China: a growing superpower in the food industry

Posted by Isobel Drake on 17th November 2009

China is anticipated to have reaped lower growth rates in food exports this year in the wake of last year’s melamine scandal but it is unlikely to dent their future as a world leading food supplier.

The world’s most populous country is a net exporter of food and drink, with exports in volume terms worth between 25 million and 30 million tonnes. By value, exports were worth just over US$31bn (A$33.2b) in 2008. Whilst the most significant overseas markets for the Chinese food and drinks industry include nearby Asian countries such as Japan, South Korea and Malaysia, the country is also a major exporter of food and drink to the US, EU countries and Russia.

The country’s growing significance as a supplier to the global food and drinks industry is mainly the result of its economic performance, together with the development of its domestic food industry. The Chinese economy has been experiencing double-digit increases in recent years, although lower growth is forecast for 2009 as a result of the global economic downturn and its effect on China’s overseas export markets. Much of the recent economic growth has occurred in coastal provinces, which has resulted in up to 200 million rural labourers and their dependents moving to urban locations.

China’s food and drinks industry has developed in line with the country’s economy. By value, food industry output has increased by more than 150% between 2004 and 2008, whilst its food retail market has witnessed a shift away from more traditional outlets such as wet markets to modern grocery stores. Such shifts have seen the food industry – particularly large American firms – gravitate toward Chinese expansion in order to capture higher growth rates than they can achieve in developed markets.

Food and beverage manufacture and processing now accounts for nearly 7% of industrial production in China, with much of the country’s domestic food industry concentrated geographically on the eastern coast, in cities such as Shanghai.

However, concerns persist that much of the food industry’s recent expansion has come at the expense of food safety and quality. Safety scandals such as the melamine scare have rocked the industry, leading to all manner of negative outcomes. These have ranged from bans on imported Chinese foodstuffs abroad to even illnesses and deaths as a result of consuming contaminated products. In response, a new food safety law came into effect in June 2009. The new law consolidates hundreds of separate regulations and statutes, and replaced the existing Food Hygiene Law.