CC BY
23
Bailov Vladislav, Master of International Trade College of Economics and Management, Northeast Forestry University, Harbin China E-mail: [email protected] Tian Gang, Corresponding author, Professor of International Trade and Economics, College of Economics and Management, Northeast Forestry University, Harbin China E-mail: [email protected]
DEVELOPMENT OF EXPORT OF AGRICULTURAL PRODUCTS FROM THE EAEU COUNTRIES TO THE CHINESE MARKET AS ONE OF THE WAYS TO SOLVE THE PROBLEMS OF FOOD SECURITY IN CHINA
Abstract: Relations with China have always been an important area of foreign economic and political activity of the EAEU countries. A special place in the development of trade relations between these countries is the agro-industrial complex. China is currently experiencing both internal and external food security problems. In turn, the EAEU countries have great potential for the development of agriculture, which can serve as one of the ways to solve the problems experienced by the Chinese market. This paper analyzes the current situation of food security in China, the degree of interest in this issue of the Chinese population, the opinions of experts and business representatives on the development of bilateral relations, as well as offers potentially promising directions for the development of food exports from the EAEU countries.
Keywords: Eurasian Economic Union, China, Russia, agriculture, food security, international trade.
1. Introduction
Due to the reforms carried out by the Chinese Government in the field of agriculture, there has recently been a rather rapid transition in the Chinese market from a lack of food to increased attention to security for basic types of food. But despite this, China is still experiencing both internal and external problems. Due to the current adverse environmental situation in the country and trade confrontation with the United States, which is the main supplier of agricultural products, China has to diversify its food imports by searching for new supplying countries. As one of the ways to solve this problem, China consid-
ers the market of the EAEU region, which has a high potential in the development of food exports.
2. Literature review
2.1 Agriculture trade. Definition
World trade in agricultural products and food has historically been one of the first and most important forms of international relations, which has come a long and difficult way in the process of the international division of labour and world trade.
2.2 Factors and issues of world trade in agricultural products
As a result of the generalization of theoretical approaches to the development of international trade,
the main factors of the development of foreign trade in agricultural products of any state, as well as world trade in General, were identified:
1. Comparative advantage;
2. Economies of scale;
3. Regionalization and globalization;
4. Formation of a multilevel system of regulation in the field of international trade;
5. Improvement of transport and communication structure;
6. Vertical specialization of enterprises;
7. Deepening the international division of labour.
Since 60 years of the 20th century developing international specialization on the basis of deepening intra-industry specialization and division of stages of production. The desire to improve the efficiency of
Trade with China has increased by 23.9% over the past five years and amounted to almost $3.7 billion in 2016. At the same time, the EAEU exports to China increased by 62.4%, and imports to the EAEU from China - by 1.3%. The balance of trade in agricultural products with China in 2016 amounted to -112.6 million dollars [2].
2.4 China's food security
For the last time on the market of China has seen a fairly rapid shift from a shortage of food for increased attention to security at the main types of food. But despite this, China is still experiencing both internal and external problems. Internal problems include the remaining unfavourable environmental situation, lack of arable land, fluctuations in the growth rate of agricultural production, and low incomes of farmers. External problems include the
specialized production stimulates the exit abroad not only goods, but also production. Thus, the relationship between the processes of globalization, regionalization, deepening of the international division of labor and the development of world trade is determined [1].
2.3 General situation of agricultural trade of the EAEU countries and China
Analysis of agricultural trade shows that China is an important trading partner for the EAEU (Table 1). In 2016, China ranked first among all partner countries in terms of exports of agricultural products from the EAEU and second in terms of imports to the Union, second only to Brazil. The share of China in total export volume in 2016, the agricultural products of the EAEU accounts for 10.4 percent [2].
trade policy of the exporting countries, in particular, the aggravated trade confrontation between the USA and China in 2018.
Below are examples of scientific works, the subject of which is similar to the subject of this article.
