Thursday, February 25, 2010

Trials for genetically modified rice in Hubei

An article in Zhejiang Online discusses the controversial introduction of genetically modified rice and corn varieties.

The article says, "According to a February 25 Youth Times (Qingnian Shibao) report, genetically modified rice and corn varieties quietly passed national safety certification at the end of 2009, meaning that these products will soon end up on our citizens’ tables." The article says the public's attention was grabbed by the government's prominent support voiced in its "No. 1 Document" released this month which said, "Advance the industrialization of new genetically modified varieties using scientific assessment, on the basis of management according to law."

The new varieties are resistant to rice borers. They were created by inserting into the rice plant a toxic protein which kills the insects when they eat it.

Tu Yumin, now a professor at Zhejiang University's crop science research institute, spent over a decade developing the rice varieties--"Hua Hui No. 1" and hybrid "Bt Shan You 63"--which passed safety certification by the Ministry of Agriculture’s Genetically Modified Organization Safety Management Office last November.

Prof. Tu explains that the protein is toxic only to insects because it is not absorbed by receptors in the acidic stomachs of humans and animals.

The genetically modified rice will be sold in the market on a pilot basis in Hubei Province. Prof. Tu did most of the work developing it at Central China Agricultural University in Hubei.

A Zhejiang Province agricultural official says his province has no timetable for allowing genetically modified products in Zhejiang. He warns that the effects on the environment and human health are still vigorously debated by scholars. Even developed countries with longer experience with GM crops are hesitant to allow them into their markets. [Let those poor folks in Hubei be the first to eat genetically modified rice.]

The article describes some of the concerns about "breaking boundaries between species," effects on human health, upset of ecological balance, and the potential for big multinational companies to get monopolies through patents.

The advantages of genetically modified rice are listed. "Solving the grain shortage issue," increasing production efficiency, reducing pesticide use and pollution. Production and research costs are relatively lower than other breeding technologies. Genetic modification technology can increase food nutrition and raise value-added, and offering more types of food raises the quality of food.

The article says everyone agrees that consumers should have freedom of choice. All information about such technologies should be made public and products should be clearly labeled.

The article lists the steps for genetically modified varieties to reach the market:
1. Laboratory research. All research results are kept within the laboratory.
2. Intermediate experimental stage (2 years). Product is raised in small plots on research farms; it cannot contaminate species outside the farm.
3. Environmental release stage (3-3.5 years). Seed is planted in a large field outside the research station to produce a set quantity of product. This product is evaluated by feeding to lab rats and the reactions are observed. First they look for acute toxicity reaction; if a reaction is immediately observed, the experiment is discontinued. Then look at genetic toxicity, that is multigenerational verification. Ensure that long-term eating of rice doesn’t cause cancer, effects on organs, body.
4. Production testing stage (2 years). After planting, ensure that yields are high and stable, and it is actually pest-resistant.
5. Award of national safety certificate. After validation it can enter commercialization and use.

Genetically modified corn in soy shipment

Probably the corn seeds were inadvertently mixed in with the soybeans, but it's possible someone was trying to import them illegally. Translation of news article:

"[On January 11, 2010], the Binzhou [Shandong] branch of the Inspection and Quarantine Bureau found corn seed in a shipment of U.S. soybeans. Testing confirmed that the seed was genetically modified. Material from this shipment of soybeans has been destroyed according to regulations."

"It was learned that this was the first time genetically modified corn seeds were intercepted in soybean shipments by the Binzhou bureau. If this genetically modified seed entered China it could carry diseases like bacterial wilt, maize downy mildew, maize chlorotic mottle virus that could have serious effects on our country’s corn production. Binzhou Inspection and Quarantine Bureau activated contingency plans, carrying out strict quarantine and supervision of four companies in the region that import soybeans to prevent outbreaks of foreign diseases and pests."

Tuesday, February 23, 2010

New Feed Regulations Stoke Ire

In the wake of the latest melamine contamination revelations, China's State Council issued revised regulations to tighten control over the feed and feed additives industry. The new regulations were released for public comment February 20. Comments are due by March 15.

An opinion piece appearing on Chinese web sites describes the context for the regulations and complains that the State Council is using the melamine incident as an excuse to freeze foreign competitors out of the Chinese feed market. The regulations mainly tighten up the regulation and monitoring of feed products, but they include a provision requiring foreign feed companies to sell in China through local branches or agents. This appears to backtrack from China's WTO commitment to allow foreign companies to compete in domestic commerce on the same footing as domestic firms.

