China announced major changes in its direction of agricultural policy.
Each year China sets out policies in its No. 1 Document. The 2017 No. 1 Document was unique because it marked a clear directional change for Chinese agricultural policy. The emphasis of the new policy direction is on supply side reform. The longevity of the reforms in the 2017 No. 1 Document was unclear, but the 2018 No. 1 Document and Rural Revitalisation Strategic Plan 2018–2022 confirmed a continuation of the 2017 reform direction, with an emphasis on the revitalisation of rural areas. This report provides a qualitative assessment of the reforms, focussing on the 2017 announcements.
The changes feature principally supply-side structural reform of Chinese agriculture.
Broadly speaking, the reforms described in the 2017 No. 1 Document include industrialising agriculture, increasing the size of farms, identifying regions for production specialisation, broadening the range and quality of crops, improving the quality of livestock products and using international markets to complement domestic supply. Commodity-specific policies include reducing corn production and stockpiles, continuing the market pricing of corn, maintaining current production levels of pork, rice and wheat, and raising sheep, goat and beef production.
Reforms are also regulatory, with a major focus on food quality and safety rules.
Food safety and quality are a major focus of the new policies. Other institutional policy adjustments include strengthening international agricultural cooperation and strengthening scientific research.
The outlook for Australia's grain exports to China is mixed.
Moves to improve production specialisation and grain quality are expected to make Chinese grain more price-competitive and could soften demand growth for Australian grain for milling purposes. On the other hand, livestock sector developments should increase demand for imported feed wheat and barley once China's corn stocks have fallen from elevated levels.