Article published in
World Grain Magazine
Jan 1999 Issue
Understanding the grain industry in China is as difficult as understanding Chinese politics, and can be as confusing for Chinese as it is for foreigners. Indeed, the Chinese grain industry is one of the fundamental components of the political system as it has been historically, and it remains an arena in which political careers can quickly rise and fall. Both the maintenance of adequate grain stocks, and the avoidance of discontent amongst the population, have for a long time been perceived as pre-requisites for stable government in China.
Premier Zhu Rong Ji's recently announced plans for massive government expenditure on the expansion of the country's grain storage capacity is not only part of the Central Government's spending drive aimed at propping up the country's declining rate of economic growth, but goes hand in hand with new controls on the marketing and distribution of grain.
The new "Storage Project", as it is called, falls hot on the heels of the yet-to-be-completed World Bank GDMP (Grain Distribution and Marketing Project) which, with a $US 1 billion budget, must have ranked as by far the largest grain storage project in history, involving the construction of some 5 million tonnes of new storage together with widespread infrastructure developments. (See WGM's April 1996 issue). The Storage Project goes far beyond these numbers: with a budget of some RMB 18 billion (over 2 billion US dollars), the planned construction is for no less than 25 million tonnes of new storage.
Staggering though these figures may appear, even more amazing is the rate of progress that is being achieved on this new project. The first announcements about the project were made no more than 12 months ago when the planned expenditure was first mooted, together with a time-frame that required the entire project to be completed by the end of 1999 (a period of no more than two years). At the time, few regarded the plan as feasible, and most expected that (as so often happens in China) it would be dropped before it reached implementation. But, as China Daily reported this week (just 12 months after first mention of the plan) "China's ambitious plan to expand or build 388 grain warehouses to store 25 million tonnes of grain on State Reserve is proceeding smoothly. More than half the construction projects were underway by the end of October, with the rest proceeding". Compared to GDMP, now in its 6th year of implementation with at least another year before completion, this is a truly remarkable state of affairs.
To be fair, progress on GDMP has been slowed by its focus on introducing new technologies aimed at facilitating the movement, rather than the storage, of grain. It has taken time for the Chinese industry to come to terms with some of the new ideas that GDMP has brought with it, and delays have arisen through the Bank's close supervision of the project which has been aimed at ensuring its integrity and suitability for purpose. By comparison, much of the Storage Project funding is being spent on traditional unmechanised warehouse storages which are quick to design and construct, though more intensive in the use of in land and labour than GDMP's mechanised silos. Nevertheless, the Storage Project incorporates a significant proportion of mechanised silo storages, some of which are remarkable in size and scale. Some 20~25% of the total new storage capacity is expected to be in the form of silo storage, most of which will be "squat" silos (large diameter with relatively short walls). Examples of these are to be seen being constructed in the new Beijing Central Grain Depot in Changping (approximately 30 km north of the city close by the Ming Tombs), where 14 x 30 metre diameter concrete silos are being constructed with a capacity of 10,000 tonnes each (see photo 1). The rapid rate of construction (started in August and already four silo walls are completed) contrasts with the construction of the depot itself and its unfinished 50,000 tonne silo block being built as part of GDMP, construction of which began in 1995.
Even more prestigious components of both the GDMP and the Storage Project are in progress at the new Dalian Beiliang Grain Terminal just outside the port city of Dalian, at the southern tip of Liaoning Province in the North East of the country. Two and a half years ago, Dalian Beiliang was a poor fishing village perched on the edge of a mountain barely visible to and largely unknown by the inhabitants of Dalian City. Since then, under GDMP funding, the mountain itself has disappeared, being transformed into a new breakwater and land-fill area; new wharves have been constructed to service vessels of up to 80,000 DWT; a new 12km rail connection has been constructed including a 1 km tunnel, and a new 400,000 tonne silo block has been constructed. The speed of the construction work for such a large and complex project has been amazing, and the scale of the work is stunning by any standards that are normally associated with grain storage projects. When completed, the Phase 1 (GDMP funded) component of the new Dalian Beiliang terminal is planned to ship 9.3 million tonnes of corn annually from the North East provinces (for consumption in central and southern China) and to simultaneously import 3 up to million tonnes of wheat per year for consumption in the North East. Such rates will be achieved with the two 2000 tph ship-loaders and two 1000 tph ship unloaders. Several kilometers of rail tracks have been constructed within the terminal complex to handle the ten 2,500 tonne (45 wagon) unit trains that are expected to bring the grain to the port each day. Emptying of these trains will be carried out on-the-move through two large dump hoppers currently under construction. One hundred and forty 3000 tonne concrete silos have been constructed to service these throughputs, each of which will have an average grain turn-around time of no more than 15 or 20 days. (See photos)
Whilst the scale of the GDMP component of the Dalian Beiliang project is impressive, the Phase 2 component funded through the Storage Project, is, from a grain storage point of view, even more-astonishing. Construction began in August, and already the walls of the ten of the planned 20 new silos have been constructed, each 32 metres diameter by 45 metres high (see photos). Each of these enormous silos will hold close to 30,000 tonnes of grain which (it is believed) will make them the largest vertical silos in the world. Furthermore, their construction will take the total storage capacity of the Dalian Beiliang terminal over the 1,000,000 tonne mark, which will just exceed that of Kwinana in Western Australia: this should give Dalian Beiliang claim to be largest grain terminal in the world. Should there be any doubt on that score, Dalian Beiliang's Phase 3 project, involving the construction of a further 300,000 tonnes of storage, should dispel any further argument. It is understood that construction of the Phase 3 storages will begin in the near future, once detailed design has been completed, though it is unknown at this stage whether they will consist of silos or warehouses.