The opinion piece states that the reason for the regulations is the adulteration of milk products with melamine. The author attributes the problem to farmers adding melamine to feed or milk and feed mills doing it, sometimes to meet demands of farmers. He says that prior to the melamine incident farmers were getting caught in a cost-price squeeze and added melamine as the only way to make a profit. (At the time, farmers denied being responsible because they said they didn't know what melamine was.)

The author says that the Ministry of Agriculture feed association held a meeting a month after the melamine incident (October 2008?) where all agreed that a zero tolerance standard was unrealistic and they agreed on an industry standard of 15-20 ppm.

The author argues that it makes no sense to restrict foreign feed companies. The melamine problem was restricted to domestic companies and statistics show that China is the largest melamine producer in the world. The author claims that the government is always looking for chances to freeze out foreign companies as well as domestic private companies, pointing to previous examples in the steel, petroleum, and express delivery services. "State-owned companies work out the policies, shouting about industry security, national security, food safety, etc, so they can jump on the last car of the monopoly train."

The author concludes: "Melamine and foreign companies—which will be kicked out the door?"

Thursday, February 18, 2010

Noodles Pull Man Cross Country

This is a feel-good human interest story for the Chinese New Year holiday from a small-city newspaper that offers a window into the life of a rural migrant/entrepreneur. I was looking for something else when this story caught my attention.

Mr. Ding's photo from the Shangqiu Daily Newspaper

Mr. Ding Ximai was born in a village in Gansu Province. He's a member of the Hui ethnic minority--a Chinese muslim whose ancestors may have come across the silk road from the middle east centuries ago. At the age of 14, having finished primary school he faced grim prospects in an area where each family has an average of one mu of land per person (1/6 acre) and there are few other jobs. Like many others in his village, he left for Lanzhou, the provincial capital. Lanzhou is known for its "pulled noodles" usually served with beef. He got a job washing dishes in a noodle shop and after a year took off to wander the country as a purveyor of the famous Lanzhou pulled beef noodles, opening shops in Sichuan, Shandong, and Jiangsu Provinces.

Eighteen years later, while running a shop in Yangzhou (a mid-sized city in southern Jiangsu), he got a call from a friend from his village who told him that he should go to Shangqiu, a small city in Henan (near where Henan, Shandong, Anhui, and Jiangsu provinces come together). His friend said business is good and people are nice, so he gave it a try. You have most likely never heard of Shangqiu--and have no reason to--but dozens of photos posted on google show a big city with lots of new construction, bright lights, and giant sculptures.

Mr. Ding came to Shangqiu and rented a two-room shop of 80 square meters for 1800 yuan per month. It's in the downtown business district next to the "Dennis" shopping mall. Amazingly, a google map of the city turns up a photo of the street (see below).

The street where Mr. Ding's Lanzhou Pulled Noodle shop is located in Shangqiu. See the Dennis sign in the background?

Mr. Ding found that Shangqiu was just as his friend had told him. Business is good--he can clear 9000 yuan a month generally. He has been able to build a two-story house. He says the people are polite to him, no one has tried to over charge him, and the customers don't argue over their bills. A local master chef gave him four months of cooking lessons. He thinks the local people are nice to hime because they realize he's an outsider and it's hard to do business locally. Mr. Ding is so pleased that he has encouraged about a dozen other people from his hometown to set up Lanzhou Pulled Noodle shops in Shangqiu (the city's name translates as "Commerce Hill") and they are all doing well.

He's been away for two decades, but Ding has a wife and two school-aged children back in his home town. He sends money home every month to support them and his aged parents. He stays in Shangqiu during the holiday. Business is especially good then because the other restaurants close down. He generally goes home for a visit twice a year--once after the holiday and again some other time during the year.

When asked what his greatest hope is--business or family, he sort of answers "both." He says his top priority is to expand his shop so he can make more money. The more money he makes, the more he can send home. He tells the reporter that his older brother who went to university (leaving no money for him to go to school?) now works overseas and sends lots of money home. His brother's kids are able to go to good schools and have good prospects. This is what Mr. Ding aspires to. More money, for the family.

Wednesday, February 17, 2010

Agriculture: Biggest Polluter

On February 6, China released a communique reporting results from its first "pollution census" conducted jointly by the Ministries of Environmental Protection, Agriculture, and National Bureau of Statistics. As a number of journalists have reported, the census is the first estimate of emissions that includes agriculture and shows that agriculture creates more pollution than industry. There has been a lot of effort to bring industrial emissions under control in recent years, but agriculture was mostly ignored as a gigantic silent polluter. Environmental protection reports have been saying this for a while, but these are the first statistics showing this.

