In today's Finshots we look at why China is importing rice from India for the first time in decades.


The Story

The Chinese love their rice. It’s a staple food item for two-thirds of the people living in China. However, it seems the country is running out of this basic commodity. In fact, they are desperately looking to plug a shortfall and they’re looking at India to meet this demand. At first glance, you might be tempted to think there isn’t anything out of the ordinary here. After all, China is the biggest importer of rice and India by far the largest exporter. Surely their paths are bound to cross.

But in reality, it’s not that simple. China avoids buying rice from India because they don’t like the “quality” of rice we produce. Instead, China prefers sourcing it from countries like Thailand, Myanmar, Vietnam and even Pakistan. However, as the pandemic unfolded, these countries were struggling to resuscitate their supply chains and China was forced to look at alternative producers.

Enter India — We had a bumper rice harvest this year and we were offering sharp discounts — as much as $100 per tonne, compared to other exporters from Thailand and Vietnam. And if reports are to be believed China is contracted to import 100,000 tonnes of Indian broken rice —a particular variant mainly used to produce noodles and Chinese wine.

But it still begs the question — How did China run out of rice exactly?

First, there was a flood. The Yangtze River basin, home to 70% of China’s rice farms, witnessed the worst floods since 1939. It damaged millions of acres of agricultural land destroying a lot of produce. Then, there were the locust attacks — Swarms of critters laying waste to everything on their path — crops, stems, leaves, pulses grains, you name it. Soon after, there was the African Swine flu — a disease that started killing pigs en masse which eventually led to a shortage of pork. Now pork has nothing to do with rice. But it’s still part of the staple diet in China. So when pork prices started spiking alongside other food grains, doubts about an impending food crisis started looming large. The Chinese government intervened almost immediately releasing millions of tonnes of rice, soybean and corn from its national reserves. And while it assuaged prices for a while, reserves started running thin simultaneously.

The domestic food supply simply couldn’t replenish the buffers quickly enough and China was forced to look at importers elsewhere. But then there is another more fundamental problem here. The country’s agrarian economy has had to play second fiddle to massive Chinese industries over the past few decades as urbanization paved the way for the country’s growth. Since 1949, China has lost one-fifth of its agricultural farms and it now faces the daunting task of feeding 22% of the world population with only 7% of the global arable land. And now they’re buying and leasing fertile lands and fields in various African, South American and ASEAN nations in a bid to fix the deficit. This decade alone, the Chinese invested around $94 billion in farming lands abroad. But clearly, it’s still not enough.

In the meantime, the Chinese state kept denying anything was amiss. And while they had to face the inevitable prospect of admitting there was a mini food crisis unfolding with the country, the state machinery pinned the blame on chronic food wastage. And truth be told, they weren't entirely wrong. According to estimates, China generates 17–18 million tonnes of food waste each year. And with rising disposable income they can actually afford to eat more and perhaps even waste more.

So in a coordinated effort, the Chinese state reintroduced the “clean plate” campaign and President Xi personally called on the Chinese people to stop wasting food. He asked them to — “cultivate thrifty habits, and foster a social environment where waste is shameful and thriftiness is applaudable”.

What followed eventually were a slew of PR campaigns sponsored by the Chinese state. It was designed to imbibe a sense of patriotism and unite the Chinese people in a time of adversity. Hotels adhered to strict portion control and trimmed down their buffets. Restaurants started rewarding people to finish their meals and some even fined those who left food on their plates. In some cases, servers were instructed to ‘nag’ diners not to waste. But you can only pacify people for so long because after everything’s said and done, food is still a very sensitive subject in China. 45 million people starved to death in the 1950s and 60s as the country witness multiple famines. So the Chinese state cannot afford to gamble here and therefore they are turning to India.

Until next time…

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