Bloomberg News put out an interesting piece on Tuesday titled “China Is Scouring the Globe in Search of New Food Suppliers”.
It provides interesting stories of lobster farmers in Vietnam, nut producers in Africa, and beef producers in South America, and how their trade with China has grown as the country looks to diversify supplies chains away from the US and tradition trading partners and more towards the Global South.
But this has been happening for a while, with mixed results.
For example, China has approved soybean imports from several African countries, but volumes are minimal, and it doesn’t materially change China’s dependence on the US and Brazil.
Policy makers in Beijing see expanding the number of countries where imports can be sourced from as diversification and enhancing food security, but there seems to be little attention paid to the volume that those countries can actually produce and export.
For example, the article mentions Bolivian beef exports, which have increased exponentially. But even through November 2024, imports of Bolivian beef are 90k tons compared to 1 million tons from Brazil. This does offer some diversification, but the scale doesn’t compare to what Brazil can provide.
The Bloomberg article does mention risks for exporters which included a quote from a Vietnamese lobster producer who said “I can only sleep well when they reply on WeChat.”
On a geopolitical level, policymakers in other countries are more aware of this now. Given China’s size, imports of a certain commodity from a specific country might be a small portion of China’s imports, but a large portion of that country’s exports. This gives China leverage in trade or political disputes because the damage to the exporting country is larger than the damage that China faces as an importer by stopping the trade.
In 2023, I was invited to a lunch in Shanghai with some pork industry people and the consul general of a European country that was looking to expand their pork exports to China.
I told them it was a bad idea. China wants to have the value-added processes in China. They want to import soybeans, crush them, make animal feed, feed pigs, slaughter pigs, and process the meat in China. Because every step of the process involves jobs and tax revenue. They don’t want to import the most expensive part, the finished product, unless they have to.
And this country’s imports would represent maybe 1% of China’s pork supply while it was already a large portion of their export market. That would put them in an uncomfortable situation if geopolitical issues happened.
We see this playing out currently with the EU adding taxes on Chinese electrical vehicles and China doing an anti-dumping investigation on EU pork.
More broadly, I think we’re seeing a change in rules around international trade. China has tended to abuse the system. As an importer of agricultural products, they have a lot of options under WTO rules to investigate or block trade.
All countries also tend to provide a certain level of subsidies and support to farmers, but China’s case against the EU does not seem defensible. After African Swine Fever in China, local governments fast-tracked construction and permits for hog farms and state-owned banks provided low-interest loans from state-owned banks. In that context, it will be difficult for China to win that case.
A similar situation is happening with beef. Even according to the Chinese government, Chinese beef producers aren’t competitive. However, they need to protect beef farmers, many of which are in more rural, and poorer, areas and this coincides with the other policy objective of rural poverty alleviation.
The next few years are going to be especially interesting. In less than a week Trump will be inaugurated, and he has said he loves tariffs. He also doesn’t like the World Trade Organization. China has also not fulfilled its obligations under the Phase One trade deal for agricultural purchases.
The amounts were not feasible, but China agreed to them, and now they’re in an uncomfortable situation where Trump is back in power and might want to enforce them.