The Peterson Institute for International Economics (PIIE) said that Russia created a crisis in food security and rising energy prices after its war against Ukraine, but that China – under the radar – has also taken actions that they exacerbated inflation in Worldwide.
“The Russian war in Ukraine has taken a heavy toll on the region and has also contributed to the global food crisis, as Russia blocks exports of vital fertilizers that farmers need elsewhere and Ukraine’s role as Africa’s granary has been destroyed, “PIIE wrote analysts Chad Bown and Yellen Wang and the Middle East. “
“But there is another underestimated risk to global food security,” they added in a note last week, referring to China’s restrictions and tariffs on two main subjects primefertilizers and steel, according to CNBC.
China’s restrictions have extended beyond food. The Washington-based think tank noted that the Asian giant, one of the largest steel producers in the world, has limited exports.
All these moves have pushed prices up in other parts of the world, according to the analysis, which shows that the problem with China is that it continues to behave like a “small country”. Its policies often have the desired effect in homeland – for example, by reducing input costs to one Chinese industry or group of farmers or by increasing yields to another group – where China chooses a policy that solves a local problem by passing the costs on to people elsewhere.
Prices of fertilizers
The prices of fertilizers in China and the world started to rise last year, due to strong demand and high energy prices, but they increased after the Russia-Ukraine war. In July, the authorities ordered major Chinese companies to stop exports of fertilizers “to ensure the supply of the domestic chemical fertilizer market,” the PIIE noted.
By October, as prices continued to rise, the authorities began to impose additional export controls.
And Reuters reported that the restrictions continued questyear and should continue at least until the end of the summer.
This combination of non-tariff barriers has led to a sharp decline in Chinese fertilizer exports. The analysis stated that as domestic production continued to rise, Chinese fertilizer prices had stabilized and had started to decline since then.
That is in stark contrast to the situation in around the world, the think tank said, where fertilizer prices have continued to rise more than double the levels seen a year ago.
China’s share of global fertilizer exports was 24 percent for phosphate, 13 percent for nitrogen and 2 percent for potash, before restrictions, according to PIIE.
The PIIE analysis states that China’s decision to withdraw fertilizer supplies from global markets “passes on the problem to others”.
He added that when there is less fertilizer, less food is grown, in one moment in which the Russo-Ukrainian war is already threatening the global food supply. Russia and Ukraine are the main exporters of crops such as wheat, barley, corn and sunflower oil.
“At such a critical time, China must do more, not less, to help overcome the potential humanitarian challenge that could arise. in many poor countries and food importers, “the report said.
Steel prices have also risen in China and the world over the past two years, as the country announced it would reduce its domestic steel production to meet its decarbonization targets.
In order to reduce high domestic prices, Chinese authorities lifted the ban on imports of steel scrap last year. They have even implemented some round export restrictions and increased export taxes on five steel products.
In March of questyear, steel prices in China were 5% lower than before the restrictions.
“But as in the case of fertilizers, these declines have come at the expense of the rest of the world, with prices outside of China even higher,” says the PIIE analysis.
Read More About: Business News