- From 2000 to 2013, China’s paddy rice production increased from 188 million metric tons (MTs) to 204 million MTs while yields increased from 6.2 MTs per hectare (ha) to 6.6 MTs per ha
- In 2013, China had approved 96 varieties of super hybrid rice strains, with cultivation reportedly occurring on 4 million ha or roughly 24% of China’s rice paddy fields.
- In 2013, China imported 2.5 million MTs of rice (primarily from Vietnam, Thailand, and Pakistan), with 80% of imports entering via the ports of Shenzhen, Huangpu, and Hong Kong.
In October 1996, China’s State Council published a white paper setting a policy of 95% grain self-sufficiency for the country. As the world’s largest consumer of rice, there was reason for concern over the nation’s ability to adequately supply its own grain stocks. From 1993 to 1995, China saw its self-sufficiency in rice drop below 100%, even tumbling to 95% in 1994. This was a significant drop considering China had a 107% self-sufficiency rate in 1990 – more than enough to feed its own people and export the remainder to international buyers. China was at a crossroads at how best to keep its rice output at a healthy and sustainable level. China wanted to ensure its rice industry contributed to the country’s grain self-sufficiency goal.
One answer was to boost the overall productivity of their rice crop. At the same time as the white paper’s publication, China’s Ministry of Agriculture instituted a new “super hybrid” rice breeding program to boost its hybrid rice yields. Hybrid rice, or rice that has been crossbred to combine the superior traits from separate parents, was pioneered by China in the 1970s. Hybrid rice helped to sustain the country’s explosive population growth during that decade (833 million in 1970 to 1 billion in 1980). The program was to be carried out in three phases in experimental fields across China. The stated purpose was to improve upon 1996 hybrid rice yields that stood at 8.5 metric tons per hectare by 25% in 2000, 45% by 2005, and 60% by 2015. Yuan Longping, an agricultural scientist who developed China’s first hybrid rice varieties and his team of researchers were enlisted to ensure the program’s success.
By 2000 the super rice hybrid program was progressing well and achieved its phase one goal of a yield of 10.5 MTs per ha (a 25% increase from 8.25 MTs per ha in 1996) for a single season’s worth of rice. Impressive as these yield increases were, national rice yields on the typical Chinese farm averaged 6.2 MTs per ha in 2000. Despite the contributions of agricultural scientists, Chinese rice production faltered in the years that followed. By 2003, China’s average rice yield slipped to just under 6 MTs per ha, while total production dropped to 160 million MTs (its lowest output since 1981), equating to an 85% self-sufficiency rate. Poor weather conditions and the shrinkage of rice land under cultivation combined to push rice output down. The following year China announced that they completed phase two of 12 MTs per ha and that the super hybrid rice program was achieving what it was set out to do. Regardless, the damage from the preceding year’s lackluster harvest was such that local farmers began to look elsewhere for higher crop yields.
Emerging as alternative to hybrid rice was genetically modified (GM) or rice that has been engineered in a laboratory to carry specialized traits from other rice varieties or even other organisms such as bacteria (Bacillus thuringiensis or Bt) and human beings (human serum albumin). Since the mid-1980s, China had invested heavily in GM rice research with the hope and confidence of eventual government approval for its widespread cultivation and commercialization. Despite government backing via research grants and funding, commercial approval would not be forthcoming. In 1993, China issued its first biosafety regulation, “Measures for Safety Administration of Genetic Engineering”, which was followed up in 1996 by the Ministry of Agriculture’s own biosafety measures which regulated GM crop development. In 2000, GM rice commercialization hit a roadblock when China suspended the commercialization of all GM crops after signing the Cartagena Protocol on Biosafety. Though commercialization was temporarily off the table, GM rice research and development continued, albeit with tempered expectations of its eventual approval.
GM rice’s moment came in the wake of the dismal 2003 harvest. At the time, GM Shanyou 63, a Bt rice variety that is resistant to attacks from the rice stem borer, a serious rice pest, was being field tested by Huazhong Agricultural University in Hubei province in central China. Shanyou 63 could reportedly increase rice yields by 8% through a combination of savings on pesticide costs and curtailing pest related crop losses, but its production and distribution was restricted to scientific purposes only. In spite of the ban, in 2004, Shanyou 63 seeds from the university’s experimental plot were being sold under the table by a Hubei-based company. In the following years Shanyou 63 was found in major rice producing provinces of Hunan, Jiangxi, Zhejiang and Anhui. By September 2006, Shanyou 63 was detected for the first time outside China when the United Kingdom, France, and Germany found it in rice products imported from the mainland. In January 2007, Japan announced they detected Shanyou 63 in rice from China, though they only began testing since the interceptions by Europe a few months earlier. It appeared the proverbial horse was out of the barn. In 2006, China had more than 100 GM rice varieties growing in experimental fields across the country and only 34 certified super rice hybrids.
Undeterred by the clandestine sales of Shanyou 63, China announced in 2006 that it was beginning the third and final research phase of its super hybrid rice program. From 2006 to 2008, Chinese rice yields rose from 6.15 MTs per ha to 6.5 MTs, with hybrid rice being grown on 18.6 million ha or roughly 63% of China’s rice paddy fields (Hunan province growing the most). Additionally, the country’s rice self-sufficiency crossed the 100% self-sufficiency mark in 2006 and remained at that level throughout 2007 and 2008. As a consequence of growing rice output. China felt confident enough to issue safety certificates to two GM rice varieties in 2009, one of which was Shanyou 63. Safety certification did not mean nationwide commercialization but rather, as a Chinese Ministry of Agriculture official put it, “a safety certificate is a precondition for further use”. GM rice commercialization was in essence put in a holding pattern while the government evaluated the environmental and societal impact of potential nationwide approval. The government was hedging its bets.
