China keeps stable domestic grain market

Updated: 2008-05-11 11:12

BEIJING  -- Amid a major wave of international grain price hikes, China has managed to maintain stable domestic prices.

Wheat prices on the Chicago Board of Trade surged more than 140 percent in March, and rice prices went up over 80 percent.

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The average grain retail prices on Chinese domestic market, by contrast, register a slight growth only, from 4.14 yuan (about 59 cents) per kilogram from the beginning of January to 4.19 yuan by March end, according to statistics from the Ministry of Commerce.

The Chinese government's unswerving effort to ensure food supply in the country, including its restrictions on grain-consuming bio-ethanol projects, was behind the stable prices, analysts said.

The central government vowed this year to spend more than 562 billion yuan (80.1 billion US dollars) to support farms and the rural sector, 130.7 billion yuan more than last year.

The government decided in March to spend another 25.25 billion yuan in addition to this year's rural budget, mainly to subsidize farmers' purchase of seed, diesel, fertilizers and other production materials.

The Ministry of Railways last month ordered railway authorities in the northeast provinces to improve efficiency and send 10 million tonnes of grains out of the grain-rich northeast to the south from May 1 to June 30, in a bid to ease supply imbalances and stem price rises.

China ranked second worldwide in energy output and consumption. Almost half of its crude oil demand depends on imports. But China attached greater priority to grain security when it actively developed alternative energies.

The National Development and Reform Commission (NDRC) stopped approving bio-ethanol projects using corn and wheat in May, 2007, and planned to adapt the existing four grain-consuming projects to use non-grain materials such as cassava and straw.

"Corn is an important feed material in China, and developing corn-consuming bio-ethanol would affect the supply of meat and eggs," said energy expert Han Xiaoping.

China would rather use non-grain plants that usually grew in wild and salt land to produce bio-ethanol, so as not to take away farm land and reduce grain production, said the NDRC.

Currently, the country is producing 750,000 tonnes of bio-ethanol annually, and it scheduled to boost the output to 5 million tonnes by 2010.

Apart from restricting grain-consuming bio-ethanol projects, China is actively promoting other alternative and clean energies, such as nuclear, wind and solar energies.

A total of 26 million households in rural areas were using methane to provide for cooking and heating by the end of 2007, and another 5 million households will join the group this year.

In the foreseeable future, the international energy crisis is likely to pressure China to scale up its development of alternative energies, but as the Agricultural Minister said recently, to a country with 1.3 billion mouths to feed, any problem in food and agriculture would be perilous.

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