CHINA'S GRAIN IMPORTS AND AGRICULTURAL POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80M00165A001700080001-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 18
• Document Creation Date: December 15, 2016
• Document Release Date: February 12, 2004
• Sequence Number: 1
• Publication Date: December 28, 1977
• Content Type: MF

Approved For Rose 2004/03/1;1 : CIA-RDP80M001651700&8
The OVcclor
Central Intelligence Agency
Ex~ cut ~ ~"`~--?._
//~ a 1Re9isCrg
MEMORANDUM FOR: The Honorable Bob S. Bergland
The Secretary of Agriculture
SUBJECT China's Grain Imports and
Agricultural Policy
Attached is the short paper describing
China's agricultural policy and its effect on
grain imports that I promised at our meeting
of 12 December. I hope it will help you in
evaluating China as a potential market for
grain imports.
s1, Stansfield Turner
Attachment:
As stated
Approved For Release 2004/03/11 : CIA-RDP80M00165A001700080001-8
 Approved For Fuse 2004/03/11 : CIA-RDP80M00165 1700080001-8
23 cember 1977
China: Grain Imports and Agricultural Policy
Agricultural policy in China is aimed toward achieving
self-sufficiency in grain production. Since the early 1960s,
however, China has regularly purchased moderate amounts of
foreign grain, mostly under medium-term contracts with
Australia and Canada. In the last seven years, imports have
averaged 5 million tons per year, ranging from .2 million
tons in 1976 to 7.6 million tons in 1973. (See Figure 1)
It is unlikely that the average level will increase as the
result of a policy decision favoring higher imports.
Agricultural Policy
Agriculture has had the highest priority in Chinese
economic development plans since 1962. The failure of the
Great Leap Forward, which was greatly aggravated by three
years of bad weather (1959-1961), made clear to the regime
that the agricultural production base had to be strengthened.
During the 1950s, Peking had not pushed the development and
dissemination of new agricultural technology or the large-
scale production of industrial inputs to agriculture.
The Tenth Plenum of the CCP in September 1962 marked
a break with past development policy. A new "agriculture
first" policy allocated a larger share of state investment
to agriculture, and industry was restructured to produce
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
 Approved For Felase 2004/03/11 : CIA-RDP80M001654D 1700080001-8
Figure 1
China: Imports of Grain, by Source
7.6
7.0 7.0
0.9
Arg
0.3%
4.8
0.9
Unil
3.0
0.8
ed States
2.5
EC and Other
3.3
12
3.6
Cai
ntina
ralia
1.0
1966-70 1971 1972 1973 1974 1975 1976 1977
Annual Average (Prelim)
Approved For Release 2004/03/11.CIA-RDP80MOOl65AO01700080001-8
 Approved For ease 2004/03/11 : CIA-RDP80M0016501700080001-8
more farm inputs. Chemical fertilizer imports were stepped.
up and grain imports were put on a planned rather than an
emergency basis. The goal of "self-sufficiency" announced
at that time meant the agricultural base should be made
strong enough to carry the country through years of below
average harvests.
The current campaign, "Learn from Tachai," continues
the recent emphasis on agricultural self-sufficiency at the
local level and holds up a model for all to emulate.
.(Tachai is a production brigade in a poor area of North China
which has achieved high crop yields.) At the same time
China's present leaders are pushing programs for developing
a large industrial base that can provide modern farm inputs.
Self-Sufficiency
The idea of self-sufficiency is very strong in China
and runs through all levels of administration, from the
national to the local. It applies to almost every aspect of
the economy, but most forcefully to food. The reasons for
the heavy emphasis on self-sufficiency are complex and
have deep historical roots. The aim of building an
economically independent nation has strong and consistent
political appeal in China.
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
 Approved For ease 2004/03/11 : CIA-RDP80M00165*1700080001-8
There are fundamental economic reasons for the Chinese
policy of self-sufficiency. China is a large continental
country,,like the US,.India, and the Soviet Union, with
vast domestic resources. But In. addition, China minimizes
its dependence on imports. Imports are equivalent to only
about 2% of Chinese GNP compared with 4% in the USSR, 6%
in India and 7% in the U.S.
Foreign Trade Supports Agriculture
China has been using a large portion of its limited
foreign exchange supply to excellent advantage in trying
to solve its food problem. Imports of grain, agricultural
inputs, and agriculture-related industrial plants in recent
years have made up 20-25% of total Chinese imports. Foreign
trade has supported agricultural policy in three major ways.
