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 products affected by the war in Ukraine, experts say.

Beijing is promoting the development of agricultural supply and marketing cooperatives and state canteens to help the government control the supply of key food products as relations between China and Western democracies deteriorate. Canteens are similar to university cafeterias with limited offerings and prices that officials in Beijing consider affordable.

Xia Ming, a professor of political science at the City University of New York, told VOA Mandarin in a telephone interview on November 4: “The emergence of supply and marketing cooperatives is often a product of economic scarcity. Today, China is clearly facing a large number of economic crises. If these crises lead to economic scarcity, the country must control the situation, especially these basic supplies, for the sake of stability.”

Wen Guanzhong, an emeritus professor 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 actually going down a path that is the opposite of the path of deepening comprehensiveness by the market, he also knows that relations will China will become increasingly tense with countries around the world, especially Western countries. He hopes to re-establish the CCP’s (Chinese Communist Party) overall control over society, including control over 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 that, “I think the CCP’s ambition and desire to use force against Taiwan could be implemented very quickly. Canteens, Supply and Marketing Cooperative they can control social materials and food supply during war, which is the best way for China.”

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

In 2014, there were 696 cooperatives in the province, down 61% from a peak of 1,800 in 1984, according to a Nov. 2 report in the state-run Beijing Business Daily (BBD). Across the country, 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 a member of the CPC Central Committee. After the congress, the agency immediately issued a job bulletin, which experts saw as a sign that China’s future economic development will be led by a government focused on improving self-sufficiency and economic security.

Global food crisis

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

Xia said China is looking for alternative sources of grain due to strained relations with Western exporters such as the United States, Canada and Australia. Beijing fears that if these exporting countries cut back on sales to China for geopolitical reasons or to meet their own domestic demand, prices could rise across China and cause discontent in the country.

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According to Reuters, the IMF said in September that disruptions to global grain flows caused by the war in Ukraine had fueled the worst food security crisis since the 2007-2008 global financial meltdown.

Xia said China’s refusal to publicly condemn Russia for its invasion of Ukraine in February has exacerbated Western democracies’ dissatisfaction with China.

“When China wants to team up with Russia and fight the West, I think it will prepare itself for many food and energy security crises,” Mandarin told VOA. “So if he wants to be hostile to Western countries or use wolf warrior diplomacy, I think he has to deal with (the consequences).”

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

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

In 2021, Beijing proposed a pilot project of comprehensive “three-in-one” cooperation in the production, supply and marketing of food products that included loans to farmers and distributors. About 49,000 civil servants supervise the entire system of procurement and market cooperatives starting at the county level, according to the official website.

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

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Concerned consumers

Consumers are worried that Beijing’s new focus on supply and marketing cooperatives and canteens could be the death knell for the current market-oriented shops and restaurants, which contribute to the growth of the private economy.

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

Officials added that the community pilot projects, including building a canteen, “are not mandatory, not everything on the file needs to be tried.”

Wen said the difference between the old cooperatives and today’s “depends on how private enterprises will be treated in the future, whether they will be restricted or whether privileges such as monopoly power will be given to state-owned supply and marketing cooperatives.”

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

He said: “Just like canteens and supply and marketing cooperatives in the old days, it is impossible to have the vitality of a market economy after the return to a planned economy. … Only the most basic meals, or the most basic food and services can be provided, which will definitely affect the living the standard of the Chinese people.”

Adrianna Zhang contributed to this report.

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