In 2016, Osipova A. I., describes that China is pursuing a successful social policy, trying to provide the population with the necessary resources, so that, together with economic indicators, the standard of living has increased. But China still has many problems with food security, the most sensitive of which is the disappearance of the main natural and strategic resources that can not be imported: water, arable land, forests. The ecological crisis in agriculture, demographic factor, urbanization also cause problems of food security in China.
Table 1.- Dynamics of export-import of agricultural products between the EAEU and China in 2012-2016, million dollars [2]
Direction The volume of trade in agricultural jroducts
2012 2013 2014 2015 2016 2016/2012
Export 1089.7 1205.6 1223.4 1494.7 1769.8 Î 62.4%
Import 1859.1 1958.6 2298.6 1937.9 1882.4 Î 1.3%
Balance -769.5 -753.0 -1075.2 -443.2 -112.6 -
Trade turnover 2948.8 3164.2 3522.0 3432.6 3652.2 î 23.9%
Factors contributing to food security in China:
1. The disappearance of natural resources;
2. Climate change;
3. Reduction of arable land;
4. Increase in grain imports;
5. Demographic factor [3].
Based on Luchik A. A. paper, which focused on 2016 data highlights the fact that the provision of food to the population is gaining a new round of relevance due to the significant growth of its total number on the planet, while the issues of food safety and preservation of the positive environmental situation remain open.
In order to provide the population with the necessary resources and improve the overall standard of living, the Chinese Government is implementing a successful social and economic policy, and also focuses on the fact that the main factor determining the problem of food security in China is the environmental situation in the country. China is home to 21% of the world's population, with only 9% of the country's arable land and much less fresh water for human consumption. Given the significant increase in income of the population of China increases its demand for protein-rich food, while domestic production of such products is close to the lowest level.
As a promising direction for solving the problem of domestic consumption, the author identifies the Russian market. Having rich natural resources, Russia can provide the Chinese market with certain types of agricultural products [4].
In 2018, Erokhin V. L., in his work focuses on the external problems of China's food security. Speaking about the fact that in the current trade conflict between China and the United States, China's trade position does not give the country ample opportunities to respond to the increase in US duties in the field of agriculture. And this problem will not be solved until China finds alternative markets to import the necessary food [5].
In 2016 Guseva E. S., in his article, the author analyzed the problems of providing the population of
China with food. According to the author, the problems should be solved in three main topical regional economic areas:
1. Use of agricultural land in the territory of foreign States;
2. Export-import supplies of food raw materials and food with the border countries and the States -participants of the project "one belt-one road";
3. Expansion of Chinese organizations in the international food market [6].
The authors of the above-mentioned works analyze the General state of food security in China, as well as some proposals to solve these problems.
3. Methodology and data
3.1. Methodology
For a clearer understanding of the problem, this work will address issues such as the problems of food security of China and the agricultural market of the EAEU countries, as a promising direction to address these problems. In addition, primary and secondary data, as well as qualitative and quantitative approaches, were used to analyse these issues. To obtain primary data, the purpose of which is to obtain and analyze up-to-date information that allows to verify the accuracy of opinions, the author used oral surveys and online questionnaires. Official scientific journals, mass media and other sources were used to obtain secondary data, the purpose ofwhich is to search and analyze existing information.
3.2. Limitation
To collect more accurate and reliable information, the main audience that participated in the study were representatives of China, Russia and other EAEU countries, as representatives of other countries may not be completely competent in some matters. Websites in Russian and English were used to collect secondary data. The author conducted an analysis for 2015-2018, focused on the markets of agricultural products of China and the EAEU countries.
Two main methods were used in the collection of information. First, to conduct an online survey, the author used an online service Surveymonkey.com.