First, grain has been imported to help fulfill the
immediate needs of large urban areas in the north. Wheat
is the main staple grain in northern Chinese diets, and
foreign wheat deliveries to the north have eased the burden
of taxes and grain procurement on the peasants in this
traditionally grain deficient area. Taxes have been kept
relatively low and stable in recent years to help increase
the incentives for peasants to produce more grain and to
earn more investment funds for agriculture. Importing grain
into the major coastal cities also provides some relief
to the North's hard-pressed transport system.
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
 Approved For ease 2004/03/11 : CIA-RDP80M001601700080001-8
China helps pay for part of the wheat imports by
exporting some higher-valued rice from the south, but the
amount exported since 1973 has been declining. Though rice
prices are generally 2-3 times those of wheat, some of the
sales are in the form of barter agreements and do not earn
hard currency. The tabulation gives rice 1970 - 988
1971 - 924
exports (in thousand metric tons) for the 1972 - 899
1973 - 2,142
1970s. 1974 - 1,933
1975 - 1,440
The second way that trade supports 1976*- 1,000
1977 - 600
agriculture is in the purchases of modern
agricultural inputs such as fertilizer, pesticides, and
plastics for seed bed covering and irrigation pipe. Fertilizer
imports have represented about 20% of the total fertlizer
supply in the past several years.
The third type of trade in support of agriculture is
the purchase of industrial plants and technology which
produce import substitutes for the relatively expensive
imported agricultural inputs. During the mid-1960s foreign
fertilizer plants were bought mainly to serve as models for
China's own domestic machinery industry. In 1972, the
Chinese decided that it would be quicker and cheaper to import.
modern fertilizer plants than to develop them independently.
* Preliminary estimate.
Approved For Release 2004/03/19_ CIA-RDP80MOO165AO01700080001-8
 Approved For lease 2004/03/11 : CIA-RDP80MO016*1700080001-8
Domestic output of high-quality fertilizers and plastics
was growing too slowly for the needs of agriculture. The
need for fertilizer imports had not decreased, and with the
energy crisis fertilizer prices were rising faster than
the price of machinery. Also, a domestic supply of petro-
chemical feedstock had become available with the growth of
China's petroleum industry.
Grain Imports and the Stability of Agricultural Growth
Since 1962, when the "agriculture first" policy was
instituted, grain output has declined only in two years.
As a result, grain imports have not fluctuated widely. Curing
the 1970s, for example, Chinese imports have ranged from 2.0
to 7.6 million tons while Soviet grain imports ranged from
2.9 to 24.5 million tong Perspective on the relative stability
of Chinese agricultural growth can be gained in comparing
production trends for China and the USSR. (See Figure 2)
Unlike the USSR, where agriculture is dominated by one
crop and one weather system, China's crops and climate. are
diverse. Natural divisions of climate and topography separate
China's main agricultural area, the eastern half of the
country, into two broad segments--north and south China--with
the break occurring at roughly the Yangtze River. (See Map)
The river separates the high-precipitation, semi-tropical
south from the drier north, where precipitation is more
seasonal. Agriculture in the south is based upon paddy rice,
while in the north the base is dry land crops, especially
coarse grains and wheat.
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
 Approved For ?ase 2004/03/11 : CIA-RDP80M0016^1700080001-8
Figure 2
China - USSR Grain Output Time Trends
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76
Years
Approved For Release 2004/03/'17:-CIA-RDP80M00165A001700080001-8
 Approved For ease 2004/03/11 : CIA-RDP80M0016-*1700080001-8
China's agriculture has been characterized historically
by intensive inputs of labor on a limited supply of land.
Steady expansion of multiple cropping, exacting crop rotations,
improved irrigation and heavier use of organic fertilizer
have enabled the Chinese over centuries to extract ever
higher annual yields per unit of cultivated land. The
diversity and intensity of Chinese agriculture has'been the
major factor in the relative stability of output. Seldom
are both the spring and the autumn harvests poor; seldom
is there a poor harvest in the north as well as in the south.
Prospects
Grain production between 1952 and 1976 grew at the
average annual rate of 2.3 percent Growth of population
over the same period has averaged 2.1 percent per year.
Since the late 1960s, the population growth rate has been
falling and is presently about 1.5 percent per year. The
grain supply must increase somewhat faster than the population,
because the proportion of adults, who consume the most food,
is growing and because the demand for grain for livestock
feed is increasing.
China cannot rely on imports to feed the increase in
population -- the requirements to feed 15 million additional
people each year are simply too large. China might increase
grain imports to buy time needed for domestic agricultural
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
-8-
 Approved For ease 2004/03/11 : CIA-RDP80M001601700080001-8
China: Agricultural Regions
Percent in cultivation
0 /0 30
NAMES AND BOUNDARY REPRESENTATION
ARE NOT NECESSARILY AUTHORITATIVE
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
-9-
 Approved For ease 2004/03111 : CIA-RDP80M001601700080001-8
programs to succeed. We believe these programs are at
least close to schedule so that grain production will
probably stay ahead of population growth, except in
occasional poor years.
