Thousands of Chinese corn farmers aren’t getting paid this month after China’s largest corn refinery, Global Bio-Chem Technology, suspended operations, the Financial Times reports. The refiner’s fate is tied up with the country’s propped up corn prices, which Beijing keeps at a level higher than global prices, a policy that “destroy[s] margins for corn processors, feed companies and other private agricultural firms that are the mainstay of the rural economy.”
On the ground, this is what China’s economic mess looks like. Back in the glory days of yesteryear, stuff like this didn’t happen — the rising tide lifted all boats, even leaky ones. But it is very hard to run an economy that is partly state-controlled and partly market-driven; distortions like the corn bubble are sort of baked into the cake. Of course, it is very hard to turn a communist system into a capitalist one, and as China repeats its familiar pattern of promising Singapore-style reforms and then backing away from them, a saying popular in 1990s Poland comes to mind: It is much easier to turn an aquarium into fish soup than to turn fish soup into an aquarium.
China’s push to be as resource independent as possible points to a specific underlying weakness to which people, hypnotized by the country’s apparently rapid growth, don’t always give enough consideration. Compared to the U.S., China has a very slender resource base. China has seven percent of the world’s arable land, but twenty percent of the world’s population. The country is bigger than the U.S., but has one-sixth the amount of arable land per capita. China’s resulting heavy dependence on imported food is a huge geopolitical weakness, and would be a serious vulnerability in the event of a confrontation with the U.S. No wonder, then, that the Chinese are looking at all kinds of ways to expand agricultural production, and that makes this corn disaster particularly bad news for Beijing.