The compiled survey was distributed through social networks in China, such as Wechat, QQ, Weibo. Due to the ease of filling, anonymity and minimal time, this type of data collection has been very effective. Secondly, the following types of interviews were conducted: oral interviews, questionnaires by e-mail and telephone interviews with business representatives of the studied sphere. The questions concerned both the problems of food security of the Chinese market and the search for a solution to this problem in the development of trade in agricultural products between China and the EAEU countries. These questions were addressed to business representatives of the two sides of this sphere, as well as experts engaged in research in this area. In addition, additional data were collected using news websites, books, magazines and websites of international organizations.
When collecting data, the main objectives pursued by the author were:
1. To consider and analyze the problems offood security of China and the situation oftrade in agricultural products between China and the EAEU countries;
2. To identify the degree of interest of the parties in the development of trade relations between China and the EAEU countries in the field of agriculture;
3. To find points of interaction and promising directions for the development of trade relations between China and the EAEU countries in the field of agriculture.
VIRAL DISEASE UNSAFE FOOD
UNHEALTHY LIFESTYLE
THE POOR QUALITY OF THE ENVIRONMENT
EARTHQUAKE
3.3. Questionnaire
The online survey was conducted only among Chinese citizens, as the purpose of this survey was to determine the degree of interest of representatives of this country in the problem of food security, consumption ofimported goods, as well as the idea ofthe EAEU countries as States that have the ability to supply environmentally friendly agricultural products. In total, about 120 people took part in the survey, the average age of the respondents was 20-29 years.
3.4. Interview
The interview was attended by representatives of both the scientific community and representatives of the business environment. Thus, it is more possible to find out reliable information about the situation on food security in the Chinese market and the development of trade relations in the field of agricultural products between China and the EAEU countries. The survey helped to gather a large number of opinions and suggestions on the current situation.
3.5. Data collection
The data are collected through such well-known Internet resources as National Bureau of Statistics of China, United Nations Conference on Trade and Development, as well as some information based on specialized journals, scientific articles, expert opinions, etc.
4. Analysis and results
4.1 Questionnaire
54%
0% 10% 20% 30% 40% 50% 60%
Figure 1. The most important factor that can affect you
According to the survey, the most important poisoning the residents in this country, shocked the
problem related to the factors that can cause irreparable damage to the health of Chinese citizens is food security (Figure 1). Numerous instances of pollution and contamination of food, and as a consequence,
NO
YES
Chinese public.
The survey on the degree of confidence in imported products showed that the majority of the population is confident in its quality-82% (Figure 2).
1
18%
82%
11(11
0%
20% 40% 60% 80% 100%
Figure 2. Imported goods are a sign of quality
When choosing products of certain categories between local and foreign producers, Chinese citizens often prefer foreign ones. This indicates a still existing degree of distrust of the population to domestic producers. The second reason for this result is the increase in average per capita income among Chinese citizens. The population is less eager for the low cost of production, paying more and more at-
tention to quality, which indicates a change in the attitude to food and lifestyle.
The online survey showed that Chinese citizens (73%) have an idea of the EAEU countries as a region with a favorable environmental environment and producing high-quality agricultural products (Figure 3).
Figure 3. EAEU are a countres capable of producing and supplying environmentally friendly agricultural products
This suggests that China has a certain demand for products from the EAEU countries, which opens up additional opportunities for increasing exports of agricultural products to the Chinese market.
4.2. Interview
This section presents the questions that were asked by Chinese and Russian experts, as well as representatives of agricultural business and their
answers. The author has collected opinions and shared conclusions.
1. What is the General situation of food security in the Chinese market?
At present, China has been able to achieve self-sufficiency in basic agricultural products. However, due to the existing environmental problems and shortcomings of arable land, the Chinese market is still a quite high degree of dependence on imports. To date, the main commodity groups of China's food imports are meat and meat products, fruits and vegetables, cereals, animal feed. China is the world's largest importer of soybeans, cotton, palm oil and sugar.