I pieced together data from different sections of the report to create the chart below showing sources of water pollution, measured by COD (chemical oxygen demand) emissions in metric tons. By this measure, agriculture is the biggest polluter, accounting for 42% of emissions. Processing and manufacturing industries (ag processing, food manufacturing, beverage manufacturing) are listed as major polluting industries as well. Adding these "value-added" industries, agriculture and related processing contributes about half of water pollution emissions. Big industrial polluters are textile and paper industries.

Source: Data from "Communique on First Pollution Census" Feb 6, 2010.

The biggest perpetrator appears to be the livestock industry. The communique reports estimated manure and urine produced by the industry which I have charted along with meat production for reference. Studies I've found in the Chinese literature estimate livestock waste far higher than this.

Source: Data from "Communique on First Pollution Census" Feb 6, 2010 and National Bureau of Statistics.

Is anybody paying attention? Yes! In December, the top leadership stressed the importance of rural environmental protection work for 2010. A big chunk of money for rural environmental protection was announced recently. A set of environmental "problem villages" has been targeted, and a mechanism for giving financial awards for environmental measures was set up a couple of years ago. There are dozens of pilot programs addressing all kinds of environmental problems.

Monday, February 15, 2010

A Private Land Exchange Venture

In recent years there have been a number of local government experiments in setting up rural land exchanges. The exchanges allow farmers to transfer the rights to operate their land (but not sell it). County governments have three-level systems that consist of a physical land exchange—a room in an office building with a big LED screen on the wall, a web site, database, and maybe a touch screen. Townships have land exchange offices and villages have an official in charge of collecting information from farmers who want to transfer their land.

Chengdu Scientific Land Ltd. Co. is an interesting private venture in the communist party-dominated rural land brokerage business. The company was started last year by four recent graduates of Southwest Minorities University. The company set up a web site,, which lists parcels of land and people and companies seeking land all over the country. The site lists dozens of parcels, showing the location, type of land, length of contract, desired rent, a photo and map showing the location. It includes small parcels of 1 mu or less renting for 200-400 yuan per year and large parcels renting for thousands. The site includes statistics showing average rents and number of listings by province.

The site serves as a platform to match farmers or collective organizations that are offering land for rent with people looking for land. The company encourages brokers to match up parties for a fee. Average rents for Beijing and Shanghai are 1,400-1,500 yuan (over $200) per mu per year, but the average is 300-400 yuan (about $50) in other provinces. The site claims to have 3000 registered users and transferred 4.5 million mu in 2009. This blows the communist party exchanges out of the water; most of them have turned over a few hundred mu.

The director of the Chengdu Rural Property Exchange, a local competitor, says the creativity behind the site is good, but he questions whether the company can verify the information on the site and prevent frauds. The site claims that it tries to verify the identities of people listing on the site and requires those offering land to present required certificates, but it posts a “buyer beware” warning. The company plans to provide verification and financial services eventually.

How long before the government shuts these guys down? Their web site is far better than any of the government exchanges and it functions with much lower up-front costs—no physical office building/trading hall, just a few guys with computers offering services nationwide.

Another threat is competition from other entrepreneurs. There are several other sites offering similar services. If succeeds copycats will spring up like mushrooms. initially is offering its service free. Will it be able to start charging if there are competitors?

Thursday, February 11, 2010

Thanks Dairy Farmers, Now Please Behave!

Below is a translation of "A letter to dairy farmers nationwide" issued by the Ministry of Agriculture Press Office. The context: starting in September 2008 the melamine crisis rocked the industry. The Ministry of Agriculture worked hard to deal with the crisis. Just when things seemed to be back to normal, the melamine crisis reappeared in the last two months, as several companies were caught selling melamine-tainted milk powder that should have been destroyed. Dairy farmers themselves were not directly implicated in the melamine problem, but they probably played a role. The rectification policies require farmers to use "modern" techniques, etc.

This letter is an interesting example of Confucianism in China's current government/party. It reassures farmers that their leaders are doing all they can to help them while appealing to the farmers' sense of duty to follow the rules so everyone will benefit. The dairy industry is an example of how the central authorities go to great efforts to set up an orderly system while at ground-level everyone quietly keeps doing their own thing.

My translation of letter follows...

Dairy Farmer Friends:
With Spring Festival approaching, the Ministry of Agriculture Dairy Management Office and China Dairy Industry Association bring you greetings and wish you the best!

