A majority of the world’s calendar year is well underway. However, roughly one fourth of this world’s year is about to close and a new one is set to begin. Of course, I’m referring to China and the coming Spring Holiday, which will usher out the Year of the Ox and bring in the Year of the Tiger. Since this blog focuses on issues dealing with China’s agriculture sector, I thought it appropriate to write the first blog on the eve of the Spring Holiday.
Here are some items of interest I’ll be watching in the Year of the Tiger:
Without a doubt, the single most concern of the Chinese government is the growing income/standard of living gap between its urban and rural residents. Enter the new circular emphasizing China’s commitment to improving and boosting rural development jointly issued by the Central Committee of the Communist Party and the State Council.
Specifically, the document declared a need for maintaining grain production and helping farmers continue raising their incomes. At the same time, it called for additional subsidies to increase the output of grain, barley, potatoes and peanuts. It even mentioned additional subsidies for agricultural machinery.
Buried within the bowels of the circular were words about strengthening the financial services to the rural sector by offering micro-credit loans and insurance. Likewise, it mentioned additional banking services to the rural areas.
I particularly noticed the commitment and perhaps because it was so boldly stated for the government to continue purchasing and stockpiling key commodities, such as corn, soybeans and rapeseed.
How I translate the above is fairly simple and straightforward. The Chinese government plans to do whatever necessary to not only stabilize its vast rural populace but will do so entirely at the expense of anyone or anything that gets in its way.
For example, while the reserve policy worked remarkably well this year, its distortion created variances either by production imbalances or price run ups/downs, which we must agree will be commonplace as long as the reserve's policy is in place. But, truthfully, this should really come as no surprise especially if you read this blog. With the commodity price run up in 2008 and the subsequent inflation, China’s government made a decision to maintain a stable food policy at all costs. Since then, they have been remarkably consistent and true to this policy. I expect more of the same in the Year of the Tiger.
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