China agriculture: customer or
competitor?
Allan Rae
• 1.3 billion people
– 800 million rural
– 500 million urban
• 34 cities with >1 million
• Farm production still primarily in the hands
of smallholders. E.g.
– 98% dairy farms & 65% of milk production on
farms with less than 20 cows
– But 5% output on farms with >1000 cows
Trends in China's food consumption
300
250
kg/person
200
1981-83
150
1991-93
2001-03
100
50
0
rice
meats
dairy
fruit
vegetables
fish
Drivers of consumption growth
• Rapid economic growth: average 8% since
1990
– Expenditure elasticities
• Grains
0.42
• Meat/dairy/fish 1.31
• Processed foods 0.81
• Rapid urbanisation
– Urban population grows by 3.5% per year
How does urbanisation drive
consumption?
•
•
•
•
Higher incomes
Sedentary life style
Supermarkets
Exposure to mass
advertising
• Refrigerated supply
chains
China's Beef consumption growth higher in
urban residents (kg/person)
2.50
2.00
1.50
Rural
1.00
Urban
0.50
0.00
80 82 84 86 88 90 92 94 96 98 00
19 19 19 19 19 19 19 19 19 19 20
China’s production response
• Production of foods such as animal products, fish and
fruits/vegetables has also increased rapidly
• Recognises comparative advantage in labour-intensive
agriculture
• Some reasons:
– Economic reforms
• Household responsibility system
• Development of local markets
• Land tenure reform
– Less policy emphasis on grains
– Vegetable Basket Programme
– Productivity growth:1%-5% in livestock
• FDI : dairy, horticulture…impacts on productivity &
quality
China: milk self-sufficiency and net imports
20000
18000
16000
'000 tonnes
14000
12000
production
10000
consumption
net imports
8000
6000
4000
2000
0
2001-03
1991-93
1981-83
Beef: Self-sufficiency and net imports
7000
6000
'000 tonnes
5000
4000
production
3000
consumption
net imports
2000
1000
0
2001-03
-1000
1991-93
1981-83
China: Sheep&goat meat net imports
3500
3000
'000 tonnes
2500
production
2000
consumption
1500
net imports
1000
500
0
2001-03
1991-93
1981-83
China can be both customer &
competitor, depending on the
commodity
• Dairy products
• Fresh apples
• Kiwifruit
China’s Imports of Dairy products:
A continuing customer…
Shares of China's dairy imports
China's total dairy imports
60
600
50
500
US$ million
300
Series1
% by value
40
400
Australia
NZ
30
200
20
100
10
USA
EU15
0
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
China is world’s largest apple producer, & has 12% of global exports
180
160
140
120
100
80
60
40
20
0
ASEAN-10
EU15
Russia
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
South Asia
19
US$ million
China's Apple Exports
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
China
USA
EU15
NZ
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
Australia
19
% total value imports
China's Rising Share of ASEAN10 Fresh Apple
Imports: A competitor to NZ
China’s kiwifruit output second only to Italy: rapid
increase in exports over last few years
China's trade in fresh kiwifruit
7000000
6000000
US$
5000000
4000000
exports
imports
3000000
2000000
1000000
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
New Zealand the major supplier to China: will
China become a competitor in future?
% total HS081050 import value
Shares of China's Kiwifruit Imports
100
80
60
40
20
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
From Chile
From NZ
China increasing competitiveness
in labour-intensive horticulture
China's increasing international comepetitiveness
1
0.8
0.6
TCI index
0.4
0.2
fresh apples
0
-0.2
-0.4
-0.6
-0.8
-1
cut lfowers
1999
2000
2001
2002
2003
2004
2005
kiwifruit
• Trade
Competitiveness
Index
• TCIij=(Xij-Mij)/(Xij+Mij)
• TCI = 1 if only export
• TCI = -1 if only import
Will China continue to export, or
import, grains or meats?
Net imports of maize and meats
(grain equivalent)
10000
China meats
19
90
0
19
75
net imports ('000 tonnes)
5000
-5000
-10000
-15000
China maize
-20000
Outlook
• Demand growth likely to continue, if overall
income growth & urbanisation trends continue
• Supply increasingly facing constraints
–
–
–
–
–
Environmental
Water
Land
Animal health issues
Quality standards
• Future growth especially in labour intensive
cropping & small animal prodution
• China will be both customer and competitor