demand keeps growing but no country is irreplaceable

With geopolitical tensions mounting in recent years, diversifying ag imports has become a prime concern for Beijing. Established ag trading partners like Australia, Canada and the US have lost markets. What has it meant for consumers in the PRC?

In a report prepared for the Australian Bureau of Agricultural and Resource Economics earlier this year (see full text here). China Policy probed factors shaping purchase of Australian products by China’s consumers, and the likely impact of changes in supply/availability. Relevant to producers, policymakers and other key stakeholders internationally, the findings are summarised here.

basic vs high-end needs

China’s food and ag planning centres on food security and rural development: raising the baseline is the primary focus.

Yet the tastes of ever more urbanised, affluent and health-conscious PRC citizens are diversifying. New market segments are continually opening to meet these demands. Food safety scandals—e.g. recurring adulteration of infant formula, poor control of pesticides, mismanagement of grain reserves—remain imprinted in the public mind. Despite unrelenting food safety campaigns, imported goods are deemed safer and healthier.

dominant perceptions

Some common themes emerge across the range of products examined: beef, dairy, wheat, barley, wine

  • demand is growing for them all, yet domestic production hurdles mean reliance on global markets will continue
  • high regard for imports is largely based on their safety, taste and provenance
  • food safety and quality assurance standards in exporting states are important to Chinese buyers
  • rising as a venue for sale and marketing of imported goods, the internet is ever more important
  • consumers foresee little difficulty replacing goods from one country, whatever their reputation, with goods of equivalent quality from another

beef

Considered healthier than other meats, demand for beef keeps rising, and domestic production certainly cannot keep pace. Japanese and Australian beef are deemed the highest in quality, superior to that from the Americas. They rate better than domestic for both Western and East Asian dishes.

Growing demand coupled with the rise of an online market are big pluses for global beef suppliers. Authenticity and provenance will be key for import success. But if less Australian beef was able to reach the Chinese market, buyers expect to be able to buy quality product from elsewhere.

I’m not sure how consumers feel about bilateral relations, but for me it’s no big deal: while wholesalers can source beef from Latin America or the US, it shouldn’t be too much of a problem for them to stop selling Australian beef.—Mr Hong, beef wholesaler, Chongqing, September 2020

Sizable quantities of US beef are smuggled into the PRC, suggest interviewees, mainly via Vietnam and Yunnan, as are Indian or Burmese buffalo, multiplying sources of cheap ‘beef’.

dairy

Given demand from consumers and state sponsorship, the dairy market will keep growing: 40 percent over the next decade is the expectation. Milk and infant formula are highly-sought imports.

Goods sourced from countries with strict quality assurance and ‘organic’ reputations are the most highly valued. Strongly flavoured milk, rich and thick in consistency and with a pale yellow hue, suggesting creaminess: these qualities are felt to indicate sound levels of protein, fat and nutrients, without being overly processed.

While the state supports domestic players heavily, there is still a huge untapped market in lower-tier cities.

Many European countries are traditional milk exporters, hence reliable. Low quality businesses don’t survive. Yet some European brands are not sold in their own countries, only targeting the Chinese market…This makes consumers suspicious of their quality.—Mr Zhao, imported milk buyer, Beijing, November 2020

wheat

China remains over 95 percent self-sufficient in wheat: domestic supply largely satisfies the demands of traditional Chinese diets. But demand for better quality food is rising, and imports are seen as higher quality.

Imported wheat is mostly used in China’s growing baked goods sector. Europe is seen as the cultural home of baked goods and its wheat is preferred by bakers.

The advantages of different wheats are largely about specific final products. For pasta, durum wheat from North America (Canada, US) is best. For bread, you want hard wheat from Europe, Australia and North America. For traditional Chinese food, domestic wheat is good enough. But Australian wheat is a potential competitor, as it is ideal for producing Asian products such as noodles, dumplings and steamed buns. Chinese consumers prefer the bright and clean appearance of the final products. For cakes and pastry, soft wheat from Australia and North America is best.—Mr Zhou, flour company founder, Ningxia, October 2020

barley

The PRC depends heavily on imported barley; some 90 percent is shipped in. Until recently Australia dominated the market, but 2020’s anti-dumping duties will open the market to other suppliers: the US and Belt and Road partners; for malting, Canada and France. Beijing had been making moves toward diversifying barley sources for a number of years prior to recent bilateral friction; with domestic production struggling, opportunities exist for others.

Chinese buyers are maltsters (and livestock feed buyers) not the general public. They liked Australian barley for its price and quality but do not expect to encounter issues switching to barley from other countries and report little difference between Australian barley and other imported varieties. Buyers for the beer industry seek distinctive flavours and aromas, uniform appearance, high germination rate, ideal protein content and low ꞵ-glucens.

The quality of Australian barley is not as competitive as people think, almost at the same level as barley from other origins…Their advantages are low cost and large export volume.—anonymous craft beer business owner, Beijing, October 2020

wine

Most wine is consumed at business meetings and consumers described it as a good alternative to hard liquor. French wine is seen as top of the market. Australian wine is regarded as value for money and a good ‘entry-level’ wine. Online influencers are playing a growing role in shaping Chinese wine tastes; a preference for wines with strong flavours is clear as they are considered to pair well with robust regional Chinese cuisines. Red wine is favoured over white.

Recent duties will see Australian wine become less competitive on price, potentially leaving the market open for other ‘new world’ wines. There may be opportunities for importing wine in bulk and bottling in free trade zones.

There are basically two types of imported wine: French and Australian. Due to lack of exposure, consumers know little of other wines…unless directly asked about wines from other countries, consumers will only ask for French or Australian.—Mr Tao, wholesaler at wine tasting event, Kunming, November 2020


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