Recipe for Disaster?: Implications of the Ukraine-Russia War on China’s Food Security

The outbreak of war between Russia and Ukraine on February 24 has created an enormous diplomatic challenge for China and had a significant impact on various aspects of the nation’s economy and development. Ahead of the 20th National Congress of the Chinese Communist Party in the latter half of the year, when Xi Jinping is expected to secure a historic third term as the country’s leader, a key concern for China is the war’s impact on the its food security and, by extension, its stability. 

In recent years, despite the central government’s emphasis on the importance of domestic food production, China’s food imports have been rising and are likely to continue to grow. Chinese policymakers have expressed concerns that the country relies on too few agricultural products and suppliers, particularly from the United States. As part of its food security strategy, China has been increasing efforts to diversify imports to reduce its reliance on the US, boost domestic agricultural production, overcome domestic production deficits and meet growing domestic demand. However, the Russia-Ukraine war will likely hinder such efforts.

Wheat 

Although self-sufficiency remains at the core of China’s food security strategy, the focus has shifted from achieving that goal in grains (rice, wheat, corn, soybean and root tubers such as potatoes, and coarse grains) to ensuring basic self-sufficiency in cereals (wheat, rice, and corn) and absolute security in staples (referring to rice and wheat). The overriding objective of China’s food security is to safeguard the country’s rice and wheat supplies. Compared with rice, the importance of wheat as the second staple is often overlooked. Globally, China is the largest wheat-producing country in the world and is reported to have the largest wheat reserve globally, representing over half of the worldwide wheat stock in 2022. China’s current wheat production accounts for over 17 percent of the global total. In recent years, however, the effects of climate change, including extreme weather causing disasters such as severe flooding, have put domestic production of wheat and other grain crops at risk and have caused production deficits.

Despite its huge domestic production and massive wheat stock, China is also one of the world’s leading wheat importers, purchasing nearly 10 million tons of wheat last year. The obvious reason for this is the large gap between domestic and international wheat prices, but the second and more important factor is the structural imbalance in China’s wheat supply: For decades, China’s wheat policies have focused on quantity rather than quality. To a certain extent, the quality of wheat is often sacrificed in favor of quantity. With rising income and shifting food preferences, however, the country now faces a shortage of high-protein wheat. 

For years, China’s wheat imports mainly came from Australia, Canada and the US. Because of the trade war with Washington and worsening ties between China and Western countries, Beijing has been trying to diversify the country’s wheat import sources, eyeing Russia and Central Asian countries such as Kazakhstan, which have not only emerged as key exporters in the global wheat market but also have enormous potential for further increases in wheat production. 

Feed

China's more pressing food-supply challenge is feed, especially soybean and corn, and fertilizers. In 2021, China had to import 28.35 million metric tons of corn, up 152 percent from the previous year, representing 9.4 percent of domestic corn consumption. Most imports came from the United States, Ukraine and Brazil, with Ukrainian imports accounting for one third of the total amount. Although the decrease in US corn imports in recent years can be attributed to the China-US trade war, China had sought out other corn suppliers, importing a considerable amount of corn from Ukraine. Since 2020, China has been Ukraine’s top trading partner, viewing the country as a critical entrepôt for BRI-related commerce, with its agricultural exports becoming increasingly crucial for China. Combined with potential labor shortages and rising gas and fertilizer prices, the Russia-Ukraine war and subsequent disruptions to shipments to China will create significant inflationary pressure.

Soybean, meanwhile, makes up 65 percent of global protein feed supply. Three countries – the US, Brazil and Argentina – contribute 80 percent of global soybean exports. Although China is the world’s fourth biggest soybean grower, the country is also the world’s largest importer, with what it buys from abroad accounting for 84 percent of domestic consumption. Last year, Chinese customs data showed that soybean imports, mainly from the US and Brazil, jumped 13.3 percent to 100.3 million tons.

As China’s reliance on American soybean was viewed as a weak link during the trade war under the previous US administration, China has sought to increase domestic production and encourage soybean production elsewhere, particularly Russia. In 2018, China’s soybean imports from Russia reached 0.8 million metric tonnes, up 64 percent compared to 2017. Given Russia's huge potential to produce soybean, China has exported more agricultural labor to Russia and increased investment in Russian soybean. In 2021, however, Russia imposed a 30 percent tariff on soybean exports in response to increasing food prices. 

The Russia-Ukraine war adds another dimension to China’s soybean import concerns. Ahead of the Russian invasion, China’s National Food and Strategic Reserves Administration announced that it would release soybeans from state reserves. Aside from increasing domestic production to encourage self-sufficiency, Beijing may also continue to diversify its import sources of soybeans to ensure a stable supply. But China's ability to add soybean imports from new suppliers faces market and policy uncertainties, and its growth potential remains limited in the short term. For example, this year's prospects of a record Brazilian soy crop were shattered by adverse weather that ended up delaying harvests, with exports far below initial estimates. 

With the ongoing war, sanctions on Russia and Belarus, and a proposed ban on fertilizer exports from Russia, global potash supply will face major disruptions. This will have significant repercussions for food production in countries that rely on potash imports, including China, and for global food security. 

The implications of the Russia-Ukraine conflict for food security extend worldwide. The absence of both Ukrainian and Russian grain and fertilizer exports could exacerbate existing food-security concerns and potentially cause social and political instability. Like many other developing economies, China is a major importer of Ukrainian and Russian agricultural produce, particularly grains. For Beijing, food security remains a top priority as China’s heavy reliance on grain imports increases its vulnerability to trade tensions and supply shocks. 

In response to these challenges, China is putting more effort into boosting domestic production, diversifying agricultural imports, and releasing wheat and fertilizer reserves. Nonetheless, these measures may not be sufficient to counter the long-term impact of the Russia-Ukraine War, particularly if the conflict is prolonged: China could soon face increased competition from other food-importing countries for supply of grains and fertilizers, while also dealing with persistent deficits in agricultural production at home.