China’s soil pollution: It’s much worse than you think

A polluted field at a black lead mining area in northern China

FORTUNE — When the Chinese government completed its first national soil pollution survey in 2005, the findings were so alarming that Beijing promptly declared the data a “state secret.”

Chinese leaders apparently changed their minds and, a few days ago, the Ministry of Environmental Protection and the Ministry of Land Resources jointly announced the key results of the 2005 survey.

While the rare display of transparency from the Chinese government merits applause, the admission that close to 20% of China’s arable land has been contaminated by heavy metal not only demonstrates the severity of China’s environmental degradation but also has profound economic and geopolitical consequences for the international community.

Before Beijing’s latest disclosure, the most pessimistic estimate of China’s soil pollution suggested that perhaps up to 10% of China’s arable land had been contaminated. Now, the official data show that the actual amount of polluted land is twice as large. Roughly 66 million acres of arable land are laced with dangerous chemicals and should be taken out of agricultural production. The Chinese government has set 300 million acres of arable land as the minimum amount of land needed to ensure the country’s food security. As of 2012, China had 334 million acres of arable land. If the 66 million acres of polluted land were to be declared unfit for food production, the total amount of arable land would fall 32 million acres below Beijing’s self-defined “red line.”

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Due to its large population and land scarcity, the amount of arable land on a per capita basis in China is only half the global average. Since China launched its modernization drive 35 years ago, urbanization, industrialization, and rising consumption have further reduced available arable land and increased demand for food production. Although Chinese agricultural output has grown by a factor of 4.5 in this period, demand growth has outpaced production. As a result, Chinese imports of food, particularly grain, have risen rapidly. In 2011, China imported 9.9 million tons of grain. Last year, China imported 22.8 million tons, roughly 7% of total global grain imports. According to the OECD, China imported 6.2% of its food in 2001. That figure rose to 12.9% in 2012.

If anything, this trend will only accelerate in the future if soil pollution forces China to take land out of production and rely on imports to make up for the shortfall. Although Beijing will have ample financial means to pay for its food (it had a net trade deficit of $31 billion in agricultural products in 2012), its efforts to source food from abroad will have disruptive effects on a global food production system that will come under increased strain due to climate change, population growth, and industrialization. In a worst-case scenario, Chinese attempts to increase its food security could encounter an ugly backlash abroad.

Most likely, Chinese officials and private entrepreneurs will pursue strategies that promise to deliver quick results to plug the growing hole in China’s food output. Buying well-established Western food companies that own or have access to clean land and water supplies is evidently a tempting tactic. In May 2013, Shuanghui International, a Chinese pork producer, paid $4.7 billion for Smithfield Foods, then the world’s largest hog farmer and meat processor. This acquisition, a brilliant business move in its own right, also has the practical effect of strengthening China’s food security.

China can also build food-processing factories or acquire such facilities in countries with ample arable land and water resources (preferably countries that welcome and protect foreign investments). In March, a top Chinese baby formula maker, Synutra International, broke ground on a $125 million facility in Brittany in France. It will produce high-quality milk products for the Chinese market, where locally made baby formula is viewed as unsafe because of pollution. Acquiring established food producers and investing in food processing facilities are better options than purchasing arable land abroad (which is more politically sensitive and economically risky).

At the moment, such moves by Chinese companies have been modest. They have raised eyebrows, but not alarms. However, in the future, if soil pollution causes the Chinese public to lose confidence in the safety of food produced in China, Beijing may have no choice but to expand its efforts, which could be viewed as a threat to food security by foreign nations.

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While China’s need for food security is understandable and will create enormous opportunities for countries with excess production capacity, Beijing must move carefully. It must devise credible and enforceable safeguard mechanisms that will reassure its trading partners. Otherwise, foreign governments will erect barriers to stymie Chinese efforts.

In light of China’s massive soil pollution, such a development would be an epic catastrophe.

Minxin Pei is the Tom and Margot Pritzker ’72 Professor of Government at Claremont McKenna College and a non-resident senior fellow of the German Marshall Fund of the United States

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