The Sino-Russian Land Grain Corridor and China’s Quest for Food Security
by Genevieve Donnellon-May and Zhang Hongzhou
Introduction
As the world’s leading agricultural importer, China has been actively diversifying its food strategy. As part of this diversification, it has been working with Russia on the New Land Grain Corridor (NLGC) to establish the world’s first specialized railway grain terminal in the Russian Far East.
The development of the NLGC could significantly impact global food dynamics, affecting not only China and Russia but also the wider world. In China, the world’s primary food producer and importer, the corridor supports food security by diversifying imports, increasing investments in the Russian Far East to enhance grain supplies, and bypassing potential supply blockages. In the long run, this initiative could also strengthen China’s influence in global and regional food trade and security, potentially shifting agricultural product flows in its favor. For Russia, amidst Western sanctions, the grain corridor ensures the continued export of agricultural products to not only China but also potentially to other Asian markets while also facilitating more agricultural investment in the country’s Far East. For the rest of the world, the reliance on food movement from key production areas to undersupplied regions means the corridor’s expansion could potentially reshape global and regional food supply chains.
The New Land Grain Corridor
The NLGC concept, which would connect China with Eurasian Economic Union countries (Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia), was first proposed by Beijing in 2012. It received official support from Russian president Vladimir Putin and Chinese president Xi Jinping in 2016. Nevertheless, the project was not prioritized by Russia until recently because its main grain export markets have historically been the Middle East, North Africa, and Europe. However, as Western-imposed sanctions ascribed to Russia’s invasion of Ukraine impacted its agricultural exports, this project has become more attractive.
In June 2022, the Russian New Land Grain Corridor Group of Companies and Chinese state-owned China Chengtong International Investment signed an agreement to jointly develop infrastructure; increase the production of grains, grain legumes, and oilseeds in the territories from the South Urals to the Far East; and increase grain exports by 1.9 trillion rubles ($19.6 billion), with settlements in national currencies. In May 2023, the Russian government announced that it would boost its grain exports to China via the NLGC, connecting the Far East (Russia) to Inner Mongolia (China). A few months later, in October 2023, Russia and China signed a massive grain supply contract worth 2.5 trillion rubles ($25.8 billion) amid ongoing disruptions to Russian and Ukrainian agricultural exports. Under the agreement, Russia’s EPT grain export company is expected to supply 70 million tons of Russian grain, legumes, and oilseeds to China Chengtong over the next twelve years. To be sure, with the equivalent of 6 million tons per year, the new overland corridor would still constitute only a fraction of China’s total annual grain imports, which amounted to 160 million tons in 2023. However, the country’s grain imports have been largely dominated by soybeans (around 100 million tons each year); in contrast, its imported wheat totals around 12 million tons, mainly from Australia, Canada, and France. As wheat exports are expected to account for the majority of Russian grain exports to China, the corridor could play a significant role.
The massive October 2023 grain supply agreement will be delivered through the NLGC. Further, President Putin has instructed his cabinet and the Central Bank of Russia to finalize an intergovernmental agreement to increase grain exports to China, which will increase grain production in the Far East, Ural, and Siberian federal districts, as well as the volume of Russia’s exports to China. Improved transport and border infrastructure will significantly help Russia increase its agricultural exports to and strengthen agricultural cooperation with China. Direct overland supplies of agricultural commodities from Russia to China have generally been quite modest. Significantly, the difference in the width of railroad gauges between the two countries has made it impossible to transport grain directly by rail without interruption — Russia’s railway network uses 1,520 mm gauge, whereas China’s uses 1,435 mm gauge. Thus, Russian grain exports to China had to be transported by sea, which could take up to three months to arrive. This delay limited export competitiveness.
To address this issue, Russia has constructed Grain Terminal Zabaikalsk (GTZ), a railway transshipment facility and onshore grain terminal at Russia’s border with Inner Mongolia, designed to maximize the loading capacity of railway vehicles between China and Russia. Construction of GTZ was completed in September 2022. By overcoming railway track gauge differences, GTZ will increase competitiveness by shortening transit times. With an annual transshipment capacity of up to 8 million tons, which can be further increased to 16 million tons with new infrastructure (e.g., cross-border grain and multimodal terminals), GTZ is expected to significantly increase Sino-Russian trade.
