The restrictions and tariffs China has imposed on two key commodities – fertilizer and pork – have sent prices around the world skyrocketing.
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Russia is guilty of creating a food security crisis and higher energy prices The Peterson Institute for International Economics said that through the war with Ukraine, but China – has also taken actions in three areas that are exacerbating inflation around the world.
PIIE analysts Chad Bown and Yilin Wang write: “Russia’s war in Ukraine has done an incredible amount of damage to the region. “It has also contributed to the global food crisis, as Russia is blocking the export of vital fertilizers that farmers need elsewhere and Ukraine’s role as a platform for Africa and the Middle East. was destroyed.”
“But there is another, underappreciated risk to global food security,” they wrote in a note last week.
The trouble with China is that it continues to act like a small country… it can also beg its neighbors, with China opting for a domestic policy of solving problems by shifting its costs. to people elsewhere.
Chad Bown and Yilin Wang
Peterson Institute for International Economic Analysis
Analysts point to the restrictions and tariffs that China imposes on two main commodities – fertilizer and pork.
China’s curbs have extended beyond food. The Asian giant, one of the world’s largest steel producers, has also imposed restrictions on raw materials, the Washington-based consultancy noted.
All of those moves have resulted in higher prices elsewhere, even as they benefit the Chinese people themselves, according to the report.
“The trouble with China is that it continues to act like a small country,” the analysts wrote.
But they can also become a beggar neighbor, with China opting for a policy of solving problems at home by passing its costs on to people elsewhere.
Fertilizer
Fertilizer prices in China and around the world started to increase last year, due to strong demand and higher energy prices, but since then was even pushed higher after the Russo-Ukrainian war.
Last July, the authorities Ordered major Chinese companies to suspend fertilizer exports “to secure the supply for the domestic chemical fertilizer market,” noted PIIE. By October, as prices continued to rise, authorities began to require additional monitoring of exports.
Curbs have continued this year, and will last until at least the end of summerReuters reported.
“The combination of non-tariff barriers has led to a sharp drop in China’s fertilizer exports. With more domestic production, China’s fertilizer prices have leveled off and even declined,” the analysts wrote. begins to decrease”.
That is in stark contrast to the situation worldwide, where fertilizer prices continue to more than double the levels seen a year earlier, the team said.
China’s share of global fertilizer exports was 24% for phosphates, 13% for nitrogen and 2% for potassium – before the restrictions, according to PIIE.
PIIE analysts said that China’s decision to withdraw fertilizer supplies from the world market only “pushes the problem to someone else.”
They added that when there is less fertilizer, there is less food, and that is “hardly possible at a worse time” given the Russia-Ukraine war that is threatening the global food supply. 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 that may arise in many poor countries, importing fertilizers and food.” , the report said.
Steel
To reduce soaring domestic prices, the authorities last year lifted a ban on imports of scrap steel. They also implemented several rounds of export restrictions and increased export taxes on five steel products.
By March this year, China’s steel price was 5% lower than before the restriction.
“But in the case of fertilizers, these declines come to the rest of the world, where prices outside of China are still higher,” PIIE analysts said. know. “The concern is that the widening gap between world and China steel prices has been present since January 2021.”
Pork
The story of pork prices are higher globally started in 2018, when China – which produces half of the world’s pork supply – saw its herd affected by an outbreak of African swine fever.
That forced the country to destroy 40% of its total herd, which causing its pork price to more than double by the end of 2019. According to PIIE, world prices also followed, increasing by 25% as China imported more pork and pulled the supply out of the market, according to PIIE.
“China has been reducing domestic price pressure since the beginning of 2019 by exploiting imports before its recent shutdown. These policies have affected the rest of the world,” PIIE analysts wrote. gender”.
Beijing also cut import tariffs on pork in 2020, which could expose consumers elsewhere to higher prices due to reduced supply, the team said.
However, authorities raised those tariffs again this year as the swine fever problem eased.
A potential unintended benefit would be reaped if, amid current high global meat prices, China’s tariffs unexpectedly released world supply and helped alleviate pressure, the report said. up pork prices faced by consumers outside of China.”
