BEIJING, March 17 China's top agriculture bank
has urged Beijing to speed up the sale of its state grain and
cotton reserves, now at record high levels, to help ease the
bank's mounting debts, state media reported on Monday.
The Agricultural Development Bank of China, one
of the country's three policy lenders, provides the financing
that allows big state firms to stockpile farm products,
including grains, cotton and sugar - a key part of China's
policy to boost rural incomes.
Beijing's stockpiling policy distorts the domestic market by
setting artificially high prices for grains and cotton,
encouraging buyers to turn to cheaper imports, the bank's
president Zheng Hui told the official Rural Financial Times.
The policy also encourages smuggling as buyers and
suppliers try to get round China's strict import tariff and
quota system, he said.
As the government's expensive stockpiles expand, the bank
has been put under "unprecedented pressure and difficulty" when
it comes to capital flows and management, Zheng added.
Zheng also urged Beijing to restrict cheap imports and to
reduce its bidding prices for domestic agricultural commodities.
Alternatively, it could offer tax incentives to domestic firms
in order to boost reserve sales, some which were already
deteriorating in quality, he said.
Any big sales of China's state cotton and soy reserves could
dent imports and put pressure on global prices, given China is
the largest buyer of both commodities.
In 2013, loans for stockpiling farm products accounted for
70 percent of the bank's total loans, and returns have been too
low even to cover its costs and risks, "which is not beneficial
for the bank's sustainable development," Zheng was cited as
With state cotton stocks now higher than China's annual
consumption levels, loans used to stockpile cotton have reached
their rate highest ever, he said.
China, the world's second largest consumer of corn, plans to
add 60 million tonnes to its state corn stocks in 2013/14, in
addition to the 30 million tonnes stockpiled during the 2012/13
marketing year, said an official think-tank.
The world's top cotton consumer will also have an estimated
12.5 million tonnes of the fibre in its reserves, or nearly 60
percent of global stocks, after adding more than 6 million
tonnes in the current marketing year.
The record stockpile rate has also put the country's storage
capacity under pressure. Heilongjiang, the country's top soy and
corn growing region, has a 15 million-tonne shortage of grain
storage capacity while the top rice grower of Hunan needs to
find an additional 3 million tonnes of storage space this year,
Beijing has already expressed its commitment to end its
stockpile policy for cotton and soybean this year and replace it
with direct subsidies, but the stockpiling of grains will
continue in order to meet the country's food security
(Reporting by Niu Shuping and David Stanway; Editing by Richard