Audit of China Grain Reserve to Uncover Hidden Dangers

How much grain does China's government have in its bloated reserves? Have local officials duped top leaders by inflating the numbers? Is the grain too rotten to be eaten? It will take more than a year for Chinese officials to get the answers through a massive audit of the sprawling grain reserve system. If it turns out that China doesn't have as much grain as officials thought, there is no promise that the audit results will be revealed to common Chinese citizens or to market analysts.

On July 13 China's State Council ordered a complete check-up of national and local grain reserves to find out the actual quantity, quality, and location of the grain. The program will be conducted in a series of steps that will take 15 months to complete by the end of September 2019.

On July 26, Xinhua News Service said the grain inventory check-up is urgently needed following the accumulation of grain from price support programs in recent years, “difficulties of managing the reserves,” and "hidden dangers" to food security. Xinhua formulate plans to dispose of excess stockpiles, formulate targeted policies and assign responsibilities to central and local governments, warehouses, and grain enterprises.

Some of the specific concerns can be inferred from the State Council document:

• Statistics on grain purchases and reserves reported to higher-level authorities have been inflated
• Warehouses receive subsidy payments and loans for holding grain that they don't actually have
• Grain was not deducted from reported holdings after being sold or transferred to another province
• An unknown proportion of grain held in inventory is inedible or even toxic--i.e., is a food security hazard

The main part of the program will be an audit of "policy-type" grain reserves held by various companies and a check of commercial grain inventories held by grain reserve companies (presumably branches of Sinograin, the government's grain reserve corporation). "Policy-type grain" includes:

• central reserves
• minimum price purchase reserves 
• national temporary reserves
• national one-time reserve purchases 
• local reserves

Inspection teams will be formed to check inventories of all warehouses controlled by Sinograin, other enterprises, and warehouses hired to hold reserves. The audit will check physical quantities held against what is on the books.

The grain reserve audit will begin with a pilot conducted in 2 pilot counties each in 10 provinces from October to January. Most of the national audit work will be conducted in March-May 2019 through filing of reports and onsite inspections, with final results reported to the State Council by September 2019.

Previous grain reserve checks were conducted in 2001 and 2009, Xinhua said. The results of previous grain reserve investigations have never been revealed to the public. The results of this one will be reported to the State Council, but there is no mention of reporting the results to the Chinese public to assure them that their food supply is secure.