Russia announced it would boost its grain exports to China via the New Land Grain Corridor. Proposed by Beijing in 2012, the corridor aims to develop infrastructure and increase grain production, connecting Russia’s far eastern regions to Inner Mongolia in northern China.
In June 2022, Russia’s New Land Grain Corridor Group of Companies and the state-owned China Chengtong International Investment Company signed an agreement to jointly work on the project, with a focus on settling transactions in national currencies.
The construction of a grain railway terminal transshipment facility at Zabaikalsk, near the Russia-China border – which was inaugurated in September 2022 – addressed the rail gauge differences between the two countries. Previously, it was impossible to run trains from one network to the other without interruption, so Russian grain exports had to be shipped to China, which took several months.
The transshipment hub reduces transport time to two to three weeks and has an annual capacity of up to 8 million tonnes, enhancing Russian agricultural product competitiveness and boosting Sino-Russian trade.
The new grain corridor can potentially offer multiple benefits for China, particularly in the context of food security.
First, the corridor contributes to China’s agricultural import diversification strategy, which has become crucial amid domestic climate shocks and strained relations with major grain suppliers such as the United States. As President Xi Jinping noted in a recent article on agricultural self-reliance, the crisis arising from Russia’s invasion of Ukraine shows that agriculture is a “foundation of national security”.
Having become increasingly reliant on the global food market, Beijing sees Russia and Central Asian countries, which are top agricultural exporters, as having the potential for further growth in grain production and exports. With China allowing unrestricted imports of Russian wheat, the corridor will facilitate increased imports of cheap Russian wheat, in addition to other agricultural products including fertilisers.
Second, the corridor can attract more Chinese agricultural investment in Russia’s fertile far east. Despite joint initiatives such as agricultural cooperation parks and free-trade zones being in place, agricultural transport infrastructure issues and regulatory barriers make Chinese investment in the Russian agricultural sector difficult. However, the grain corridor’s promise of reduced transport time is expected to attract more Chinese investment in Russia, particularly in the far east.
Third, the corridor can help China avoid potential chokepoints that could affect domestic and international food availability and prices. Amid its push for increased self-sufficiency, Beijing considers chokepoints such as the Strait of Malacca a critical concern.
The concentration of corn, wheat, rice and soybean trade – some of China’s main staples and agricultural imports – in a handful of countries creates vulnerabilities for the country’s food security. By using the grain corridor to further diversify supply routes, China can reduce its reliance on these chokepoints amid increasing pressure on them while also ensuring a more secure food supply chain.
The new grain corridor faces several challenges and also has potential global implications. While Russian grain exports to China have doubled in the past five years, the volume remains relatively small compared to China’s overall imports.
In 2021, China’s soybean imports from Russia accounted for less than 1 per cent of its total soybean imports. Similarly, despite China’s large wheat imports of 6 million tonnes between January and April this year, Russian wheat was limited to just 30,000 tonnes.
China and Russia also have different approaches to agricultural collaboration. The Russian strategy is centred around its government and major companies, aiming to penetrate the Chinese market.
In contrast, China uses small and medium-sized businesses that supply their own machinery, seeds and labour for international development. The growing presence of Chinese farmers and small agribusiness in Russia’s far east has already become a source of tensions between the two sides.
Other barriers also stand in the way of Sino-Russian agricultural partnership, including Russian tariff policies, protective market strategies, a lack of adequate infrastructure and a sluggish customs clearance system. To overcome these hurdles and ensure the import-export process is efficient on both sides, China and Russia will have to work together to jointly set standards in each of these areas.
Nevertheless, Sino-Russian agricultural trade has enormous potential. Increasing Chinese imports of Russian agricultural products and fertilisers could result in major agricultural exporters such as Australia and the US losing ground to Russia. Additionally, the new grain corridor will not only allow more Russian wheat and other agricultural products to enter China but also to enter other Asian markets from China.
The grain corridor provides China with opportunities to strengthen agricultural trade, safeguard food security and further diversify supply routes while also mitigating risks associated with chokepoints in global trade.
Looking ahead, the expected expansion of grain and fertiliser exports from Russia and Central Asian countries to China and other Asian markets could challenge the long-standing dominance of the US and Australia, particularly in the regional wheat and barley markets, while also strengthening China’s role in global and regional food trade and security.
Dr Zhang Hongzhou is a research fellow with the China Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.
Genevieve Donnellon-May is a researcher at Oxford Global Society, the Asia-Pacific analyst for The Red Line podcast and a 2023 Pacific Forum Young Leader.
South China Morning Post
By Zhang Hongzhou and Genevieve Donnellon-May