Importance of the New Land Grain Corridor to China’s Food Security
In China, the world’s largest food producer and importer, where an idiom holds that “people regard food as their heaven” (民以食为天), food security is paramount. For decades, food security has been a key priority for the Chinese authorities. The NLGC can contribute to the country’s food security in two main ways: by supporting its food import diversification strategy and avoiding potential food chokepoints.
First, increasing grain supply from Russia is part of China’s import diversification strategy to mitigate domestic climate shocks and strained relations with major grain suppliers like the United States and other Western countries, which are among the top agricultural suppliers to China. Rather than relying on one country or region to ensure the stability of its food supply amid an increasingly fractured and complex geopolitical environment, Beijing imports agricultural products and inputs such as fertilizer via multiple channels, regions, and approaches, including under the Belt and Road Initiative, to avoid reliance on one country or region. As noted by President Xi in his recent article on agricultural self-reliance, the Russia-Ukraine crisis shows that agriculture has become a “foundation of national security,” ensuring a country’s prosperity and its people’s well-being.
The grain corridor may also relieve domestic grain scarcity. Although Beijing has attempted to improve soil, land, and water quality, these efforts have thus far only marginally improved the country’s grain output. Notably, between 2013 and 2021, China’s per capita grain output increased from 1,020 lbs to 1,066 lbs. At the same time, its food self-sufficiency rate has decreased from 101.8% in 2000 to 76.8% in 2020. By 2035, this is expected to further decrease to 65%. Consequently, Beijing has become steadily dependent on imports and, since 2004, has been a net importer of food items, including grains. For example, China has long been the world’s largest wheat producer, contributing over 17% to global wheat output. Despite this, in 2023, it became the top wheat importer, bringing in 12.1 million tons, with more than half of its imports coming from Australia, along with significant quantities from the United States, Canada, and France. This paradox of high production and high importation stems from challenges such as extreme weather events, including droughts and floods, and the loss of arable land that have compromised domestic wheat production and led to deficits in recent years.
Given the uncertainties surrounding Chinese agricultural production as well as external factors, the NLGC is a lucrative prospect. In February 2022, China announced that it would allow the unrestricted import of Russian wheat, and the NLGC will enable it to import even more. Indeed, against the backdrop of rising wheat imports, China considers the NLGC conducive to further enriching its wheat imports and ensuring a secure wheat supply.
China’s strategy of diversifying agricultural imports extends beyond key food products to include agricultural inputs like fertilizers, particularly potash. Although China does produce potash, its domestic production falls short of the increasing demand — it requires approximately 14 million tons of potassium chloride per year and imports only half that amount. In 2021, China's potash imports amounted to 7.57 million tons, accounting for 83.3% of its total fertilizer imports that year. Only a few countries, such as Canada and Russia, export significant quantities of potash. Canada, in particular, possesses nearly half of the world’s known potash reserves and accounts for over 35% of global potash exports. There have also been concerns that China’s reliance on potash imports “could pose a major threat to its food security.” In order to secure its potash supply, China aims to expand domestic production and increase imports from Russia, Belarus, and, to a lesser extent, Kazakhstan. In 2021, of the 7.57 million tons of potash imports, 2.25 million were imported from Russia (30% of total imports), and 1.75 million tons were imported from Belarus (23% of total imports). Thus, in 2023, closer cooperation in fertilizer supply was listed as a priority area in the Pre-2030 Development Plan on Priorities in China-Russia Economic Cooperation.
Second, the corridor is crucial for China to avoid any chokepoints that could affect food availability and prices. Having become increasingly reliant on the international market, China considers food chokepoints a critical concern. For most countries, despite their significance, chokepoints are frequently overlooked in assessments of strategic food security. This is in stark contrast with energy security analyses, where chokepoint risks are managed by global governance mechanisms. In this regard, however, China is an exception. With its large population and reliance on the international food market, China takes food chokepoints as seriously as their energy counterparts. Because chokepoints are vulnerable to geopolitical tensions, conflicts, piracy, natural disasters, and accidents, disruptions can delay delivery, resulting in strains on food availability and prices. Longer shipping times also risk spoiling perishable foods.
