Sector Overview
Driven by growing consumption and resource constraints, China is expected to become the world’s largest importer of agri-food by 2015-2020. Canadian exports of agriculture, food and beverages to China rose 56 percent in 2009 to reach almost $2.6 billion, generating a trade surplus of $1.6 billion.
Canada’s largest export products to China in 2009 were canola seeds, wood pulp, coal and nickel. Canola seeds and iron ore products are Canada’s fastest-growing major export products to China. China’s major imports tend to be land-intensive crops, while its fastest-growing exports are generally labour-intensive.
Canadian imports from China in the Agriculture, Foods and Beverages sector were worth $561 million in 2007. The top imports by value were: apple juice, mandarin oranges, peanuts, sugar confectionary, prepared shrimps and prawns, pasta and preserved mushrooms.
Agricultural Production by Region:
The Beijing-Tianjin corridor represents the region with the greatest consumer purchasing power for food products in its territory; second-tiers cities such as Dalian, Qingdao and Shenyang also offer lucrative markets which are less competitive and sometimes more interested in imported products.
Heilongjiang, Inner Mongolia, Hebei and Shandong are leaders in dairy production. These and other provinces in the Western and Northern parts of the country have significant livestock industries. Hebei, Shandong and Henan produce about one-fifth of China’s hogs. The same provinces are among China’s top poultry and egg-producing provinces. Corn, soybeans and sugar beats are produced in China’s North and Northwest. The principal wheat-growing areas include Shandong, Hubei, Gansu, Shanxi and Shaanxi provinces. There are opportunities for selling fertilizers, machinery and equipment and other inputs in these areas.
Shandong Province and some of the larger cities also have significant food processing industries. China’s vermicelli noodle industry is an important client for Canadian dried peas. China has a large brewing industry led by companies such as Tsingtao and Yanjing which import large quantities of barley. COFCO, a state-owned enterprise, is China’s largest food company and imports significant quantities of grains and oilseeds. The import of a number of agricultural commodities is controlled by State trading monopolies. For example, China’s central government has authorized COFCO, headquartered in Beijing, to handle 90-per-cent of China’s wheat imports. Depending on market conditions on local production, commodities are imported for either immediate resale on the domestic market or for storage in the national strategic reserves.
Bilateral Cooperation:
Bilateral cooperation in the fields of agriculture and food safety is extensive with many meetings between Canadian and Chinese officials taking place each year. Under a memorandum of understanding signed in early 2007 between Canada’s Department of Foreign Affairs and International Trade and China’s Ministry of Science and Technology, both countries engage in joint agriculture related research projects which are deemed to have a commercial potential.
Market and Sector Strengths and Weaknesses:
There is still a wide gap between the standards of living between Chinese cities and the countryside. In order to promote social stability, China’s central government has made agricultural development its primary focus in order to address widening economic disparities between urban and rural areas. This translates into support for the development of physical and social infrastructure in rural areas as well as a greater emphasis on the application of science and technology to improve productivity and increase farmers’ income. A policy allowing the trading of land use rights in rural areas was announced in the fall of 2008. This policy allows for a consolidation of farming plots and increased productivity.
In rural areas, many government subsidies and incentives are designed to encourage a transition from small, localized operations to larger commercial-scale operations in both the horticulture and livestock sectors. The result is that new sales opportunities are being generated for Canadian companies selling products such as slow-release fertilizers, farming equipment, veterinary medicines, livestock genetics, and feed additives that were previously considered too expensive or not economically viable by smaller-scale producers.
There are many challenges to selling to rural areas in China’s North and West. Some companies have been successful selling through state-sponsored programs at the local, provincial or even central government level which aim to improve rural processing or farming techniques. Relations with local officials are important and a detailed knowledge of local plans and objectives is required. Farmers purchasing inputs subsidized by local governments are not always free to choose imported products. Good, long-term cooperation with local officials is sometimes required to introduce Canadian goods as viable alternatives and allow Canadian supplier take advantage of these opportunities.