The Storage Project replaces Premier Zhu's earlier plan to boost employment and utilize existing infrastructure by converting defunct government factories into grain storages. This plan was shelved when it was found that few factories were suitably located for easing the storage problems in the grain production areas, and even fewer had suitable buildings that could be converted into grain storages.
Whatever economic benefits may come from the short-term injection of these huge amounts of money into the grain sector, it is likely that the new storages will find themselves in full use as soon as they are completed. They can be expected to absorb some of the huge stockpiles of grain that have been accumulating in some production areas (particularly NE China) as a result of government policies and subsidies.
For several years, China's government has wavered on the question of grain subsidies costing billions of RMB annually in support of grain procurement prices, and in payments to depots which encourage the storage of grain rather than its distribution and sale (for the purpose of maintaining China's huge "strategic" stockpiles). The last several years have seen moves to deregulate the industry including threats to cut out subsidies altogether, but each time the government has retreated back to its traditional position of maintaining full control over the industry. Indeed, a move in this direction was confirmed very recently by Premier Zhu Rong Ji himself, when pronounced new and tighter controls than ever. These controls include:
- government-set minimum payments to farmers;
- a decree to all government grain receival depots that they must borrow from the Agricultural Bank of China whatever funds are required to pay for any grain that farmers wish to deliver;
- a decree that government depots must pay their way by selling their grain at a profit sufficient to cover their operating costs;
- a decree that no grain is to be allowed to be bought privately at discounted prices, or otherwise to by-pass the central storage system.
Presumably, the idea behind this plan is for the cost of farm-price subsidies to be paid by consumers, by ensuring that they are passed down through the distribution and processing chain. However, sources within the industry predict that the net effect will be to increase illicit sales of grain at discounted prices through private arrangements between farmers and processors. Far from being assured of increased incomes as a result of these decrees, it seems that some farmers are already experiencing difficulties getting paid by some depots which are, in turn, experiencing difficulties securing funds from the Agricultural Development Bank.
Nevertheless, with the application of policies like these, it is likely that there will no shortage of grain to put into the government's new storages for some time to come.
In the background are the new wharves that have been constructed, with one of two new wharf cranes visible. The main wharf behind the crane is for handling up to 80,000 DWT vessels (for imported wheat) and the finger wharf on the right is for handling 30,000 DWT vessels (for "exporting" corn to the south).
View of the new 140,000 tonne Phase 1 (GDMP) silo block. The "ridge" in front of the silo is the embankment for the railway sidings which extend outwards onto the breakwater beyond the left of the picture. On the right immediately behind the silo block is a plateau just below silo roof level, which is all that is left of the "mountain" that once stood over the area now occupied by the silo block. Spoil from the mountain was used to form the breakwater and the vast land-fill area, from a part of which the photo is taken.
Closer view of the 140,000 tonne Phase 1 (GDMP) silo block. Each of the 140 bins is 12 metres diameter and 36 metres high. Top of concrete is 40 metres above ground level and top of the enormous oversilo conveyor gallery is another 10 metres above that.
Two of the Phase 2 30,000 tonne silos under construction. Two more can be seen in the distance. On the top right of the photo, the Phase 1 silo block can just be seen. A month after the photo was taken (in early November) ten of these gigantic silo walls had been substantially completed.
View from the top of the Phase 1 silos looking back on the Phase 2 silos which can be seen under construction. Part of the extensive rail siding network can be seen in the foreground. Almost all the land on the right of the picture is reclaimed land.
View of the newly constructed single-track tunnel linking the terminal with the main rail line from the North East provinces. An average of 10 x 45 wagon grain trains are expected to enter the terminal through the tunnel. On the left is a new road tunnel that is currently under construction, for the purpose of shortening the road journey time to the site.
XZ-RAIL4: View of rail tracks from the top of
the silos, showing the new road bridge, the tunnels (in the background) and
part of the new grain receival pits in the right foreground.