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China's Grain Stockpiling: A prelude to war?

China’s Grain Stockpiling: Preparation for War?

Published: January 2, 2022

China has always had a resource problem, and one vital resource which has long worried the Chinese Communist Party is food. So in any war, sufficient food supplies will be critical if China is to prevail. With this in mind, news of China’s recent behaviour is concerning.

China is a vast country with a huge population, but China is not a resource-rich country. The result of this is that China is heavily dependent on imports of a wide range of raw materials, including food. Whilst responsible leadership in any country would take precautions to lessen risks to the supply of necessary raw materials, the latest news on China seems to go far beyond prudence. In broad terms, as can be seen below, China has now stockpiled over half of world grain reserves, despite having only 20% of the world population.

China's Share of Global Grain Stocks

Furthermore, the pace of Chinese Imports has been rising fast and this is apparent in the chart below:

China's food and Beverage Import Growth

Again, it is important to recognise that it is prudent to have stockpiles of food, particularly for a country with a limited food supply, such as China. However, the scale of China’s stocks seem to exceed prudence and suggest that the Chinese Communist Party (CCP) has another motivation. Indeed, the last five-year plan included food reserves as a target for the first time. This might be explained away by the CCP’s obsession with internal stability, and a reliable food supply would be important for this goal. But again, why such large reserves?

Indeed, the size of China’s reserves may contribute to instability within China. In particular, the large purchases by China have served to raise the prices of grains and is pushing some countries into famine. Aside from the external effects, the increase in grain prices has also meant rising food prices within China.

It is not just grain that China has been stockpiling. Another critical resource is oil, and China has been rapidly increasing its oil stockpiles. In a 2020 article, Reuters describes China’s oil purchasing as a ‘binge’ due to the massive volumes involved. The oil was going into reserves and is clearly a strategic plan. China has been massively increasing its oil storage capacity. It is only at the start of this year that China has cut back on import quotas, but these are cutbacks from previous highs, and some think this is a move to put downward pressure on oil prices. In fact, China is stockpiling many resources, including iron ore, copper and even cotton.

At the very least, China’s stockpiling activities should raise some question marks. However, trying to parse the meaning of the machinations of the CCP’s behaviour has never been easy. Additionally, data from China is notoriously opaque, and new laws in China have further increased the Chinese economy’s opacity, including over questions such as strategic stockpiling. Nevertheless, China’s massive efforts towards building stockpiles does look suspicious. It is expensive to build the stockpiles and very expensive to maintain them. While stockpiles are a sensible precaution, the scale and cost of China’s stockpiles indeed point to a motive beyond prudence. And it is regrettable to say that the best explanation is preparation for some type of conflict, including war or, hopefully, the less alarming possibility of trade sanctions. Or perhaps both. Only time will tell.

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