5 Facts On Crop Failures Due To Water Risks

By Max Leung 16 January, 2018

CWR's Leung on flood & drought impact on crops in China

In 2016, around 44mn tonnes of crops were lost due to droughts & floods

Chinese farmers have long been suffering from water risks – droughts and floods (note: floods in this article include floods, waterlogging, landslides and debris flow). According to the Ministry of Water Resources (MWR), in 2016, about 2.6 million hectares of China’s cultivated land, about 9.5x the size of Hong Kong, suffered from crop failures due to droughts and floods. These resulted in the loss of around 44 million tonnes of crops. Although these account for less than one percent of agricultural value-added of Chinese GDP, it is still around RMB47 billion. Indeed, the Chinese government has been focusing on ways to develop agriculture while also alleviating crop failures. This can be seen from the agricultural focus of China’s No.1 Document for many years.

Below we share 5 facts that you should know about crop failures in China due to droughts and floods from differences between the north and the south to provincial level exposure and what actions the Chinese government is taking.

1. Crop failure due to drought the most severe in northern China, while no clear pattern for floods

Crop failures caused by droughts have been the most severe in northern China, which can be seen from the map below. Inner Mongolia has particularly suffered from relatively serious crop failures, especially in 2007 (it was the No. 1 ranked province for crop failures due to droughts), 2009 (No.1 ranked) and 2010 (No. 3 ranked). However, from 2011 to 2013, crop failures due to droughts lessened. In fact, during these years, crop failures caused by floods in Inner Mongolia worsened (No. 1 ranked in term of crop failures due to floods in 2011 & 2012 and No. 3 ranked in 2013). In 2014, there was another shift with droughts becoming prevalent again (No. 3 ranked in 2014 and No.1 ranked in 2014 & 2015).
Comparatively, the pattern for crop failures due to floods is not clear with occurrences in northern and central parts of China (see map below). Heilongjiang in northern China and Anhui in central China are two such examples.

Crop failures due to floods impacted an area 3x the size of Hong Kong in Heilongjiang in 2013

The biggest instance of crop failures due to floods occurred in Heilongjiang in 2013, where around 815,000 hectares, equivalent to 3x the size of Hong Kong, was impacted. This is related to the 2013 China-Russia flood, which was caused by unusually heavy rainfall near the Amur River which divides the border of China and Russia.

2. Crops grown in northern and southern China are not the same

When we are talking about crop failures in China it is important to realise that crops grown in northern and southern China are different. About 83% of corn and 72% of wheat came from northern China (see chart below). Clearly, crop failures caused by droughts in northern China can potentially affect corn and wheat supply chains in China.

3. Heilongjiang: Crop production affected by droughts & floods

In 2015, Heilongjiang was the largest national beans producer, accounting for around 28% of total beans production in China and 6% of the total crop production in Heilongjiang. According to FAO, China was the fourth largest beans producer in the world.

There appears to be a link between crop production; in this case beans, and droughts & floods

As can be seen from the right chart below, there appears to be a link between crop production, in this case beans, and droughts & floods. In 2007, there is a significant downward spike in beans production, which corresponds to a period of severe crop failure due to droughts. Similarly, there is another downward spike in 2013 though this time with a period of crop failure due to severe floods. It should be noted that other factors may also contribute to these spikes.

4. Overall crop failure due to droughts & floods appears to be falling

As can be seen from the chart below, overall crop failures due to droughts and floods seem to be decreasing. In 2016, overall crop failures were about half of the level a decade ago. Note that there are fluctuations over the period shown.

Crop failures caused by floods were relatively steady throughout the period; thus, the decline in the overall crop failures was primarily due to the reduction in crop failures caused by droughts. In 2016, floods accounted for about 59% of the overall crop failures compared to 38% ten years ago.

5. Government funds driving water-related projects with minimal private sector contribution

In order to mitigate crop failures due to droughts and floods, the Chinese government is increasing investment in measures and infrastructure to prevent their occurrences.

Funds invested in flood control projects doubled in 2011-2016

Funds invested in flood control projects increased from RMB101.8 billion (33% of total water funding) in 2011 to RMB207.7 billion (34.1% of total water funding) in 2016 – double the amount (see chart below).

In 2016, about 7% of total funding was raised from enterprises & private investment

According to the MWR, while the total amount being invested in water-related projects, such as flood control projects, soil and water conservation projects, has been increasing over the last 10 years, only a small portion was from the private sector. In 2016, about 7% of the total funding was raised from enterprises and private investment. To increase this portion, the Ministry of Finance is pushing the Public-Private-Partnership (PPP) model (See more in this article). However, the 7% portion was a significant increase (126% increase) from the 2015 value. The proportion of private investment is expected to keep proliferating in the near future.

The private sector has a role here & can tackle future challenges arising from crop failures with the Chinese govt together

Crop failures due to droughts and floods can be an issue in China on a national and provincial level. With climate change, extreme weather events including droughts and floods are going to become more common. The positive news is that the Chinese government is already on the right track to reduce crop failures. The private sector also has a role here and can tackle future challenges arising from crop failures with the Chinese government together.

Further Reading

• Droughts: Misery In Slow Motion – Floods and storm surges are sensational disasters but the World Bank’s new report shows droughts can actually be more impactful. We sat down with their Richard Damania to find out more
• Companies Are Taking Water Security Seriously – Here’s How – CDP’s Cate Lamb shares key findings from their 2017 Global Water Report, which includes a 41% increase in companies disclosing and a record number of corporates achieving an ‘A’ score. Is putting an internal price on water the next step?
• Hotels & SDGs: Moving Together On Water Risk – Forward thinking companies are re-aligning their strategies with the SDGs and so is the hotel sector. International Tourism Partnership’s Fran Hughes on their recently announced 2030 vision and goals
• Key Takeaways From The 5th China SIF Conference – The 5th China Social Investment Forum Annual Conference was just held in Beijing. See Dr Guo Peiyuan of SynTao Green Finance, a co-host of the event, three key takeaways, including the first ESG Chinese equity index
• China’s Green Planning For The World Starts With Infrastructure – China can exert greater external influence through infrastructure development but Professor Asit K Biswas and Kris Hartley from the Lee Kuan Yew School for Public Policy caution against it citing financial and environmental risks. See more

• 8 Reasons to Invest in Irrigation in China – To grow 75% of total grains & 90% cash crops, China’s irrigated areas need water equivalent to the Pearl River flow. With an additional 18 million hectares to adopt water-saving tech by 2030, CWR’s Hu says investment in irrigation is worth exploring
• Flood Insurance in China: Lessons & Opportunities – Only 2% of the RMB147bn of losses from 2016 summer floods are covered by insurance. With various pilots since the 80’s failing, Liu expands on past & future role of flood insurance for CWR
• Counting the Costs of Floods in China – With China in the midst of one of its worst flood episodes in history, Asit K Biswas & Cecilia Tortajada look at the significant social and economic costs of floods, and what can be done about them
• China’s Soil Ten – With ~1/5 of China’s farmland polluted, the Soil Ten Plan could not come sooner. See impacts to the “Hateful Eight” polluting industries & get the distilled version of the 231 actions in our review
• Sponge Cities: An Answer To Floods – Floods have cost China close to RMB2 trn between 2000-2014. Today, with 641 cities prone to flood risk, the Chinese govt has turned to sponge city pilots. Do they work? How much do they cost? CWR reviews