China’s fertiliser policies and the global chain reaction

China imports and exports a diverse range of goods, which can impact the health of entire industries and economies when it decides to alter those exports and imports.

Last year, China gave its businesses the order to stop exporting fertiliser to other countries. Fertiliser prices began to rise as a result of rising prices for natural gas and energy, which are significant inputs into fertiliser.

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What does it imply to the rest of the countries?

Fertiliser is produced in enormous quantities in China. Thus, the rest of the world is affected when China exports less. The worldwide price of fertiliser increased rapidly as soon as China announced these export limitations.

This is before the war in Ukraine, or any other actions governments have taken. Leading the way by pulling its products from global markets, China contributed to an increase in fertiliser prices all around the world.

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Steel is another example of how China’s export regulation can affect other global trades. China has always been a significant steel supplier, and about 50% of world steel production in any given year comes from China.

The rest of the world has been concerned about China’s steel production. The country was widely accused of overcapacity, and its low export prices drove American, European, and steelmakers out of business.

Then Beijing abruptly announced steel export restrictions. Now, China is a steel glutton rather than a contributor to the global glut, driving up prices globally and adding further unwelcome pressures to inflation.

China has arguably made more formal pledges than any other nation to refrain from using export restrictions. This is primarily due to China’s history of utilising export restrictions. You know, other countries that have not used them have not necessarily promised they would not do so in the future because it has not been an issue for them.

However, the problem is that we do not have a functioning World Trade Organisation (WTO). No actual dispute settlement process is working, and the major economies are not talking to each other anymore about many of these trade issues. The concern stems from the economic situation, where rising food and steel prices, in particular, may come back to haunt us.

Last fall, Russia cut its fertiliser exports after observing China reduce them. Fertiliser is widely produced and exported by Russia. So, the fear is that everyone would start acting independently, worrying solely about their problems back home and ignoring the effects on the rest of the world.

Furthermore, some countries in the world do not have the option of getting fertiliser elsewhere and must import it to grow food and crops. Unfortunately, poorer countries like Ethiopia, Nigeria, South Sudan, and Yemen will be the ones to pay.

Conclusion

Major producers can harm other nations through their activities, but they can also prevent such harm.

China imposing export restrictions is a big issue globally since they are one of the biggest exporters of goods like fertiliser and steel.

If one country is relying on importing your goods, suddenly you stop exporting, which will significantly affect that specific country’s economy. So, it must be studied well before deciding because many are impacted by one choice.

Major producers need to get together and decide to stop acting in this way. If they don’t, sadly, the rest of the world will suffer and become worse off.

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