Eyeing Global Food Crisis, Beijing Revives Elements of Planned Economy

China may be reviving key elements of its 20th-century planned economy to ensure domestic stability as a way to reduce dependence on the West for consumer goods, particularly food items affected by the war in Ukraine, says experts.

Beijing is promoting the development of supply and marketing cooperatives for agricultural products and state-run canteens to help the government control the supply of staple foods as relations between China and Western democracies deteriorate. The canteens are like a college cafeteria with limited offerings and prices that Beijing officials consider affordable.

Xia Ming, a professor of political science at the City University of New York, told VOA Mandarin in a November 4 phone interview, “Emergence of procurement and marketing cooperatives is often the result of economic scarcity. Today, it is clear that the China is facing its many economic crises. If these crises lead to economic shortages, the country must control the situation, especially these basic supplies, for the sake of stability.”

Wen Guanzhong, professor emeritus of economics at Trinity College, told VOA Mandarin by phone on Nov. 4 that “In general, because (Chinese president) Xi Jinping knows that he is really taking a path that is opposite the way for a comprehensive deepening. Marketing, he also knows that China’s relations with countries around the world, especially Western countries, will become increasingly tense. He hopes that the full control of the CCP (Communist Party of China ) on restoring society including control of supply and sales.”

Xie Tian, ​​a business professor at the University of South Carolina Aiken, said in an interview with VOA Mandarin on November 4, “I think the CCP’s ambition and desire to use force against Taiwan could be implemented very soon. Canteens and supply and marketing cooperatives can control social matters and food supply in wartime, and that is the best way for China.”

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In Hubei province alone, local officials have reformed and rebuilt 1,373 supply and marketing cooperatives with 452,000 members, according to a report last month in the official Hubei Daily. Officials told the news outlet that the cooperatives will have 1.5 million members by 2025.

In 2014, there were 696 cooperatives in the province, down 61% from a peak of 1,800 in 1984, according to a report in the state-affiliated Beijing Business Daily (BBD) on Nov. 2. Nationwide, the BBD reported, there are currently 31,000 supply and marketing cooperatives in China, with nearly 400,000 outlets.

At the 20th National Congress of the Communist Party of China, which closed on October 22, Liang Huiling, who headed the All China Federation of Supply and Marketing Cooperatives, was promoted to membership in the CCP Central Committee. After the conference, the agency immediately issued a recruitment bulletin, which experts saw as a sign that China’s future economic development will be led by the government focusing on improving self-sufficiency and economic security.

World food crisis

China is one of the largest importers of food in the world. According to a 2018 report by CSIS, a Washington-based think tank, China’s food imports exceed its exports, leading to a food trade deficit.

Xia said China is looking for other sources of grain due to strained relations with Western exporters such as the United States, Canada and Australia. Beijing’s fear is that if these exporting countries reduce sales to China for geopolitical reasons or to meet their own domestic demands, prices could rise throughout China and cause domestic discontent.

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According to Reuters, the IMF said in September that the disruption of global grain flows due to the war in Ukraine is the worst food security crisis since the 2007-2008 global financial crisis.

Xia said China’s refusal to publicly criticize Russia for invading Ukraine in February has exacerbated Western democracies’ dissatisfaction with China.

“When China wants to join forces with Russia and fight against the West, I think it will solve a lot of food and energy security crises,” he told VOA Mandarin. “So if he wants to be hostile to Western countries or use wolf warrior diplomacy, I think he has to deal with (the consequences).”

Supply and marketing cooperatives for agricultural products first appeared in China in the 1950s when Beijing planned and controlled the economy. When Deng Xiaoping proposed economic reform and opening in 1978, the supply and marketing cooperatives began to weaken, but never disappeared.

Under the leadership of President Xi Jinping, the Chinese government has called for the reform of supply and marketing cooperatives as part of its gradual tightening of economic control.

In 2021, Beijing proposed a pilot project of comprehensive “three-in-one” cooperation in food production, supply and marketing including loans to farmers and distributors. About 49,000 state employees oversee the entire system of procurement and marketing cooperatives starting at the county level, according to the official website.

According to data for the first half of 2022 from the All-China Federation of Supply and Marketing Cooperatives, the sales of supply and marketing cooperatives in the entire system exceeded $435 billion (2.9 trillion yuan) – a year-on-year increase of 19.1%. In 2021, total sales will be about $926.9 billion (6.26 trillion yuan), according to official figures.

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Concerned consumers

Consumers worry that Beijing’s new focus on supply and marketing cooperatives and canteens could kill off the current market-oriented shops and restaurants, fueling the growth of the private economy.

According to Chinese media reports, Chinese officials last week sought to allay those concerns, saying the resumption of supply and marketing cooperatives will allow them to “take advantage of their many outlets, improve function of the county’s circulation service network, and to promote rural revitalization.”

The officials also said that community pilot projects, including the construction of canteens, “are not mandatory, it is not necessary to try everything on the file.”

Wen said the old cooperatives differ from today “depending on how private enterprises are treated in the future, whether they are restricted or given privileges like monopoly power to state supply and marketing cooperatives.”

Xie believes that the state-led economy lacks the vibrancy of a market economy, which will ultimately affect the living standards of Chinese residents.

He said, “Just like the canteens and supply and marketing cooperatives of the old days, the vibrancy of a market economy is impossible after a return to a planned economy. … The most basic meals, or food and services only basic. to provide, which will definitely affect the living standards of the Chinese people.”

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