Grain reserves stored in Chinese silos exceed 140 million tons: much more than what is missing from the market due to the Russian invasion of Ukraine. But why did Xi Jinping come so prepared for this shock? How will he use the “treasure” he is sitting on?
There is one country in the world that, despite being a major wheat importer, is not suffering from the current crisis but, on the contrary, can benefit from it. It’s China: For “mysterious” reasons, it has amassed more wheat stocks than the rest of the world combined.
It began long before Vladimir Putin launched the recent military aggression on Ukrainian soil.
The mystery of Beijing’s food supplies could be solved with a few twists and turns if Xi Jinping only wanted to.
At the moment we can only ask ourselves about an abnormal situation, about its possible explanations, about the developments it will have. The data is official and one of the most reliable sources in this sector is the US Foreign Agricultural Service.
Grain reserves stored in Chinese silos exceed 140 megatons (million tons).
That in and of itself is great news.
It is reassuring to compare this figure with the amount of wheat missing from world markets due to the Russian invasion of Ukraine: 50 or 60 megatons at most. But the immense bulk of China’s reserves is troubling when compared to grain supplies available in the rest of the world.
The western coalition of the United States, Europe, Canada and Australia is barely approaching 40 megatons of grain reserves. South Asia, which includes India, has less than us (but it’s true that India has become a major producer/exporter of wheat). The area, which includes the Middle East and North Africa, has reserves covering about half of the west.
Adding up all these stocks, the bottom line is both positive and troubling: the world has 280 megatons of wheat, enough to counter Putin’s blackmail seizing Ukrainian exports.
As in the case of fossil energy, we are not really facing a shortage and certain price increases are exaggerated compared to the actual imbalances between supply and demand. However, partial upheavals in some traditional supply streams are enough to send markets tumbling.
In addition, grain reserves are managed by each nation according to specific criteria and are not available to all to deal with local emergencies.
The “Chinese mystery” remains. If you add up all the grain reserves in the rest of the world, it falls just short of the more than 140 megatons that China has. Its demographic size is insufficient to explain this disparity. Even with 1.4 billion inhabitants, the People’s Republic does not represent nearly half of the world’s population (we are about eight billion).
The overabundance of their holdings is the result of a conscious policy, an accumulation that began long before the start of the war in Ukraine.
Xi Jinping “knew” long in advance what Putin would do and did he foresee the consequences for the world food market? Of course, the first phase of Russian aggression dates back to 2014, so this explanation is not far-fetched. However, it needs to be placed in a broader context.
The Chinese communist leadership is obsessed with the problem of food self-sufficiency, which, among other things, is fueling their expansion into Africa and Latin America. Beijing leaders may also have anticipated a recovery in post-Covid global demand ahead of schedule. The communist nomenclature fears inflation, it does not forget that the high cost of living was one of the causes of the explosion of social protests that led to the 1989 Tiananmen Square tragedy.
As “traders” and speculators, the Chinese rulers certainly had a remarkable flair: if they started selling their surplus stocks in the markets today, they would make phenomenal profits. will they do it When will they do it? As?
Unlike oil reserves, grain reserves cannot be stored indefinitely: they are perishable. With active management of this immense food heritage that Xi Jinping “sits” on, many conclusions and simulations can be drawn.
The gradual sale on the markets would have a calming effect on world market prices, in addition to generating profits for the benefit of the Chinese treasury; However, it would harm Putin, who would be deprived of food blackmail.
Can we imagine a grand humanitarian diplomacy, with Beijing offering grain aid to the countries in North Africa and the Middle East most affected by the current crisis? Sooner or later we will learn what strategies and what calculations Xi Jinping will employ to use his power in the food crisis. It will remain a mystery why he arrived so well prepared at this point.
June 9, 2022 (change June 9, 2022 | 17:06)
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