Canadian exporters should be aware of technical barriers to trade that may exist. China’s recent drive to improve safety has led to tightened quarantine inspections of imported food products, creating customs delays across the board in 2007. China’s sanitary and phyto-sanitary standards do not always conform to Canadian standards and are not always in line with international standards. Chinese ports have been known to apply phyto-sanitary standards differently. For health food products, various standards can restrict the use of active ingredients and lengthy approval periods can be problematic. Labeling approvals for retail products are now carried out by the local quarantine authorities, which can result in delays and added paperwork.
For more information on these and other issues, please contact a Canadian Trade Commissioner at infocentrechina@international.gc.ca.
Sub-Sector Identification
Cereals and oilseeds:
China’s demand for Canadian wheat fell dramatically over the recent year and has not recovered due to bumper harvests and adequate state reserves. China has a stated policy of self-sufficiency in grain. China imports large quantities of oilseed, mainly soybeans. Canadian exports of canola seeds to China have surged in 2008 due to lower rapeseed harvests and high prices for cooking oil. China is currently facing a shortage of oilseeds, vegetable oils and meal for its livestock industry. The outlook for canola seeds and canola oils are good. There is great scope to expand sales of canola meal to China’s dairy industry. China’s demand for Canadian barley is likely to grow as beer consumption increases.
Food ingredients and food service products:
Canadian products in demand by China’s food processing sector include: yellow peas, potatoes, frozen blueberries and milk powder (and whey powder). China’s labour-intensive processing sector is increasingly modern. Foods are produced both for the domestic market and for export markets. Western functional foods and ingredients have not yet received widespread acceptance in North and West China. Chinese consumers are demanding higher protein and fewer grains in their diet, and are eating out more often. Expenditures on food products have been increasing faster in some cases than income levels, and they are expected to continue to increase about 10-15 per cent in 2007. Some of the greatest opportunities for Canadian suppliers of value-added goods exist in the food service industry. Products in demand by hotels and restaurant include meat products, fish and seafood, cooking oil, maple syrup and beverages.
Livestock genetics, feed and other agricultural inputs:
China’s consumption of pork rose 80% between 1989 and 2005. The demand for protein by Chinese consumers is driving expansion of the livestock industry. Pork is the preferred meat, followed by poultry products. Beef and lamb consumption are smaller but growing. China currently has 456 million pigs. After many years of rapid expansion, the Chinese dairy industry is currently going through a major restructuration resulting from a drop in consumer confidence following a number of food safety issues. The long term prospects for the dairy industry remain positive. Demand for dairy and swine genetics, live animals, veterinary medicines, management services for commercial-scale operations as well as for machinery and equipment is growing. China’s consumption of animal feed grew by 10 per cent in 2007 to 120 million tons. Most feed is domestically grown corn as well as soybeans. There is a growing demand for various feed ingredients. On the horticultural side, China is the world’s largest user of pesticides and fertilizers. Canada continues to export large amounts of potash to China. Demand for new products that can lessen the environmental impact and improve food safety is increasing.
Retail, packaged products:
Canadian products with high potential include cooking oils, margarine, natural health products, maple syrup, bottled water as well as wine (especially icewine). Canadian imported processed products tend to be expensive and are found mainly in high-end supermarkets that cater to expatriates, wealthy Chinese people and weekend shoppers. Currently, Canadian food products are under-represented in North China in comparison with other foreign brands. Canadian companies wishing to sell higher volume of products at the retail level in China are advised to undertake some processing and/or packaging in China to reduce their costs and, in certain cases, adapt the formulation and packaging to respond to local tastes. Currently, most best-selling foreign brands are produced locally.
Canadian Government Contacts:
Embassy of Canada in Beijing
Email : infocentrechina@international.gc.ca
Website: tradecommissioner.gc.ca
Foreign Affairs and International Trade Canada
125 Sussex Dr .
Ottawa, ON K1A 0G2
Website: tradecommissioner.gc.ca