2009 was an extraordinary year for our country’s dairy industry development. Facing the serious effects of the infant formula incident, the central commission of the communist party and State Council paid great attention, issuing many effective measures. Under the leadership of the party and state council, various departments, the majority of companies and the nation’s dairy farmers met the difficulties head on, meeting the storm together, through more than year’s hard work together, out country’s dairy industry made a fast recovery in 2009, and the industry is back on course, farmers’ profits are back up.
Dairy farmers are the central force of the industry’s development. The hard work of our country’s dairy industry is an inseparable part of the industry’s rapid recovery after heavy losses. The Ministry of Agriculture Dairy Management Office and China Dairy Industry Association would like to thank you for overcoming difficulties and contributing to the industry’s speedy recovery during this period.

Promoting healthy development of the industry, preserving farmer profits is the starting point for the work of government departments. In the new year, the State will continue the subsidy for fine dairy cattle breeds, subsidies for purchase of milking equipment, policy support for construction of standardized, commercial-scale dairy production zones, and continue improving the mechanism for jointly benefiting farmers and enterprises, giving more support for dairy farmer specialized cooperative organizations, supporting construction of dairy farms and production zones, strengthening technology guidance and service, raising the level and capacity for public services, promoting dairy industry transformation and modern dairy industry development.
The dairy industry is becoming a shining new industry with great prospects. Promoting its healthy development is our responsibility and our obligation, and every dairy farmer has a stake in it. It is hoped that most dairy farmer friends will continue to do a good job in raising dairy cattle according to requirements in “Dairy Product Quality Supervision Regulations” and “Dairy Industry Reorganization and Revitalization Plan,” using scientific methods, maintaining a good quality structure of dairy herds, using standardized production, raising the level of husbandry, protecting quality and safety in dairying, ceaselessly raising the quality of milk for the development of our country’s dairy industry and the health of the masses.

A new year, new hope, new atmosphere, the Ministry of Agriculture Dairy Management Office, China Dairy Industry Association wish all our country’s dairy farmer friends a happy “year of the tiger,” health, and luck!
Ministry of Agriculture, China Dairy Association, February 10, 2010

Friday, February 5, 2010

Revive Rural China in 27 Simple Steps

China's "Number 1 Document" for this year--the seventh year in a row that it has focused on rural issues--portrays a very ambitious plan for addressing rural problems. It goes on for pages and pages and covers agricultural markets, science and technology, seed companies, rural finance, land, cooperatives and agribusinesses, harmonizing rural and urban development and much more.

Chinese authorities published the graphic below (probably available as full-color poster to decorate communist party office walls nationwide) as a summary of rural policies for 2010. Rural policies have been whittled down to 27 points divided into five sections. Each point represents a whole set of policies, pilot programs, and subsidies. I think this corresponds to the Number 1 document's organization. A translation is below.

2010 Central No. 1 Document
Five-sided Solution to New “Three Rural” Issues

I. Establish and strengthen a complete rural policy system, mobilize rural resources
1. Continue expanding national agirulctural and rural investment
2. Improve agricultural subsidy system and market control mechanism
3. Increase rural financial service quality and level
4. Guide social resources to invest in agriculture and rural areas
5. Open up the rural market

II. Modernize agriculture, promote the transformation of the mode of agricultural development
6. Stabilize development of grain and agricultural commodities in general
7. Build water management infrastructure
8. Build high standard fields
9. Raise agricultural science innovation and extension capacity
10. Establish a complete agricultural commodity system
11. Pursue ecological safety

III. Speed up the improvement of rural life, reduce urban-rural differences in development
13. Enthusiastically promote rural employment creation
14. Raise rural education and health and cultural level
15. Raise rural social insurance level
16. Strengthen rural water, electricity, road, gas, and housing construction
17. Continue poverty alleviation work

IV. Coordinate urban and rural reform, strengthen agricultural and rural development
18. Stabilize and improve rural basic operation system
19. Orderly advance rural land management system reform
20. Raise agricultural production operations organization level
21. Reform forestry
22. Continue deepening rural general reform
23. Advance urbanization development system and innovation
24. Raise agricultural external openness

V. Strengthen rural grassroots organization, strengthen the Communist Party’s basic legal enforcement and administration in rural areas
25. Strengthen and improve rural grassroots party construction
26. Advance and improve rural grassroots governance mechanisms according to national conditions
27. Maintain rural social stability

More Farm Subsidies in 2010

A Xinhua News Agency release says that this year's agricultural subsidies will be 86.7 billion yuan (about $12.75 billion). This includes 15.1 billion yuan for direct subsidies to grain farmers and 71.6 billion yuan for the general input subsidy. This doesn't seem to include the other two major subsidy programs--machinery and fine seed subsidies--which are expected to increase. Peoples Daily says the central finance grain direct subsidy, input subsidy, machinery subsidy, and fine seed subsidy totaled 123.1 billion yuan last year, an increase of 19.4%.

