A customer wearing a face mask buys flour in a supermarket on May 12, 2020 in Taiyuan, Shanxi Province in China.
Zhang Yun | China News Service Getty Images
China has built up its food and energy reserves this year, taking advantage of falling crude oil prices before the coronavirus pandemic disrupted supplies.
The world's second largest economy, with limited farmland, is under pressure to support its food supply as food prices began to rise before the virus broke out last year.
Locks and restrictions on movement to contain the corona virus have triggered transport and logistics bottlenecks.
These blockades have highlighted the vulnerability of global supply chains, and the fear of food shortages has come to the fore in both developed and emerging economies.
Fear is a powerful motivator. It is currently the driving policy in China. Goes well with hardliners who want to rebuild food reserves.
Chief Resource Economist at INTL FCStone
China's consumers are concerned about the wider impact of the pandemic, which is spreading worldwide.
"The people there (in China) are panicked that the corona virus will eventually close the world's ports, making imports impossible," said Arlan Suderman, chief economist for raw materials at INTL FCStone, in a tweet on Monday. "As such, they're now hoarding supplies as long as they're cheap and available."
"Fear is a strong motivator. It is currently driving politics in China. It fits well with the hardliners who want to rebuild food reserves," he added.
Food prices are rising
China is the world's largest consumer of pork, a staple in the country.
In the first four months of the year, meat imports in China increased by 82% compared to the previous year. This includes pork, beef and poultry.
"We expect food stocks to continue, particularly in cities that are experiencing logistical disruptions. The combination of expected food price increases with an economic downturn and rising unemployment will increase the risk of unrest," said Kaho Yu, Senior Asia Risk Analyst at Verisk Maplecroft, a consultancy.
Food inflation in the country has already risen.
China announced last Tuesday that food prices in April rose 14.8% year over year. Although it was lower than the 18% increase in March, it was still at a high level.
Pork prices rose nearly 97% in April, which has been a continuing trend since early 2019 due to the African swine fever epidemic in pigs that decimated China's herds of pigs.
In comparison, non-food prices rose only 0.4% in April, according to official government data.
Hundreds of millions of chickens at risk of extinction, with much of China blocked by viruses
Soybean stocks are particularly vulnerable to supply shocks, as China, the largest importer of the commodity, needs oil seeds to produce animal feed and cooking oil.
In April, China's soybean imports declined 12% year over year, according to customs data. Due to the bad weather, the loads of the top supplier Brazil were delayed.
In rice, China is the world's largest staple producer, with most of its supplies being consumed domestically.
Nonetheless, concerns about the food security of the basic grain have led to panic buying and prompted the state to buy more stocks from the market for its national reserve.
In April, the Chinese authorities assured the population that they were boosting the government's purchase of rice and that there was sufficient stock, the state-run Xinhua news agency reported.
"We expect China to continue storing grain over the next six months to ensure adequate supplies by scanning the globe for available supplies," Yu said in a recent report.
The consultancy places China in its "high risk" category with regard to the safety of food imports, which means that its food imports may be disrupted.
Crude oil reserve building
China has also built up its crude oil supply and experienced a buying frenzy in the first quarter of this year, as data show.
Although crude oil imports decreased in April compared to the previous year, they continued to increase from March. However, analysts say that limited storage options could limit imports.
China is expected to continue importing crude oil to fill its reserves and take advantage of lower oil prices.
Senior Consultant at Wood Mackenzie
"It is known that large crude oil importers like China build their strategic reserves when prices are low, as seen in previous oil price routes," said Lei Sun, senior consultant at Wood Mackenzie, in a March report. "China is expected to continue importing crude oil to fill its reserves and take advantage of lower oil prices."
However, due to the limited storage capacity, the country has less space for imports than in the past two years, he said.
Since the supply lines continue to be interrupted due to the outbreak of the corona virus, Yu from Verisk Maplecroft expects Beijing to double as additional storage capacity is built, in addition to energy development at home.
"Energy is also a key component of the country's economic engine. During the pandemic, Beijing gave priority to maintaining a stable supply of coal for industrial production," Yu said. "We also expect Beijing to accelerate the resumption of major energy infrastructure projects."
Food and energy come first
Food security has always been important to China, but the pandemic has underlined these concerns.
In April, President Xi Jinping spoke several times about food and energy security, Yu said.
In the same month, government agencies – such as the China National Development and Reform Commission, the National Food and Strategic Reserves Administration, and other ministries – released a policy statement to ensure adequate food production, storage capacity, and logistics, Yu said.
Also in April, the China National Energy Agency published a list of policy areas to focus on this year. This included power supply, networks, oil and gas infrastructure and coal projects.
The developments underlined the government's concerns, he said.
"Both the rhetoric of Xi and the related policy announcements from various ministries show how high food security is on the government's agenda," Yu said.
"All aim to avoid potential pandemic supply bottlenecks and increase self-sufficiency with critical resources in the long term. The interruption of trade and industry by COVID-19 has revived the Chinese leadership's longstanding concerns about resource security."