In China, food scares put Mao’s self-sufficiency goal at risk

In China, food scares put Mao’s self-sufficiency goal at risk

Wed, May 22 2013

By David Stanway and Niu Shuping

BEIJING (Reuters) – The discovery of dangerous levels of toxic cadmium in rice sold in the southern city of Guangzhou, the latest in a series of food scandals, has piled more pressure on China to clean up its food chain – possibly at the expense of Mao Zedong’s cherished goal of self-sufficiency.

The ruling Communist Party has long staked its legitimacy on its ability to guarantee domestic staple food supplies, and has pledged to be at least 95 percent self-sufficient even as demand increases and the fastest and biggest urbanization process in history swallows up arable land.That has led to a drive for quantity rather than quality – securing bumper harvests even from land contaminated by high levels of industrial waste and irrigated with water unfit for human consumption. “China has a big population and we used to face food shortages so the government has focused on quantity,” said Li Guoxiang, a researcher at the state-backed Rural Development Institute of the China Academy of Social Sciences.

But food safety is becoming a bigger worry than food security after a series of scandals ranging from melamine-tainted milk to toxic heavy metals in rice and vegetables – and raising the share of imports may be the least-worst option.

The government, under increasing public pressure and facing anti-pollution protests, has promised to reverse some of the damage done to the environment by three decades of breakneck industrial expansion. But the scale of the problem is huge, especially as China looks to maintain its economic growth, find jobs for millions of new urban residents and ensure that just 9 percent of the world’s land can feed a fifth of the global population.

“Quantity is still a precondition, but the government is now putting lots of effort into safety, and high-quality food imports will definitely increase,” said Li. “People will realize there are more advantages than disadvantages regarding rising food imports and things are turning in that direction.”

China is already the world’s biggest soybean importer after making a strategic decision to outsource production, mostly to the United States. Some predict Beijing might have to do the same with other land-intensive farm products like beef – a move that would benefit big producers like Australia.

While it has vowed to remain self-sufficient in major staples, imports of rice and corn are expected to hit record levels this year, according to U.S. Department of Agriculture forecasts. [ID:nUIDAGE93Y] Wheat imports, too, are seen at a near record.

LAND STRAINS

Inspectors in Guangzhou collected samples from 18 locations in the city and found cadmium levels in eight exceeded the national standard of 0.2 micrograms per kilogram, with some as high as 0.4 mg/kg, the local government said late last week.

Though experts insisted the health risks were very low and China’s standards for rice, its staple food, are far higher than the rest of the world, authorities swiftly came under attack from users of China’s popular microblogging service Weibo. Guangzhou was eventually compelled to reveal the tainted rice originated from central China’s Hunan province, the country’s biggest rice-producing region.

Hunan produces 30 million metric tonnes (33.06 million tons) of rice a year, 15 percent of the national crop, but it is also a big miner of nonferrous metals and toxic elements such as arsenic and cadmium. In many cases, wastewater run-offs from the mines are used directly to irrigate farmland, and tailings also tend to be badly managed.

Yin Lihui, an official with the provincial environmental protection administration, told state media that nonferrous metals mining in Hunan has caused heavy pollution in a region dubbed the “home of rice and fish”.

“We call it ‘integrated food and mining complexes’ – basically food production and mining happening at the same place together, and this isn’t rational,” said Chen Nengchang, a researcher at the Guangdong Institute of Environmental and Soil Sciences who works on projects to rehabilitate land damaged by mining and heavy metal pollution. “The problem is that China has a big population and scarce land and soil, so we need to figure out another way of dealing with this.”

To ensure food supplies, China has said it will limit the amount of land given to development. This will not only require the government to declare farmland out of bounds to industry, but also require ruined wasteland to be returned to life. Some researchers say as much as 70 percent of China’s farmland is affected by pollution. After decades of contamination, land must be restored if it’s to return to agriculture.

That takes time and money. High real estate prices in urban areas make it relatively easy to find the money to clean up land contaminated by chemical or heavy metal waste, but cleaning up the countryside is a greater challenge, said Richard Fuller, president of the Blacksmith Institute, a New York-based non-profit group that helps clean up polluted sites in China and elsewhere. “There are solutions for the majority of damaged sites but it’s going to take time, technology and money.”

RURAL POLLUTION

An official at China’s environmental ministry said last month that a nationwide soil survey revealed traces of toxic heavy metals that were deposited as long as a century ago. It also revealed extensive use of banned pesticides – a sign that farmers, under pressure to produce more, may be as culpable as heavy industry.

“Sea and river pollution, heavy metal pollution of the soil and atmospheric pollution are very serious causes of environmental damage, but we should say that the biggest contributor is agriculture,” said Wen Tiejun, dean at the School of Agricultural Economics at China’s Renmin University.

Experts say 60 percent of the pesticides used on China’s severely overworked farms are used improperly, further contaminating the food chain. Chinese farmers are also known to use arsenic in animal feed to help fight disease and speed growth, raising levels of the toxin in rice to dangerous levels in some regions.

With all this pressure on China’s farmland and water supplies, senior agricultural officials are beginning to question the long-held goal of self-sufficiency.

“An appropriate increase in imports, if it doesn’t affect our country’s security, will be of benefit in easing domestic resource and environmental pressures,” Chen Xiwen, head of the Communist Party’s top working group on rural policy, told a forum this month.

“We do need to consider a more positive strategy towards going overseas, and make full use of the global market.”

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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