Restrictions and tariffs imposed by China on two main products, fertilizers and pork, have caused prices to rise around the world.
Deng Gang | China Visual Group | fake images
Russia is guilty of creating a food security crisis and higher energy prices through its war with Ukraine, but China, under the radar, has also taken action in three areas that are exacerbating inflation around the world, he said. the Peterson Institute for International Economics.
“Russia’s war in Ukraine has taken a shocking toll on the region,” wrote PIIE analysts Chad Bown and Yilin Wang. “It has also contributed to a global food crisis, as Russia is blocking exports of vital fertilizers that need farmers elsewhere, and Ukraine’s role as breadbasket for Africa and the Middle East has been destroyed.
“But there is another unappreciated risk to global food security,” they wrote in a note last week.
Analysts highlighted the restrictions and tariffs imposed by China on two main products: fertilizers and pork.
China’s restrictions have extended beyond food. The Asian giant, one of the world’s largest steel producers, has also imposed restrictions on the material, the Washington-based think tank said.
All of those moves have led to higher prices elsewhere, even as they benefited China’s own people, according to the report.
“The problem with China is that it continues to act like a small country. His policies often have the desired effect at home, for example by lowering input costs for industry or one group of Chinese farmers or increasing yields for another,” the analysts wrote. .
“But they can also beggar thy neighbor, with China selecting the policy that solves a domestic problem by passing its cost on to people elsewhere,” they added.
Fertilizer prices in China and around the world it started rising last year, as a result of strong demand and rising energy prices, but has since risen further following the war between Russia and Ukraine.
Last July, the authorities ordered major Chinese companies to suspend the export of fertilizers “to guarantee the supply of the domestic chemical fertilizer market,” the PIIE noted. In October, as prices continued to rise, authorities began requiring additional scrutiny of exports.
The restrictions have continued through this year and are expected to last until at least after the end of the summer, Reuters reported.
“This combination of non-tariff barriers led to Chinese fertilizer exports falling sharply. With increased domestic production, Chinese fertilizer prices stabilized and have since even started to fall,” the analysts wrote.
That contrasted sharply with the global situation, where fertilizer prices continued to rise by more than double the levels seen a year earlier, the think tank said.
China’s share of global fertilizer exports was 24% for phosphates, 13% for nitrogen and 2% for potash, before restrictions, according to PIIE.
PIIE analysts said China’s decision to withdraw fertilizer supplies from world markets only “pushes the problem to others.”
When there is less fertilizer, less food is grown, and that “could hardly come at a worse time” given that the war between Russia and Ukraine already threatens global food supplies, they added. Russia and Ukraine are major exporters of crops such as wheat, barley, corn, and sunflower oil.
“At such a critical time, China needs to do more, not less, to help overcome the potential humanitarian challenge likely to arise in many poor fertilizer and food-importing countries,” the report says.
To curb rising prices domestically, authorities lifted a ban on importing scrap steel last year. They also implemented a few rounds of export restrictions and raised export taxes on five steel products.
In March this year, Chinese steel prices were 5% lower than before the restrictions.
“But as in the case of fertilizers, these declines came at the expense of the rest of the world, where prices outside of China remain higher,” the PIIE analysts said. “The concern is the widening gap between global and Chinese steel prices that has emerged since January 2021.”
The story of the highest global pork prices began in 2018, when China, then producing half of the world’s pork supply, saw its pig population hit by a major outbreak of swine fever. African.
That forced the country to cull 40% of its herd, causing pork prices to more than double by the end of 2019. World prices followed suit, rising 25% as China imported more pork and withdrew supplies from markets, according to PIIE.
“China reduced price pressure in the country from 2019 by taking advantage of imports before closing them more recently. These policies affected the rest of the world,” PIIE analysts wrote.
Beijing also lowered tariffs on pork imports in 2020, likely causing consumers elsewhere to suffer higher prices as a result of falling supply, the think tank said.
However, authorities raised those tariffs again this year when the swine fever problem subsided.
“There is a potential unintended benefit to be gained if, in the current environment of high global meat prices, China’s tariff unexpectedly frees up global supplies and helps mitigate the pressure on pork prices faced by consumers outside China. of China,” the report says.