China has abandoned its decades-long commitment to food self-sufficiency, recognising that increasing urbanisation and incomes, inadequate water availability and land degradation will lead to an increasing reliance on imported products.
In 1978, China announced a determination to achieve self-sufficiency in food. The policy achieved such success that by 2002 the Country had become a net exporter of food, but this proved not sustainable as a decade later it had surpassed the United States to become the world’s largest importer of agricultural products.
In January this year Chen Xiwen, director of the Communist Party’s top policy making body for rural affairs conceded the abandonment of the self-sufficiency objective. He stated that food supplies would come under increasing pressure as incomes improved and despite the Country’s adoption of more productive agricultural technology, China could not “turn back the clock” when it comes to imports. “During the process of urbanisation, we must pay attention to modern agricultural development and to farm product supplies, but of course, we certainly cannot pursue self-sufficiency,” he said.
“An appropriate increase in imports, if it doesn’t affect our country’s security, will be of benefit in easing domestic resource and environmental pressures,” Chen stated. “We do need to consider a more positive strategy towards going overseas, and make full use of the global market.”
“China has a big population and we used to face food shortages so the government has focused on quantity,” said Li Guoxiang, a researcher at the Rural Development Institute of the China Academy of Social Sciences. But food safety has now emerged as a bigger concern than food security after a series of scandals ranging from melamine-tainted milk to toxic heavy metals in rice and vegetables. “Quantity is still a precondition, but the government is now putting lots of effort into safety, and high-quality food imports will definitely increase,” said Li. “People will realize there are more advantages than disadvantages regarding rising food imports and things are turning in that direction.”
Since the declaration of self sufficiency in 1978 approximately 260 million farmers have moved to the cities. According to census data the rural population decreased by 80 million between 1982 and 2010. Rapid urbanisation has also produced a significant increase in the Country’s middle-class. Both trends have contributed to an increase in consumption of meat and dairy products, which in turn has caused an increased demand for animal feed, which is usually corn and soy based. The shift toward higher meat and dairy consumption can be expected to continue given the Central Government’s focus on closing the income gap between rural and urban areas in both coastal and inland provinces and its attempts to invigorate the economy through urbanisation and industrialisation. Urban households spend three times more on food than their rural counterparts: an average 36% of their disposable income.
Between 1978 and 2012 there was a 93% increase in output of cereals, coarse grain and oilseeds. Food security improved greatly with grain shortages no longer being the problem they once were. According to the international Food and Agriculture Organization (FAO) 21 percent of China’s population was undernourished in 1990; by 2012, that figure was down to 12 percent.
While China may be 97% self-sufficient in basic staples such as rice, wheat and corn, it is only 80% self-sufficient in total agricultural products. Rising disposable incomes, growing exposure to brands, better retail distribution and changing urban lifestyles are driving big changes in the pattern of Chinese consumer behaviour. China has overtaken the US as the world’s largest importer of agricultural products and is now the world’s biggest grocery market.
Until recently, meat and dairy products were luxuries. Now they have become essentials for any middle class family. Annual per capita meat consumption has increased over fifteen-fold in less than twenty years, from 3.8kg in 1990 to 58.2kg in 2009.
While Chinese consumers have a deep and well-founded distrust of locally produced food they perceive Australia as being green and clean with high standards of hygiene and labelling integrity. Thus China’s growing need for food imports creates considerable potential for Australian producers. But the real growth opportunities for Australian exports will not be so much in bulk commodities like grains but rather in meat, dairy products, fruit and grocery lines clearly branded as originating from Australia.
As urbanisation proceeds and huge numbers of Chinese become middle income earners, demand for high quality food will continue to expand. Those Australian companies which move early and build up brand recognition and distribution channels should have the potential for sustained high sales growth, in contrast to the relative stagnation in the Australian domestic market under the tight control of the giant retailing duopolists.
Bruce Ross Consulting can offer introductions, support and guidance for companies wishing to take advantage of the abundant opportunities in Shanyin County or other counties or cities in Shanxi Province.
See also on Shanyin County:
- “Shanyin County’s accelerated urban renewal and its opportunities for Australian businesses”
- “Shanyin County – Australian businesses should go where others aren’t”