Food Riots in China: It Could Happen in the Center of Global Manufacturing
You'd think weather that damaged Chinese grain and fruit crops would be an agriculture story. But in a global economy, food shortages, revolts against Middle Eastern governments, and contract manufacturing can all come together in a potentially nasty business mix that must be on the list for any corporate risk management.
Executives should be concerned that the response to sharp food price increases set off the revolt in Tunisia, especially as the UN warns of record high commodity prices generating unrest. There have already been protests in India. Although it is speculation, the conditions that could spark unrest in China exist now. Social disturbance could easily translate into difficulty in getting outsourced manufacturing completed or good shipped.
Food riots have long history in modern China. There were at least 547 incidents from 1901 and 1949. There were others in the 1950s when China exported food during domestic shortages.
In 2007 and 2008, food riots exploded in various parts of the world, including Mexico, Africa, Pakistan, and West Bengal, India. One reason was growing consumption by those in expanding economies of China and other parts of India, where higher incomes allowed people to purchase more staples and meat. The latter, in turn, drives up grain demand and prices.
Some argue that the idea of food riots in China is "ridiculous," because the country has introduced market reforms and world food production capacity exceeds demand because of effective subsidization by the West. However, current shortfalls in domestic production will force China to seek to import more food
China is already looking to stabilize price levels to head off unrest before it can happen. This might also be a factor in why the Chinese government has forbade media to discuss Egypt, as Asia Times notes:
To forestall anti-government riots in China, the CCP leadership has the past several weeks spotlighted the "close-to-the-masses" persona of senior cadres. Premier Wen Jiabao visited the Bureau of Letters and Complaints to talk to petitioners who have grievances against governments of different levels.It was the first time that a senior official had ever talked to petitioners, who are regularly harassed and even imprisoned by police and state-security personnel.The last time commodities spiked -- in 2007 and 2008 -- at least 29 countries sharply curbed food exports. As Keith Bradsher notes in the New York Times, Chinese grain imports have grown by nearly 38 times between 2008 and 2010 to 1.2 million metric tons. That is small compared to the many hundreds of millions metric tons produced globally. However, China accounts for upwards of 17 percent of that amount. Any domestic reduction could be hard to make up.
Again, this isn't something currently happening. But it is reasonably conceivable and a good topic for some strategic scenario planning.
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