The Ministry of Finance requires local governments to get the subsidies to farmers quickly (usually by April 1--before planting), supervise the process closely, and fine tune methods for distributing the payments.

Peoples Daily announces this year's greater support for farmers included in the No. 1 document that was made public this week. Last year central financial authorities allocated 716 billion yuan ($105 billion) for rural affairs, up 120.6 billion yuan from the previous year and a new record.

This year the kinds and scope of agricultural subsidies are being extended "so more farmers can feel the warmth of the strong policies to benefit farmers."

The 2010 No. 1 Document announced that subsidies for good potato seeds will be expanded, and new seed subsidies for a type of barley grown in Tibet and a peanut seed subsidy pilot. The machinery subsidy will be spread to more kinds of cultivation, livestock, forestry and irrigation and water-saving machinery. Previously the machinery subsidy was given in grain production areas, but now it will be spread to livestock production areas (probably milking equipment), forestry, and land reclamation areas.

The no. 1 document calls for minimum prices and market interventions to protect farmers' incomes and maintain production incentives. It calls for a minimum price procurement of wheat (1.8 yuan/kg white wheat, 1.72 yuan/kg for red and mixed wheat) and a higher minimum price for rice (not specified). There will be larger grain reserves in consumption areas. There will also be reserve purchase intervention programs for corn, soybeans, and rapeseed, and market control plans for cotton, sugar, and pork. Set up a national auction system for reserve commodities.

How Melamine Got into Candy Last Year

Police in Shaanxi Province have announced the results of their investigation of how some melamine-tainted milk powder spread across the country last year. They have jailed three suspects (a fourth had a heart attack) and claim to have destroyed the powder that they tracked down. Some powder was sold to consumers in Shaanxi in 2008 and some candy made last year with tainted powder in southern China has been recalled.

The Public Security Bureau of Shaanxi Province held a press conference in Weinan, a northwestern region of China, to announce the results of the investigation (and reassure the public). They laid out a complex trail of purchases and sales that originated in Weinan, led to candy factories in southern China and ultimately to stores in northeastern provinces.

The chain of events started with 30 tons of milk powder produced by the Lihua dairy company in Dali county between April and August 2008.
-They sold 20 tons to an individual named Ma Shuanglin. Authorities found that Lihua's records failed to include this sale.
-Another 3.4 tons were sold locally through retail channels, and another 6.6 tons remained in inventory and supposedly were destroyed in Janury 2009.

Ma Shuanglin sold 10 tons of tainted milk powder to the Lekang Dairy Co. in Weinan a year later, during September-October 2009 (no explanation of what happened to the other 10 tons). The Lekang manager instructed the production manager to mix the powder with other powder at a ratio of 1:2.5 to produce 32.5 tons of milk powder.

Lekang sold 28 tons of this powder to Longxin Food Co. in Guangdong Province.

Factory of Lekang Dairy Co. in Weinan, Shaanxi

Longxin Co. then sold 25 tons to Xiangcheng Nanfang Co. in Fujian Province (Zhangzhou City). It sells products all over China.
Xiangcheng Nanfang produces milk-based candy under the "Little White Mouse" brand (presumably an imitation of the famous "white rabbit" candy).
The company:
-used 10.4 tons to produce candy which reportedly contained 0.8 tons of melamine.
-sold 3 tons to Zhenmei Co. in Guangdong which used 1.1 tons to make candy and still had 1.9 tons of powder in inventory.
-still had 14.6 tons of powder in inventory.

Most of Xiangcheng Nanfang's candy had been sold and has been recalled. Candy in inventory has been seized.
They claim to have destroyed powder in inventory last month:
14.6 tons held by Xiangcheng Nanfang Co.
1.9 tons held by Zhenmei Co.
4.5 tons held by Weinan Lekang Co.

Mr. Ma and two managers from Lekang are under arrest. A sales manager of Lekang is reported to have serious hear problems and is out on bail. The public security bureau attests to its resolve to protect peoples' health, preserve food safety, and crack down hard on criminals who create food hazards.

According to another article, more than 50% of the problem candy produced by Xiangcheng Nanfang Co. was sold to the northeastern provinces of Liaoning, Jilin, and Heilongjiang and is now being recalled. It is reported that 300-400 cases were sold and have probably already been purchased by consumers. The candy produced by Zhenmei in Guangdong has been recalled.

An electronic bulletin board entry asks, "How will the company compensate consumers who already bought the candy?" "Why is the product called 'White Mouse'--can consumers be used as laboratory mice?"