Food insecurity: China’s latest crisis

Spiralling food prices across China are adding to a growing list of domestic crises bedevilling President Xi Jinping.

On Monday, China’s Ministry of Commerce published a seasonal notice instructing local authorities to stabilise food prices and – more alarmingly – urging citizens to stock up on basic goods.

Panic-buying ensued, prompting state media to call for calm. The government–controlled paper Economic Daily admitted that Covid lockdowns had left some families struggling to get supplies of rice and vegetables, but reassured frightened shoppers that there would be enough to go round this winter.

Heavy October rain and flooding which destroyed crops in China’s fertile Shandong province has contributed to a spike in the price of vegetables like cucumber and broccoli, as well as spinach, which now costs more per kilo than some cuts of pork. China also imports one fifth of the world’s wheat, which hit its highest price since 2012 this week.

With 1.4bn mouths to feed, and the potential for unrest obvious, Beijing is taking food supply extremely seriously. In March, a food security target was added to China’s latest five-year plan for the first time.

The threat of a food crisis comes as China ties itself in knots dealing with the pandemic it exported to the world last year. Beijing is still going to draconian lengths to enforce a zero-Covid policy which is looking increasingly untenable. On Sunday, for instance, Shanghai Disneyland was quarantined until every one of its 30,000 visitors had been tested after a woman who might have visited tested positive.  

The response is weighing heavily on the economy and fraying the nerves of China’s citizens. But local lockdowns, mass testing and travel restrictions haven’t stopped domestically-transmitted Covid cases doubling in a week to their highest level since mid-September. Suggestions from health experts that the country should move towards coexisting with the virus have been steamrolled by Beijing.

Running in parallel is an energy crunch which has led to factories in 20 of China’s 31 provinces suffering power outages in recent weeks, along with millions of households in the north-east of the country. Xi has ordered electricity companies to ration power and brought in a price cap. But the 20 per cent jump in wholesale gas and diesel prices in the last month is heaping pressure on petrol stations and oil refineries.

And then there’s China’s gargantuan, creaking property sector. Evergrande, the embattled property giant and symbol of the crisis, is meeting deadlines for interest payments on its $300bn debt mountain by the skin of its teeth. 

Firms across the industry are flirting with bankruptcy. The sector as a whole owes a staggering $5trn, one third of the country’s entire GDP, and according to a recent S&P report, a third of Chinese property developers will struggle to pay their debts over the next year.

The consultancy Capital Economics warned this week that the country’s construction and manufacturing sectors “were on the cusp of a deeper downturn that could pull down China’s growth to just 3 per cent next year”.

Even if China’s economy grows by 4 per cent in 2022 (towards the top end of estimates) it will still be the country’s lowest growth rate since 1990.

The fallout from these interweaving crises has the potential to shake the regime. The unwritten quid pro quo underpinning the Chinese settlement is prosperity in exchange for obedience. Xi will be acutely aware of the dangers of not keeping his end of the deal.