Rice Trade & Prices
For a time, China’s rice sector showed healthy growth. From 2009 to 2011, Chinese rice production grew by 9.1 million MTs while yields reached 6.6 MTs per ha. However shortcomings began to appear in China’s push to for a stable rice sector. China, known globally as a major rice exporter, became a net importer in 2010. In 2011 the deficit worsened as imports increased 35% on the year to ~922,000 MTs of rice. The bottom finally fell out in 2012 when China imported 2.6 million MTs of rice and recorded a rice trade deficit of 2.4 million MTs. It was odd that a country that had recorded ever-increasing rice output was looking to the international market to meet its needs, particularly so since its rice self-sufficiency rate was hovering around 100%, enough to feed its people.
The primary reason behind the rise in imports was prices. Starting in 2004 in an effort to safeguard the incomes of its rice farmers, China instituted minimum procurement prices in its top rice producing regions. Simply put, the government (via Sinograin and other state grain companies) began purchasing rice from farmers when domestic rice prices dipped below a certain level (set by the state), effectively decoupling rice prices from those found in the international market. In the years that followed, China expanded the scheme’s scope to include more regions and periodically increased the minimum procurement prices in order to boost production and limit inflation. In 2008, procurement prices for indica and japonica rice (China’s top rice varieties) totaled US$221 to US$235 per MT, respectively. In 2009, rice prices were raised by 16.9%, the largest increase (at the time) since the price scheme began. Procurement price increases occurred on an annual basis, causing prices for indica and japonica to reach approximately US$435 per MT and US$485 per MT by 2013, respectively. These price increases led domestic rice millers to look abroad for cheaper alternatives. As seen in the graph, wholesale prices for rice in Hunan (largest hybrid producer) and Hubei (largest researcher of experimental GM rice) were roughly $270 per MT more expensive than Thai and Vietnamese rice.
As China’s traditional supplier of high quality rice, millers initially looked to Thailand to secure cheaper imports. The trade relationship was such that from 2002 to 2011 Chinese rice purchases from Thailand never dipped below 500,000 MTs annually. It was not until 2010 that another supplier, Vietnam, even broke the 100,000 MT threshold, though this marked the beginning of the end of the Sino-Thai rice relationship. In 2011, Thailand instituted their own price subsidy scheme in an attempt to secure farmers’ incomes by driving up global prices of the staple. The plan would eventually backfire, costing the Thai government billions of dollars and helped precipitate a military coup. In the meantime, Chinese importers sidestepped Thailand’s new price structure and chose instead to import cheaper rice from Vietnam and Pakistan. In 2012 and 2013, China purchased more than 1.6 million MTs per year from Vietnam and roughly 500,000 MTs per year from Pakistan. The vast majority of these imports (80% by volume) were funneled in via the southern Chinese ports of Shenzhen, Huangpu, and Hong Kong. China was now a major rice buyer and other countries began to clamor for a share of the profits. It appeared China’s bid to efficiently supply its own market with domestically grown rice was being undercut by its own pricing policy.
In January/February 2014, there were reports that China would drop its 95% self-sufficiency policy after the State Council recommended a baseline grain output level of 550 million MTs by 2020, a decline from the 602 million MTs that was actually produced in 2013 (rice accounted for 34% of this output). An economist with the Ministry of Agriculture stated that the country’s grain production target should top out at 610 million MTs. However, according to China’s Minister of Agriculture, the country’s grain demand will reach 700 million MTs by 2020; though he emphasized that China will keep its “rice bowls” filled with domestically grown rice. It appeared that China was beginning to shift gears from quantity of grains produced to the quality of the grains produced.
Interestingly, a month after the State Council’s 550 million MT announcement, the Minister voiced his approval of GM crops and stated “they help to defend the crops from pests and do not cause any harm.” In early 2015, safety certificates for both GM rice varieties were renewed, a continuation of the holding pattern that began back in 2009. Additionally, China’s super hybrid rice program’s 2015 goal of a 13.5 MTs per ha yield was achieved ahead of schedule in 2011. In 2014, Yuan Longping and his team announced they had created a super hybrid with a yield of 15 MTs per ha on an experimental plot, though national yields have remained at 6.6 MTs since 2011. Lastly, China’s rice price procurement program, which has issued increased prices every year since 2008, announced in early 2015 that no such price increases will occur that year. It appears China is taking the first steps towards reconnecting its domestic rice prices with those found in the international market.
Based on ChinaAg’s market forecast, China will increasingly look to the international market to meet its rice consumption needs. China’s growing population, rural to urban migration and environmental degradation of its rice paddy land will ensure that Chinese demand for international rice will continue. China’s price procurement program has amplified demand by creating a market price gap which is being exploited by foreign suppliers and domestic millers. If China is able to successfully phase out the price program while maintaining production capacity (via increased yields) then demand should be capped within the 5% self-sufficiency import maximum (i.e. the remainder of China’s 95% grain policy). Regarding GM rice commercialization, it is highly unlikely that China will approve of commercialization before 2020. The GM safety certification for the two GM rice varieties (Shanyou 63 rice and Huahui 1), renewed in January 2015 will expire in January 2020. China will consider commercializing GM rice then, but will likely only grant approval if:
- National rice production and yields are stagnant despite gains made by super hybrid rice in experimental plots.
- China is able to produce a strong, efficient, and commercially viable domestically-owned GM seed company that can successfully supply the market in the face of international competition.
- Domestic public opinion is at a minimum divided evenly between the pros and cons of GM food consumption. As of 2015, the Chinese public is strongly opposed to consuming GM food products.
 Rice self-sufficiency calculation: [Mill Production/Milled Production + (Imports – Exports) + (Beginning Stocks – End of Year Stocks)]*100