Well China actually didn't import rice in decades from India, despite India being the biggest exporter of rice. It instead got rice supplies from Vietnam, Myanmar, Thailand and of course Pakistan. But COVID hit all these countries full blast, cutting off their surplus rice reserves. Ergo, China needed rice and decided to get it from India. Sounds simple right. But read more in detail about the social and political as well as business and trade ramifications of this move in this article. Or go through our analysis!
Why is this relevant to an MBA student?
Well no matter whether you're interested in finance, strategy, consulting, operations and supply chain or marketing, this is a relevant bit of news as at the core it's about demand and supply.
So let's understand the problem a bit. China is also an agrarian country and produces rice in vast amounts. But their demand for rice far exceeds their national supply. Which is why China is one of the biggest importers of rice. Their rice consumption is also due to products they make from rice, like rice wine and noodles. Now here's the thing. China faced various challenges apart from this pandemic. There was a flood, locusts, an African swine flu that killed off pigs, etc. The death of pigs en masse meant a shortfall of pork in China, another food staple. This led to inflated prices. The Government then opened their reserves to supply rice to the market. But over sometime, their emergency reserves were also coming to a depletion. Hence the need to find an importer real quick.
Enter India. India's rice production has been high this year, meaning we are importing rice at deep discounts (also we have a cash strapped economy). China therefore had to import from India after decades. But that's not all. There's another poignant reason why China's rice shortfall is something to take note of. China's agrarian economy now comes second to industry and urbanisation. Since 1949, China has lost one-fifth of its agricultural farms and it now faces the daunting task of feeding 22% of the world population with only 7% of the global arable land. Their solution now includes buying arable land in African, South American & ASEAN nations for cultivation. They've already invested around 94 BN USD in this endeavour.
Meanwhile there's also a 3rd angle to this story. China has a notorious habit of wasting food. China generates 17-18 million tonnes of food waste annually. There was a time when the Chinese suffered through famine in the 50s and 60s. Since, with disposable income rising, the possibility of wasting food has also increased. The Government blamed this habit as a reason for the nationwide food crisis and implored citizens to practice mindful eating. But the food shortage had to be controlled. And so China had to import from India.
What do you think this shows us about the workings of demand and supply? How would you solve China's food crisis? And what lessons does this incident leave you with? Share your thoughts and learnings in the comments below.
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