Economics and finance, Trade and industry, International relations, Food & water | East Asia, The World, Asia

16 January 2020

With China’s agri-food companies going global and increasingly pursuing new mercantilist strategies in the agri-food sector, policymakers must consider the implications of a multipolar global economy on food security, Paul Belesky writes.

China is emerging as a powerful actor in the global food system. The country has become an important outbound capital investor, facilitating agribusiness mergers and acquisitions, as well as new East–South and East–North flows of agri-food trade.

The current restructuring of the global food system and its social, political, and economic coordinates has significance for comprehending the broader transformation of the contemporary global economy.

More on this: Food into the future

Arguably in recent times, there has been a general re-centering of the global economy on East Asia, and within East Asia, on China. For example, the Chinese Government is pursuing the Belt and Road Initiative, along with establishing new post-Bretton Woods institutions of financial governance. These have come in the form of the Chinese-led Asian Infrastructure and Investment Bank and the New Development Bank.

In the context of this broader reconfiguration of the global economy, the global food system is in a period of transition. This has been characterised by multipolarity, the re-emergence of China, and new mercantilist agricultural policies in an era of environmental change.

The Chinese Government’s export-led economic growth model has enabled the country to accumulate a vast amount of foreign exchange reserves. In 1990, China’s foreign exchange reserves were approximately $30 billion – representing 8 per cent of GDP. By 2011, reserves had increased to $3.2 trillion, or 44 per cent of GDP.

Despite some declines, the Chinese Government maintains the largest foreign exchange reserves in the world and is continuing to move ahead with diversification of its reserve holdings. In January 2020, the Chinese Government held approximately $3.1 trillion worth of foreign exchange reserves.

This is important, because some scholars have illustrated links between the accumulation of large amounts of foreign capital reserves and the Chinese Government’s new mercantilist policies. These are having crucial impact in strategic sectors such as food, energy, and finance, and are having an impact on the global agriculture and food market.

More on this: China’s murky waters

Another important aspect of this transitionary period in the global food system is the proliferation of state-owned enterprises and sovereign wealth funds, and their increasingly powerful positions in global value chains for food, feed, finance and fuel.

Lastly and significantly, China’s largest state-owned food company – China Oil and Foodstuffs Corporation (COFCO) – has recently completed a series of mergers and acquisitions and is now in a market position in the global economy to compete with the big four Western grain giants that historically dominated the global grain trade: Archer Daniel Midlands, Bunge, Cargill, and Louis Dreyfus.

In 2008, the global food price crisis and subsequent food price volatility served as a stark reminder for policymakers of the complex inter-linkages between food prices, energy prices, and food insecurity. It also revealed that polices that rely on food imports from global agri-food markets alone are not sufficient to provide national, regional, or global food security. Many food importing countries in the Global South are highly vulnerable to global food price spikes and volatile global food prices.

Considering the crisis, there is a fundamental need for policymakers to rethink the causes and consequences of food insecurity. These causes and consequences have become more complex, multi-scalar and interconnected as food insecurities transcend local jurisdictions and national boundaries.

Often it is the most vulnerable in society – the rural landless labourers, small-scale farmers and the urban poor – who suffer most from food insecurity, hunger and malnutrition. High food prices have had a detrimental impact on the lives and livelihoods of vulnerable groups.

More recently in 2018, economic shocks worsened the severity and prolonged the duration of food crises in 33 countries, affecting 96 million people. Most food policy literature to date has focused on uneven power relations and trade flows between states in the Global North and the Global South, the impasse of the Doha Round in the World Trade Organization negotiations, and the policies of agricultural liberalisation.

However, it has often overlooked the continuity of new mercantilist agricultural policies and the significance of East–South and East–North flows of agri-food trade in an increasingly multipolar global food system.

In a changing world, the return of economic nationalism and new mercantilist policies in the agri-food sector and the ongoing US-China trade war are making a significant impact on global agricultural trade and food security. Policymakers must do more to pay attention to these shifting policy paradigms in the global economy that are reshaping power relations in the global food system.

This article is based on the journal article ‘Chinese state capitalism and neomercantilism in the contemporary food regime: contradictions, continuity and change’, The Journal of Peasant Studies 46(6):119-1141. 

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