May 9, 2015

Eleven Chinese provinces and municipalities that are home to 510 million people and five of the country’s top agricultural provinces, have water resources that fall below the poverty mark set by the World Bank, and currently 61.5% of China’s groundwater is too toxic to touch according to the Ministry of Land and Resources. Not only is it too dangerous for agricultural use and drinking, but too dangerous for any human contact at all. This fact shines light on not only the fallout from China’s rapid industrialization, but China’s disadvantage and vulnerability when it comes to food security.

The condition of China’s water supply is now so tainted that it is affecting not only agriculture, but energy markets, and even the trade policies of foreign countries as China is now placed in the position of needing to rely on imports of oil, natural gas, iron ore, and increasingly, food.

This increasing reliance on imports by China has led Geoff Raby, former Australian ambassador to Beijing to label the country as ‘a constrained superpower’ and less of a regional threat.

The not-for-profit group, China Water Risk believes that the North China Plain region will be faced with having to pipe clean water from the south unless the country completely stops producing pork – a move that many see as unlikely, but not so for a shift to relying on imports for the bulk of its pork supply.

This occurrence would have a profound, and politically sensitive impact upon numerous global food markets. It would open up an enormous pork market for Canadian, EU, and Australian producers, and it would drive up the price of grain, which in turn would push up the price of poultry, beef and eggs.

Across wider markets, the lack of fresh water will also likely hamper China’s shift to nuclear power generation as fresh water is needed by reactors for cooling, and will also speed China’s turning away from coal-fired power which requires a great amount of water, causing the country to rapidly adopt energy generated from solar, wind or gas.

For China to address its water contamination head-on, it is estimated that clean-up will cost US$1.04 trillion – five times the cost estimated to clean up the country’s air pollution according to Ma Jong, dean of environment studies at Renmin University in Beijing. The ramifications of this expense will affect every aspect of the Chinese economy as funds will need to be diverted from other areas in need.

Given this combination of factors, global agribusiness players should consider that China is not only increasingly becoming an importer of food, but is increasingly becoming an importer of water through increased volumes of soft commodity shipments.

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