory is bracing itself for the changes to come. Compared with the political sphere, changes within Hong Kong's agricultural sector and agriculture trade will not be far reaching. Rather, under the stipulations of the Basic Law, which will govern Hong Kong after 1997, the Territory will maintain its commercial autonomy, and trade flows should be largely undisturbed. END-END-END