China seeks to secure supplies as tensions rise with US and its allies

China’s economic agencies, including the top planning authority, the National Development and Reform Commission and the ministry overseeing agriculture, recently selected “security” as a priority for 2022, according to an official release. In particular, officials are pledging to secure the supply of everything from grain to energy and raw materials, as well as the processes involved in the production and distribution of industrial parts and goods.

After accelerating grain purchases in recent months, China has also detailed plans to set aside arable land to grow soybeans, a crop that was abandoned after its entry into the World Trade Organization in 2001.

The security-oriented economic agenda is a step on the strategy unveiled by President Xi Jinping in 2020 to prioritize domestic suppliers and consumers over foreign investment and exports as drivers of China’s economy – or as Beijing has emphasized. That the government emphasizes, “double circulation with internal circulation as the main body.”

China’s relations with developed countries appear to have become more strained, as the internal axis intensifies. Issues ranging from the COVID-19 pandemic to human rights and Beijing’s claim of sovereignty over Taiwan have pitted the US and many of its allies, including Australia, Canada and Japan, against China, which retaliated by restricting imports of some of its products. is processed. , Australian coal bans, in particular, last year further exacerbated power shortages in many parts of China.

In turn, China is more assertive and nationalistic, thinking of ways to become more self-sufficient not only in technology, but also for basic necessities, such as certain foods, for which the country has long relied on imports. .

“The Chinese people’s rice bowls should be held firmly in their hands at all times, and the rice bowls should contain mainly Chinese grains,” Mr. Xi told a high-level meeting on agriculture in late December, according to state media. said in.

This isn’t the first time China’s leaders have called for food and overall economic security, but this time the message has come with strong political signals, highlighting Mr. Xi’s willingness to project an image of strength as he heads to succession. Let’s prepare to break the established system. To stay in power instead of handing over the reins of a once-in-a-decade leadership reshuffle later this year.

Also driving the shift are fears of increased sensitivity to US sanctions as bilateral ties continue to deteriorate.

“China has long been conscious of food and energy security,” said Patrick Choveneck, a China expert and advisor to New York-based Silvercrest Asset Management Group. “Those things have progressed as priorities.”

But the task of self-reliance will not be easy, especially for a country that has benefited immensely from its integration with the rest of the world and has become both the world’s factory and the most insatiable consumer of goods.

Exports, which have been strong throughout the pandemic, driven China’s growth last year as demand for protective gear and work-from-home appliances made in China increased. However, domestic consumption, Beijing’s hopeful source for growth, remains weak as Mr. Xi’s economic reforms—focused on empowering the party-state in contrast to market forces and individuals—have eroded business and consumer confidence. Uncertainty over pandemic restrictions has also made consumers hesitant to spend.

Even before stepping up its inward-turning efforts, China had poured resources into its research laboratories, universities and companies to try to rid the country of addiction to foreign technologies such as American semiconductors. But industry executives say that even though China will become largely self-sufficient in “good-enough” chips, such as those used for cameras, in the next few years, it will still be difficult for more advanced ones in the West and Taiwan. such as those used for electric vehicles by 2035.

A two-year trade deal with the US expired last month, with neither side making any changes, removing most of the tariffs imposed on Chinese products. Washington has also stepped up efforts to limit technology sales to Chinese companies. It is adding urgency for Beijing to promote its own manufacturers as it prepares for more sanctions on Chinese firms.

For the coming year, China’s Economic Mandarin has designated foods such as soybeans and oilseeds as a priority. Since China’s entry into the World Trade Organization in 2001, the country has become almost entirely dependent on countries such as the US and Brazil for its soybean needs. Now, Beijing plans to increase the country’s production of its soybeans, much of which is used to feed pigs, this year pledging to increase production by 19% and 1.6 million acres in northeastern Heilongjiang province has given.

Analysts like Ken Morrison are skeptical about the soybean plan. “Increasing the production of one crop reduces supply in another”, such as corn, said Mr Morrison, a former commodity trader at Cargill Inc., the US agricultural giant who now writes a newsletter on the industry. “The cultivable land which is suitable for growing the crop is not sitting idle.”

China’s stockpile is already pushing up global prices for grain and other commodities. Analysts and economists are questioning whether China has the ability to build up reserves of oil, coal, iron ore and other materials without buying more from countries such as Australia and the US.

Beijing’s policy advisers say the self-reliance campaign is a key feature of the new development era, backed by Mr. Xi, an ardent nationalist leader who has called for China, on the need to produce everything from toilets to satellites. Emphasized. In November, visiting the state-owned telecommunications-equipment maker, Fiberhome Networks, Mr. Xi recalled how the young People’s Republic managed to launch its nuclear and space project in the 1960s despite an international blockade.

He then urged Fiberhome, which was blacklisted by the US for alleged human rights abuses of Muslim ethnic groups in the western Xinjiang region, to “drop the illusion and trust yourself.”

But some in Beijing’s official circles have sought to downplay expectations for China’s ability to become mostly self-sufficient in the near future as unrealistic. “We must continue to import what can be imported,” said Yang Weimin, a senior economic adviser, in an online forum last month.

While the emphasis on security reflects China’s deteriorating relations with some of its major trading partners, the policy shift has at times gone as far as to spark fears of armed conflict. For example, China’s commerce ministry late last year urged local authorities to ensure food supplies during the winter. Its vaguely worded statement, issued amid increasingly heated rhetoric on the mainland on Taiwan, raised fears that Beijing was preparing to annex Taiwan by force.

Panic erupted in parts of China, prompting a senior Commerce Department official to go on national television to defuse the panic.

“The supply of daily necessities is sufficient everywhere and the supply must be fully guaranteed,” official Zhu Xiaoliang told state broadcaster China Central Television shortly after the announcement.