China to spend big to combat drought in north

AFP , Wednesday 9 Feb 2011

China has announced that it intends to spend around $1 billion in battling drought amid winter harvest fears

China has said it will spend nearly $1 billion to battle a drought plaguing huge areas of its north, as wheat prices continued their climb and the UN warned of serious consequences for the winter harvest.

The drought is the worst in six decades in many areas, and has left a swathe of grain-producing regions reeling from a lack of any significant rainfall in more than three months.

The government will spend at least six billion yuan ($911 million) to divert water to affected areas, construct emergency wells and irrigation facilities, and take other measures, China's drought relief headquarters said.

Wheat prices on the Zhengzhou commodity exchange in central China jumped nearly across the board on Wednesday, the exchange said.

Prices of a key contract hit a "historic high" of 2,865 yuan per tonne on Tuesday, the Chinese finance website Hexun reported. The report did not specify the contract to which the figure referred.

The spike in prices could not have come at a worse time for the government, which is struggling to cap soaring prices of food and other key goods.

On Tuesday, the central bank announced the third interest rate hike in four months, one of a series of macro-economic levers it has pulled to tame inflation -- which has a history of sparking unrest in China.

The UN's Food and Agriculture Organisation (FAO) warned in an alert issued Tuesday of the impact on the winter wheat crop, a key harvest for the world's biggest producer of the grain.

"The ongoing drought is potentially a very serious problem," the Rome-based agency said.

Eight major grain-producing provinces have been affected. The provinces together produce more than 80 percent of the country's winter wheat.

The situation could worsen, the government has warned, with no significant rainfall expected in the near future.

The drought is the worst in 60 years in eastern China's Shandong province, the nation's second-biggest wheat producer, where rainfall in recent months has been 85 percent below normal.

Hebei province in northern China was already channeling large amounts of water from the Yellow River, and was poised to divert more to affected areas, the China Daily reported.

World food prices reached their highest level ever recorded in January and are set to keep rising for months, the FAO said last week, warning that the hardest-hit countries could face turmoil.

Rising food prices have been cited among the driving forces behind recent popular revolts in north Africa, including the ongoing uprising in Egypt and one in Tunisia that led to the ouster of president Zine El Abidine Ben Ali.

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