CHINA: Falling water tables may soon raise food prices everywhere

With nearly 1.3 billion people, a growing economy and a $40-billion-plus trade surplus with the US, China has the potential to disrupt world grain markets, says Lester Brown, chairman of Worldwatch.

The problem is particularly serious in northern China. The Yellow River, the northernmost of China’s two major rivers, is being overused to the extent that it may soon fail to reach the crucial grain-growing province of Shandong. The resulting need for massive grain imports and growing dependence on US grain could cause serious problems for political leaders in Beijing, says Brown.

The Yellow River first ran dry in 1972, failing to reach the sea for some 15 days. In the following years, it ran dry intermittently until 1985. Since then, it has run dry for part of each year. In 1997, a drought year, the Yellow River failed to reach the sea for 226 days.

In fact, during much of 1997 the river failed to reach Shandong Province, the last of the eight provinces it flows through en route to the sea. Shandong, which produces a fifth of China’s corn and a seventh of its wheat, is more important to China than Iowa and Kansas combined are to the US. Half of the province’s irrigation water used to come from the Yellow River, but this supply is now shrinking. The other half comes from an aquifer that is falling by 1.5m per year.

Between now and 2010, when China’s population is projected to grow by 126 million, the World Bank projects that the nation’s urban water demand will increase from 50 billion m3 to 80 billion m3, a growth of 60%. Industrial water demand, meanwhile, is projected to increase from 127 billion m3 to 206 billion m3, an expansion of 62%.

In much of northern China, growing demand for water from industry and cities is diverting more of the Yellow River’s water at the expense of agriculture in the lower reaches of the basin. The reasons are purely economical. In China, a thousand tons of water produces one ton of wheat, worth perhaps US$200. The same water used in industry will expand output by US$14,000-70 times as much. In a country that is seeking economic growth and, even more, the jobs it generates, the gain in diverting water from agriculture to industry is obvious, says Brown. Unfortunately, nearly 70% of China’s grain harvest comes from irrigated land.

The Chinese Government is considering raising water prices to a level closer to market value. But, says Brown, this is as politically risky in China as raising gasoline prices is in the US.

Meanwhile, as China’s economy expands at a projected annual rate of seven percent, as it adds 12 million people a year, and as Chinese eat more grain-fed meat, the country’s need for grain will continue to grow. This, coming at a time when grain production will be falling in key producing regions as water shortages intensify, could make China the world’s leading grain importer, overtaking even Japan.

China has already abandoned its longstanding policy of grain self-sufficiency. After raising the grain support price by 42% in 1994 in an effort to remain self-sufficient, the leaders in Beijing have since acknowledged that the cost was too high, and they are permitting the price of grain to fall toward world market levels. They have also announced that in the competition for water, cities and industry get priority – leaving agriculture last.