In turn, against the backdrop of the escalated trade confrontation between the US and China in early 2018, China needs to quickly switch from American imports to the search for alternative suppliers. Currently, the main supplier of food products to China is the USA with an annual turnover of $26 billion, All of these groups of products with high added value, China imports mainly from the USA. The US economy is significantly less dependent on foreign trade (the ratio of exports to GDP - 11.9%) than China (19.2%), which does not give the country ample opportunities to respond to the increase in US duties.
2. How do you assess the possibility of solving the problem of food security in the current situation by developing trade relations with the EAEU countries in the field of agriculture?
Russia and other EAEU countries, mainly Kazakhstan and Belarus, also have the potential to increase food supplies to China in the light of the opening niches in the Chinese market. Such countries as Russia, Belarus, Kazakhstan, are leaders among the EAEU countries in the export of wheat, dairy products, potatoes, livestock and poultry.
Products from Russia and other EAEU countries are perceived in China as safe and clean, and it is these qualities that should be relied on when promoting food to the Chinese market.
4.3. Data collection.
4.3.1. Food security challenges in China
In the 90-ies of the last century, many experts argued that China is not able to meet the growing demand of its population for food. Then, when China joined the WTO in 2001, there were fears that the country's agribusiness would not withstand competition and the country's domestic market would be filled with cheap imported food [7]. However, to date, China has been able to achieve self-sufficiency in basic agricultural products within 91-97% of domestic consumption [8].
Many factors have contributed to the rapid development of food production in the country. The government introduced institutional innovations in rural areas, special attention was paid to technological development. The increase in investment in agriculture also contributed to the growth of production.
However, in the wake of the rapid development of agriculture, the country faced new challenges, the growth of food production took place without taking into account environmental management and sustainable development. The increase in the income level of the population has significantly increased the cost of production and reduced the competitiveness of Chinese agricultural products in the world market. Given the current state of Affairs, the Chinese Government has taken serious measures in recent years. A number of taxes for farmers were abolished, subsidies and public investment in agriculture were increased [9]. However, China still remains dependent on imports of a certain list of food products.
4.3.2. Foreign trade in agricultural products of China.
Currently, the main products imported by China
are meat and meat products, cereals, fruits and vegetables (Table 2). Also, the Chinese market is the world's largest consumer of soybeans, cotton, palm oil and sugar [10].
Table 2.- Imports of basic agricultural products to China in 1995-2016, $ billion [10]
Commodity item 1995 2000 2005 2010 2013 2014 2015 2016
Meat products 0.090 0.636 0.607 2.183 4.653 4.546 4.445 7.601
Fruits 0.084 0.367 0.627 2.062 3.983 5.025 5.871 5.719
The fish is fresh, refrigerated, frozen 0.389 0.773 2.294 3.324 3.735 4.092 3.612 3.835
Feed for animals' 0.421 0.908 1.306 3.301 3.959 4.373 4.967 3.601
Seafood (shellfish and crustaceans) 0.185 0.391 0.525 0.980 2.240 2.477 2.701 3.055
Milk and dairy products 0.056 0.207 0.406 1.795 4.785 5.759 2.631 2.709
Cattle meat fresh, refrigerated, frozen 0.004 0.007 0.009 0.084 1.270 1.290 2.321 2.516
Vegetables 0.079 0.090 0.532 1.558 2.631 2.686 2.716 1.950
Barley 0.241 0.313 0.429 0.536 0.799 1.574 2.859 1.142
China's dependence on the external food market will increase. The reason for this is the growing demand for high-nutritional products of high quality [11]. Forecasts from the Organisation for economic co-operation and development (OECD) show that by 2022 China will double its purchases of imported feed grains and beef and pork, while imports of soybeans will increase by 40%. China's grain needs will reach 700 million tons by 2020, 100 million tons of which will be imported.
