Saturday, June 16, 2007

China's Strategic Reserves

The US government has long maintained a strategic oil reserve. It's a large quantity of oil that can be made available to offset supply disruptions in the event of emergencies.

China, too, has a strategic commodity reserve only the Chinese aren't hording oil but pigs. And right now the Chinese government has opted to dip into the strategic porker reserves to stave off potentially destabilizing food price increases.

What's behind China's recent spate of food price instability? Asia Times reports that the culprit is ethanol:

"Current hikes in both grain and pork prices are blamed on the same culprit - the ethanol industry, whose explosive growth has been gobbling up a growing share of China's corn (maize) harvest traditionally preserved for food and animal feed.

"Having promoted the production of the environmentally friendly gasoline additive for years, Chinese economic planners now fear the sector has grown too much and too quickly, presenting them with an uncomfortable dilemma of choosing between the country's green agenda and its national food security.

"Pig feed, which is made mostly of corn, simply followed increases in corn prices. Prices of the commodity have risen by up to 30% since the latter half of last year, according to the ministry.

"What is more, producers have ignored a government limit on converting about 3 million tonnes of corn into ethanol a year and used up to 16 million tonnes of the crop in 2006, the ministry said in April. China has been encouraging the production of biofuel such as ethanol and bio-diesel from renewable resources to satisfy the country's voracious appetite for energy and reduce its growing dependence on imported petroleum. "


Anonymous said...

I'm so glad to see you write some positive things regarding China's desire to find other methods of fuel....or maybe not so positive in the long run as you put it. But the Chinese must be applauded for their efforts. They are also using any kind of animal fat to also produce biofuels including pig fat. Cooking oils are being reused for alternative fuel as well. Everywhere a person looks, there are solar panels installed on all newly built buildings and they are also being attached to other older buildings. The Chinese are doing much better in their war on becoming selfsufficent than we are here in North America. The Chinese know they must do something about their air pollution problem to protect their 51% population aged 15-24. There is only 7% of the population that is 60-65 years of age. Keeping the 15-24 age group healthy is their aim....what a huge upcoming labour force compared to our own. The country that needs to be addressed regarding lackadaisical attitudes toward the earth's sores is India.

The Mound of Sound said...

The Chinese are balancing on a razor's edge in their march to industrialize. I'm not sure that their top-down system is agile enough for the task of wrestling their pollution problems into some liveable state. I expect the Chinese leadership understands the problem facing their society, at least in general terms, but there are a lot of power and control issues that could pose real hurdles to meaningful action. This is a political structure that's already challenged by adopting a Western economic model and transforming it into state capitalism.