China agriculture: customer or competitor

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China agriculture customer or competitor?

• Allan Rae

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• 1.3 billion people
• 800 million rural
• 500 million urban
• 34 cities with gt1 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 gt1000 cows

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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

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How does urbanisation drive consumption?

• Higher incomes
• Sedentary life style
• Supermarkets
• Exposure to mass advertising
• Refrigerated supply chains

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Chinas 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 growth1-5 in livestock
• FDI dairy, horticultureimpacts on productivity
  quality

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China can be both customer competitor,
depending on the commodity

• Dairy products
• Fresh apples
• Kiwifruit

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Chinas Imports of Dairy products A continuing
customer
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China is worlds largest apple producer, has
12 of global exports
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Chinas kiwifruit output second only to Italy
rapid increase in exports over last few years
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New Zealand the major supplier to China will
China become a competitor in future?
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China increasing competitiveness in
labour-intensive horticulture

• Trade Competitiveness Index
• TCIij(Xij-Mij)/(XijMij)
• TCI 1 if only export
• TCI -1 if only import

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Will China continue to export, or import, grains
or meats?
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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