Deng Gang | Visual China Group | Getty Images Russia has been blamed for creating a food security crisis and higher energy prices through its war with Ukraine, but China – under radar – has also taken action in three areas that are exacerbating global inflation, the Peterson Institute for International Economics said. . “Russia’s war in Ukraine has shocked the region,” wrote PIIE analysts Chad Bown and Yilin Wang. “It has also contributed to a global food crisis, as Russia blocks the export of vital fertilizers needed by farmers elsewhere and Ukraine’s role as a bread basket for Africa and the Middle East has been undermined.” “But there is another, invaluable risk to global food security,” they wrote in a note last week. The problem with China is that it continues to behave like a small country … it can also be a beggar-neighbor, with China opting for a policy that solves a domestic problem by passing on its costs to people elsewhere. Chad Bowen and Yilin Wang Peterson Institute for International Economics analysts Analysts singled out restrictions and tariffs imposed by China on two main products – fertilizer and pork. China’s curbs have expanded beyond food. The Asian giant, one of the world’s largest steelmakers, has also imposed material restrictions, according to the Washington-based think tank. All of these moves have led to higher prices elsewhere, even when they have benefited China’s own people, according to the report. “The problem with China is that it continues to operate as a small country. Its policies often have the desired effect at home – say, by reducing the cost of inputs to industry or a group of Chinese farmers or increasing yields in another.” , wrote the analysts. .
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“But it can also be a beggar neighbor, with China opting for a policy that solves a domestic problem by passing on its costs to people elsewhere,” they added.
Fertilizer
Fertilizer prices in China and around the world began to rise last year as a result of strong demand and higher energy prices, but have risen even more since the Russia-Ukraine war. Last July, authorities ordered large Chinese companies to suspend fertilizer exports “to ensure the supply of the domestic chemical fertilizer market,” the PIIE noted. By October, as prices continued to rise, authorities began imposing additional controls on exports. The restrictions continued this year and will last at least until the end of the summer, Reuters reported. “This combination of non-tariff barriers has led to a sharp drop in Chinese fertilizer exports. With more production kept at home, Chinese fertilizer prices have flattened and have even started to fall since then,” the analysts wrote. This was in stark contrast to the situation worldwide, where fertilizer prices continued to rise more than double the levels observed a year earlier, the think tank said. China’s share of world fertilizer exports was 24% for phosphates, 13% for nitrogen and 2% for potash – before the restrictions, according to the PIIE. PIIE analysts say China’s decision to withdraw fertilizer supplies from world markets only “pushes the problem to others”. When there is less fertilizer, less food is grown, and this “could hardly come at a worse time” as the Russia-Ukraine war is already threatening global food supply, they added. Russia and Ukraine are major exporters of crops such as wheat, barley, corn and sunflower oil. “At such a critical juncture, China needs to do more – not less – to help overcome the potential humanitarian challenge that may arise in many poor countries, fertilizer and food importers,” the report said.
Steel
In an effort to curb rising domestic prices, authorities lifted a ban on steel scrap imports last year. They also implemented some rounds of export restrictions and increased export taxes on five steel products. As of March this year, China’s steel prices were 5% lower than before the restrictions. “But, as in the case of fertilizers, these reductions have been made to the detriment of the rest of the world, where prices outside China remain higher,” PIIE analysts said. “The concern is the widening of the wedge between world and Chinese steel prices that has arisen since January 2021.”
Pork
The story of the highest pork prices in the world began in 2018, when China – which then produced half of the world pork supply – saw its pig population affected by a major outbreak of African swine fever. This forced the country to kill 40% of its herd, which caused pork prices to more than double by the end of 2019. World prices followed suit, jumping 25% as China imported more pork and withdrew supplies. from markets, according to PIIE. “China has eased domestic price pressures since 2019 by leveraging imports before closing them more recently. These policies have affected the rest of the world,” PIIE analysts wrote. Beijing also reduced tariffs on pork imports in 2020, which likely led consumers elsewhere to experience higher prices as supply declined, the think tank said. However, the authorities increased these duties this year as the problem of swine fever decreased. “A potentially unintended benefit will be gained if, in the current environment of high world meat prices, China’s tariffs unexpectedly release global supplies and help ease the pressure on pork prices facing consumers outside China,” he said.