Future increases in grain output will come mainly from
increasing individual crop yields per unit of land because
the amount of arable land is practically fixed, Increases
are unlikely to come from expanded acreage although there is
some possibility for expanding multiple cropping. Chinese
rice and wheat yields, although good by developing countries'
standards, still have room for improvement. For example,
China's national average rice yield is 3.5 tons per hectare,
while Japan's is over six tons; and China's national average
wheat yield is around 1.6 tons per hectare, while France
is producing over 4.5 tons.
It is early yet, but a push for increased crop yields
in the 1980s appears to be taking shape. As the political
scene has calmed down, efforts to expand irrigation and
mechanization have increased. A program to expand areas
of "high and stable yields" emphasizes improving the quality
of the land by terracing and leveling. Modern high-yield
seed varieties are being developed and extended. In addition,
more attention is being paid to the development of pest
control measures.
Approved For Release 2004/03/1101_ CIA-RDP80MOO165AO01700080001-8
 Approved For ease 2004/03/11 : CIA-RDP80M0016D1700080001-8
The last round of imported petrochemical plants (ordered
in 1973-74)_ began producing in late 19.76, withi_ chemical
fertilizer production of all types in 1977 reportedly up
31.9 percent over 1975. (Fertilizer production probably
fell slightly in 1976 because of political disruption and
transportation bottlenecks,).. Total annual output from the
13 foreign urea plants by 1980 will be 3.5 million tons of
nutrient, which will double the. nitrogen fertilizer capacity
of 1975.
The Chinese are now on the. verge of entering another
round of foreign plant purchases, which includes petrochemical
as well as fertilizer plants. If the level of purchases is
anything close to the 1973-74 level, it will be difficult
to sustain a rise in grain purchases during the. next few
years for lack of foreign exchange.
The Chinese will continue to import as much grain and
fertilizer as is needed to maintain the marginal but
adequate diets of their people. At the same time, a long-
range solution demands that China develop the capability
of producing farm inputs itself, which will require spending
some foreign exchange for plant and equipment.
Approved For Release 2004/03/il j cIA-RDP80M00165A001700080001-8
 Approved For IWas
04af6WdR:%0IA= R0R8O I OO88O88"OTTOM
UNCLASSIFIED Co IDENTIAL SECRET
OFFICIAL ROUTING SLIP
TO
NAME AND ADDRESS
DATE
INITIALS
I
Director, NFAC
2
Director, Central Intelli
gence A
ency
3
4
S
6
ACTION
DIRECT REPLY
PREPARE REPLY
APPROVAL
DISPATCH
RECOMMENDATION
COMMENT
FILE
RETURN
CONCURRENCE
INFORMATION
SIGNATURE
Remarks: 77
1 - 2:
Attached is the paper on China's
agricultural policy that you promised
to send to Secretary Bergland at your
meeting with him on 12 December.
FOLD HERE TO RETURN TO SENDER
FROM: NAME. ADDRESS AND PHONE NO. DATE
Distribution:
Orig - Addressee, w/att
1 - DCI, w/att
1 - ER, w/att
1 - D/NFAC, w/att
1 - DD/NFAC, w/att
1 - AD-M/NFAC, AD/SS/NFAC, w/att
1 - NFAC, w/att
1 - D/OGCR, w/att
1 - NIO/Economics, w/att
1 - NIO/China, w/att
1 - D/OER, w/att
1 - D/U, w/att
1 - D/C, w/att
Approved Fore
F~1650c01700080001-8 -
ST
 Approved For ease 2004/03/11 : CIA-RDP80M0016540 1700080001-8
Eaccutive Registry
2 3 DEC 77
MEMORANDUM FOR: Director, Central Intelligence Agency
THROUGH Director, National Foreign Assessment
Center
SUBJECT, China's Grain Imports and Agricultural
Policy
Attached is a short paper describing China's
agricultural policy and its effect on grain imports to
send to Secretary Bergland. You told the Secretary you
would send the paper at your meeting with him on 12
December.
ST
Attachment:
As stated
MAURICE C. ERNST
Director
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
 INITIAL
proved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
 28 ULU Ji7
 Apptv&ved'For Release 2004/03/'I4 RDP80M00165A001700080001
Centrallntelligen gency
2 8 LL\
977
Approved For Release 2004/03/11 : CIA.RDP80M00165A001700080001
 STAT Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8
Approved For Release 2004/03/11 : CIA-RDP80M00165AO01700080001-8