Chinese exports to the world decreased by 17 percent year-on-year from January-February 2019 to January-February 2020, while Chinese imports declined by 4 percent year-on-year (World Bank, 2020b).<sup>5</sup> As Covid-19 cases increased and China implemented containment measures, food exports declined by 17 percent. The modest decline in total imports indicates that policies to support incomes in China were able to maintain demand for most goods. Food imports actually increased by 15 percent.<sup>6</sup> China’s export contraction is indicative of a decline in food production, although other factors might have played out as well. Over this period, China is not reported to have imposed export restrictions on food, nor were generalized restrictions on food imports from China announced. While there are reports that Indonesia restricted imports of fresh fruits and vegetable from China and a large retailer from the Russian Federation chose to source food away from China, these actions generally affect new orders and would have effects on exports with a lag.<sup>7</sup> Delays at the border, for instance due to enhanced monitoring and inspections, and logistics bottlenecks in addition to the negative impact on food production may have also directly contributed to the decline of Chinese food exports.

Exports of different food products appeared to respond differently as China dealt with Covid-19 in January and February 2020 (Table 1). Exports of all food product categories declined, except for sugar and nuts. Food products that rely heavily on low-skill labor registered the largest percent drops in January and February 2020 relative to the previous year. Exports of fish meat and crustaceans, products that are relatively more labor intensive in their processing stage, declined by 26 and 25 percent, respectively. Products that rely on manual labor, such as rice, groundnuts, vegetables and fruits also recorded substantial declines in exports, ranging between 18 percent for rice and 31 percent for groundnuts. For instance, due to small field/paddy size of less than 1 hectare, manual methods predominate for rice: planting, fertilizing, weeding, harvesting, raking, threshing, usually assisted with small equipment such as rototillers or small tractors.<sup>8</sup> While more data will be needed to investigate the determinants of food export declines in China, this evidence is suggestive of the negative impact of Covid-19 on food supply and exports, and particularly for those products that heavily depend on labor in production.<sup>9</sup>

**Table 1: China’s food exports and imports, January and Febrary 2020 compared to 2019**

||**Exports Jan**<br>**Feb 2019**<br>**(USD mn)**|**Exports Jan**<br>**Feb 2020**<br>**(USD mn)**|**Percentage**<br>**change**|**Imports Jan**<br>**Feb 2019**<br>**(USD mn)**|**Imports Jan**<br>**Feb 2020**<br>**(USD mn)**|**Percentage**<br>**change**|
|---|---|---|---|---|---|---|
|**Food Total**|**1,797**|**1,498**|**-17**|**10,940**|**12,614**|**15**|
|Fish|862|654|-24|1,292|1,170|-9|
|Oil-bearing|379|343|-10|154|317|106|
|Nuts and derived products|79|108|36|253|202|-20|

5 To account for the changing dates of the Chinese New Year, we present the trade data for January and February 2020 combined and relative to their respective levels in 2019.

6 Data on food production in China for the first two months of 2020 are not yet available. The decline in food exports and the increase in imports over this period are suggestive of disruptions in domestic supply chains and a decline in food production in China. Although, other factors not related to Covid-19 also mattered, such as the swine fever that reduced China’s stocks.

> 7 See for instance: <u>https://www.freshplaza.com/article/9188594/chinese-exports-and-imports-feel-the-impact-of-coronavirus/</u> 8 Indeed, news reports indicated that the authorities in China had concerns that the spread of coronavirus and the policies to mitigate it, which reduced the mobility of seasonal workers from northern provinces, would impact planting of rice in Hubei province, the epicenter of the crisis. See: <u>https://www.reuters.com/article/health-coronavirus-china-rice/china-calls-forexpansion-of-rice-production-amid-measures-to-contain-coronavirus-idUSB9N28G03R</u> and <u>https://www.ft.com/content/cafb828e-6423-11ea-b3f3-fe4680ea68b5.</u>

9 Appendix Figure 1 uses data for China in January and February 2020 and Appendix Figure 2 uses early data for the United States for March 2020 and show the correlation between the change in food exports (year on year) and the unskilled labor shares in total value added in exports for the 10 products that experienced the largest declines.

8