The main exporter of soybeans, cotton, palm oil and sugar to the Chinese market is the United States (22%). The largest position in us food exports is occupied by soybeans, exports in 2017 amounted to $22 billion, of which $12 billion were exported to China. The USA economy, in turn, is less dependent on external exporters. The ratio of exports to USA GDP is 11.9%, and in China 19.2%. In connection with the trade confrontation between the US and China in 2018, the current situation does not allow China to respond in the field of agriculture. According to Bloomberg, at the end of 2017, Chinese exports to the US amounted to $506 billion against US exports to China by $130 billion (us trade deficit with China - $375 billion). In such situations, the party with the deficit has the advantage. In the case of the introduction of reciprocal duties on food imported from the United
States, China is in a state offood dependence. The way out of this situation can be the development of own production or diversification of imports.
4.3.3 The current situation in agricultural trade between China and the EAEU countries
In 2016, Russia for the first time in 100 years topped the list ofworld wheat exporters, and the Russian Government is making every effort to maintain this position and open new markets. In 2016, China's imports of Kazakhstan flour increased by more than 10 times, exceeding $2.8 million in January-September 2017. Exports of dairy products from Belarus to China increased by 12 times compared to the same period in 2016, exceeding $4.5 million [10].
Despite the growing demand for food from countries of the EAEU in China. In 2017, Russia has increased the land area for cultivation of soybeans by 16.9% in China by 2016 and peaked at 2.6 million hectares. In 2017 was a record harvest of soybeans -3.5 million tons. In Kazakhstan, the investment cluster program "Mazhiko-2020" provides for an increase in soybean crops to 400 thousand hectares with the production of 1 million tons of beans per year [12]. Given the volume required by China (90 million tons), at the moment, the EAEU countries are still not able to provide the necessary volumes and do not solve the problem of dependence on the United States.
However, the Governments of the EAEU countries continue to strongly stimulate the increase in production volumes for such items as chicken meat, sunflower meal, sunflower oil, and cornmeal. As part of the signed long-term contract for the export of Russian products to China, as part of the program "New land grain corridor Russia-China", by 2028 the turnover of grain will reach 52 million tons [13].
4.3.4 Perspective directions of development of cooperation with Russia and the EAEU countries to ensure food security of China
Taking into account the current state of affairs, a promising direction for China is the parallel development of cooperation with Russia and the EAEU member States in three directions:
1. The growth in procurement for those items that are over-represented in the EAEU market;
2. Organization of agricultural production on unused lands of Siberia and the Far East of Russia, as well as Northern (highly productive varieties) and southern regions of Kazakhstan with the subsequent export of products to China;
3. Implementation of joint investment projects.
Since the EAEU countries ' own production is
still unable to provide such volumes of food that are necessary for China, one of the promising areas is the implementation of joint projects of Russian and Chinese agricultural enterprises on abandoned land. About 5 billion yuan of the company of Hebei province and other regions of the country are ready to invest in joint projects for the cultivation of soybeans and other crops in the Far East.
There is also an excess of pork production in the TRANS-Baikal territory. From this region, it could be supplied to the Northern provinces of China, but at the moment there are still restrictions on the import of meat products from China.
Recently, the Russian Government published a program of subsidizing container transportation of food to China. This program provides for compensation of up to 50% of the actual transportation costs. The initial amount offinancing in the amount of 100 million rubles in 2017, if the program is successful, could potentially be increased to 3 billion rubles.
For the successful implementation of this program, China should provide Russian carriers with subsidized tariffs for transportation across the country, preferential access to storage facilities and the introduction of a simplified regime of customs clearance of Russian food products.
5. Conclusion
Since Russia and other EAEU countries are the countries producing high-quality and environmentally friendly food, the development of this cooperation is promising for the Chinese market. However, the volume of food production and exports from the EAEU is still extremely small to have a significant impact on the food security situation in China.
It is possible to increase food exports to China from the EAEU countries by increasing purchases of certain types of agricultural products for which China is experiencing a shortage (soybeans, cereals, meat and meat products), as well as through the implementation of joint investment projects in the field of agricultural products.
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