Global food security is increasingly reliant on the movement of food from major breadbasket regions to areas with food deficits. The concentration of corn, wheat, rice, and soybeans, China’s main staples and agricultural imports, in a few countries further emphasizes the significance of these food chokepoints. For instance, soybeans are the world’s largest source of animal protein feed and account for 65% of the global supply. Just three countries — the United States, Brazil, and Argentina — contribute 80% of global soybean exports. In addition to food, over 180 million tons of fertilizers are needed annually to produce grains for the world’s expanding populations. As international trade in these vital agricultural inputs continues to grow, the pressure on a few critical chokepoints is increasing. The Suez Canal, the Panama Canal, and the Strait of Malacca are among the main maritime chokepoints and experience the highest grain throughput due to their strategic positions connecting Western exporters with Asian importers, including China, Japan, and South Korea.
Amid rising tensions in the Middle East, as well as growing strategic competition between the United States and China over the South China Sea and Taiwan, Beijing worries that the country’s food supply could be affected by U.S. maritime embargos. To address these concerns, China has actively invested in infrastructure to relieve pressure on existing chokepoints. By diversifying its supply routes, like the NLGC, Beijing can reduce its reliance on vulnerable chokepoints and ensure a more secure food supply chain.
A notable example of China’s attempts to mitigate these food chokepoints is its expansion of wheat imports via overland routes. For instance, in April 2017, Russia exported its first shipment of wheat to China via Manzhouli, a sub-prefectural city in Inner Mongolia, and by June 2023, China had imported 271.6 tons of wheat from Russia via the city. According to Inner Mongolia’s government, annual Russian grain imports through Manzhouli are expected to reach 8 million tons per year. China’s large-scale imports from the Russian Far East open a new channel for Sino-Russian agricultural cooperation. From Beijing’s perspective, Russia has not only emerged as a key exporter in the global wheat market but also one with enormous potential for further increases in grain production and exportation. The NLGC fits with broader Sino-Russian trade and agricultural cooperation, which has expanded in the past decade to include an agricultural cooperation memorandum of understanding, agricultural cooperation parks, an agricultural free-trade zone between Heilongjiang (China) and Amur (Russia), and the leasing of vast tracts of Russian farmland and forest to Chinese investors.
The NLGC also offers significant trade and economic dividends for Russia. In March 2023, Presidents Xi and Putin signed a joint statement to strengthen comprehensive partnerships and strategic cooperation, resulting in Beijing’s decision to remove a fifteen-year ban on Russian pork imports later that year. Russian media reports further suggest that the two countries are discussing negotiations to open the Chinese market to Russian corn and rice. The expansion of agricultural production and exports to China further allows Russia to capitalize on its agricultural potential and boost its economy. This development is critical in light of the sanctions imposed by a number of countries after Moscow’s 2022 invasion of Ukraine hampered Russia’s exports. Although agricultural trade is not directly covered by these sanctions,1 an estimated ten countries have suspended imports from Russia due to political reasons or difficulties in settlements. For Russia, the NLGC can help its export of agricultural products and increase competition in the Chinese market while also supporting the country’s foreign trade and domestic economic development.
Given these circumstances and the current geopolitical climate, the partnership provides additional motives for China and Russia to strengthen agricultural trade, especially via the NLGC. The Russian Agroexport Center estimates that the supply of Russian agricultural products to China could reach up to $10 billion per year by 2030. Already, China’s imports of Russian agricultural products have significantly increased. In 2022, China became the largest importer of Russia’s agricultural products when the volume reached $7 billion, an increase of 44% compared to 2021; the volume of deliveries also increased by 36% year-on-year. Furthermore, during the first nine months of 2023, Russia exported 3.52 million tons of grain to China, compared with 2.2 million tons the previous year.
According to Russian media, more than 200,000 Chinese farmers have resettled, and more than 200 companies have made agricultural investments in the Russian Far East. The NLGC could precipitate even more Chinese investments into Russia’s sparsely populated Far East region, especially in Siberia and the Urals, boosting agricultural production. The region lacks adequate infrastructure and is sparsely populated, though Chinese investment (and the corridor) could change this, enabling greater Sino-Russian agricultural cooperation.
Challenges and Implications
Even though Russian grain exports to China have increased twofold in the last five years, proportionally, the volume remains small. For example, in 2021, China imported about 540,000 tons of soybeans from Russia, accounting for less than 1% of its total soybean imports. Likewise, China buys large quantities of wheat from around the world, but of that amount, Russia supplied just a trickle (less than 5%) in 2021. In this respect, the potential for Sino-Russian agricultural trade remains untapped.
However, there are significant gaps in understanding between China and Russia over agricultural cooperation. The Russian grain industry relies on the government and large enterprises to open up the Chinese market. In contrast, China brings small- and medium-sized enterprises to overseas development projects with their own equipment, seeds, and workers, crowding out or denying space for Russia’s grain industry. Other obstacles to Sino-Russian agricultural cooperation include Russia’s import and export tariff policies, market protection measures, infrastructure limitations, and inefficient customs clearance processes. Furthermore, differences in inspection and quarantine standards between Russia and China, as well as logistics and transportation bottlenecks, have meant that grains from the Russian Far East are not exported to China on a large scale. To address these issues, the two countries will need to establish benchmarks to ensure a straightforward export process.
The NLGC is not only about opening a gateway for Russia to export grain to China but also for both Russia and China to export grain to Southeast Asia, the Middle East, and Central Asia. For reference, a similar situation can be seen with China and Kazakhstan. In 2014, the two countries established a joint Chinese-Kazakh logistics center in Lianyungang. This logistics center has not only facilitated Kazakh agricultural exports to China but also to Southeast Asian countries. In early March 2017, a ship carrying 720 tons of Kazakh wheat was shipped from Lianyungang port to Vietnam, marking the first time that wheat from Kazakhstan had been sold to a Southeast Asian market. Following the route’s establishment, Kazakhstan also began exporting wheat to Malaysia. The NLGC will not only allow more Russian wheat and other agricultural products to enter China but also products from other Asian markets, resulting in other major agricultural exporters like Australia, Canada, and the United States losing ground in the future.
Lastly, as China begins to import more grain from Russia via land corridors and other routes, it will be less incentivized to pressure Russia to resume the Black Sea Grain Initiative or help establish other grain agreements.
Concluding Remarks
For China, the NLGC provides opportunities to strengthen agricultural trade with another major food producer and exporter, safeguard food security, and further diversify supply routes to mitigate risks associated with global trade chokepoints. For Russia, the NLGC offers significant trade and economic dividends as well as the expansion of agricultural production with and exports to China, which could further support Russia’s efforts to capitalize on its agricultural potential while boosting its economy.
Geopolitical and geoeconomic concerns should also be considered. Amid the Russo-Ukrainian War, the NLGC is another demonstration of Sino-Russian strategic alignments and their “no limits” friendship. To address these concerns, Australia and the United States should seek to ensure food security is prominently featured in discourse with partners like the Association of Southeast Asian Nations and the Quad. Food security and related concerns could also play a stronger role in bilateral and multilateral forums, as well as in strategic partnerships with other key trading partners in the region, such as India, South Korea, and Japan.
There are also broader implications for the Australian and American private sectors. On the one hand, at present, the NLGC may not be of major concern for Western grain exporters. On the other hand, this could change in the future if Chinese agricultural product imports reshape global and regional trade flows. After all, President Xi’s focus on security and strategic concerns above economic ones further suggests that Beijing will look to Eastern and Central Europe as well as Central Asia for grain imports rather than to Western countries. The NLGC could strengthen China’s role in food trade and security, reshaping the regional and global flows of agricultural products in Beijing’s favor as a major food exporter.
In the medium-to-long term, the expected expansion of grain and fertilizer exports from Russia and Central Asian countries to China and elsewhere in the Indo-Pacific could challenge the long-standing dominance of Australia and the United States in regional markets, such as South Asia and Southeast Asia. Given the NLGC’s proven ability to increase Russian exports of wheat, Moscow may also seek to increase its exports of other grains, such as barley and soybeans, to China. However, strong trade relationships, including agricultural trade, and greater food security cooperation between major exporters and major importers in the region remain attractive and likely. Given the growing market for grains, due in part to rising animal feed demands in subregions like Southeast Asia and South Asia, there may still be room for agricultural exports from Australia and the United States, albeit more limited. Nonetheless, for major Western exporters, the diversification of agricultural exports and export markets should be encouraged.
Endnotes
- As per the U.S. Department of the Treasury, only luxury food products, like caviar, are prohibited from being imported in the United States or in the European Union. In July 2022, it issued guidance to clarify that the production, manufacturing, sale, or transport of agricultural commodities (such as fertilizers and agricultural equipment) from Russia and for destination to the United States or third markets were exempt from sanctions. The European Union has released similar guidelines.