- Location
- Bury St Edmunds, Suffolk
The global balance of power is shifting to Asia…
MARCH 28, 2015 / ALEDRHYSJONES
Having returned from a two week agribusiness tour of China, Hong Kong and Singapore, I have been left in no doubt whatsoever that the growing affluence of Asia will have a major impact on global agriculture. Not a revelation, I know, but I’ve now seen it for myself.
What hits you in the face when you travel around China is the sheer scale of development occurring in the major cities and the determination of the government to drive large infrastructure projects through. The urbanisation policy of China has seen mass migration from rural areas to the cities and now the country boasts over 180 cities with a population of over 3 million.
When you see the volume of high rise buildings being built, you can’t help but think whether this vast expansion and construction boom will lead to a potential property bubble? However, there’s no sign of that yet and China continues to be one of the fastest growing economies pushing hard to overtake the USA as the world’s largest.
There is a growing disparity between the urban areas and the rural hinterland, but the continued urbanisation flow has seen a growth in the Chinese middle class, estimated to be in the region of 300 million which is equivalent to almost a quarter of the country’s population. Forecasts predict that China’s population will peak at 1.5 billion by 2030, double that of Europe!
What does a growing middle class mean? An increase in disposable income and a shift in consumption patterns towards a high protein diet. You could clearly detect a westernisation occurring and a significant demand was predicted for red meat, particularly beef. Staggeringly, beef imports are estimated to reach 5 million tonnes within 5 years.
Food security is therefore high on the political agenda but long term self-sufficiency for all commodities is an unlikely aspiration. Whilst effort is being made to increase the productivity of Chinese agriculture, there remains some significant barriers to overcome including limited amount of cultivable land (only 15%), limited water supply and quality, lack of consumer confidence and a fragmented land management rights system. If any nation has the ingenuity to innovate a solution, then it’s China. However, in the meantime, reliance on imports will remain.
The challenge for the government is to strike a balance between protecting the domestic agricultural industry, who are currently at a competitive disadvantage on efficiency, cost of production and public perception compared to other countries, and source a secure supply of foreign food to satisfy the growing consumer demand.
The Chinese government is keen to develop the skills set of its farmers and offers a technical support service, including seminars, field demonstration days and on-farm advisors. There is not a tradition of agricultural shows as we know them, but there is an emergence of technical trade exhibitions, normally led by the government where farmers are specifically invited to attend. I spent some time with a British couple living in Hong Kong who were importing seed drills into China on the back of an increased mechanisation of farming practises. They explained the challenges of trading in China and achieveing government support was key to any success.
What also struck me amid the need to produce more was the lack of confidence by the Chinese people in their domestic products. The milk scandal of 2008 where powdered baby milk was found to contain dangerously high levels of the chemical melamine struck a massive blow to the industry, which they are yet to fully recover from. Foreign imports, particularly from New Zealand and Australia, therefore carry a far better perception of being cleaner, greener and safer amongst the Chinese people.
There is still some way to go to restore confidence in domestic food supplies and the tightening up of food safety regulations was very apparent. This has really highlighted to me the importance of communication with the consumer, a role which agricultural shows do so well. It is sometimes difficult to quantify the positive engagement achieved by shows, but when you see the lasting impact a food scandal can have on an industry, this role becomes ever more important.
Perhaps shows can also offer a platform to conduct international trade talks? In a meeting with the Australian Embassy in Beijing, I was most impressed by their proactive approach which led to a successful negotiation of a Free Trade Agreement with China. Discussions commenced in 2005 and went through 21 rounds of negotiation before the agreement was finally completed.
Having visited several wholesalers and importers over the past two weeks, I gained an insight into the volume and diverse range of products Australia exports to China.
From a European perspective, I am anxious to establish what similar efforts are being made by the UK and its devolved administrations to create more trade links with China. Whether we manage to get full market access or not, I am confident we will benefit indirectly from Chinese demand for food, with the diversion of some non-EU imports away from Europe thus creating a stronger domestic market.
With all the positive demographic indicators so widely talked about in the press and media, competition for market share is fierce. Indicators suggest that as incomes rise, spending on food also rises, which is contrary to the pattern seen in other developed countries. Interestingly, China has over 800 five star hotels and a big culture of eating out. More and more multinationals are investing and locating in Asia, including Nestlé where we visited their new Dairy Farming Institute in Harbin.
There are almost too many meetings and visits to mention here, but I must acknowledge the work of Nuffield Australia, particularly Emma Fan and Michael Chillvers, for pulling together a fantastic programme. We met farmers, growers, importers, wholesalers, industry experts, bankers, manufactures, processors, to name just a few, and were hosted by several government officials. A truly remarkable couple of weeks!
Everywhere we went we received an excellent reception and the Chinese were all polite, humble and friendly people. The importance of creating strong relationships was made very clear to us and their unique culture has certainly left an impression on me. I was introduced to the term “Guanxi”, used to describe trusted business relations. In order to create lasting business connections, I must practice good “Guanxi”.
It is refreshing to learn that people still have a strong connection with the land and during the Chinese New Year people flock back to rural areas to celebrate with their families. Described as the world’s largest population displacement, it is said that the 22 million population of Beijing reduces to just 7 million during this annual festival.
I have also managed to make many new friends on the trip, all of which have offered valuable insights into my study topic and I hope to visit some of them over the next twelve months.
Finally, my preconceptions on China have changed. China is not one country and one market place, it’s a collection of a number of ethnic groups with huge diversity from East to West, from North to South. With a continuous culture for over 4,000 years, China has a rich history. It invented paper, discovered Pi and was the first to start mapping the sky. Understanding and respecting their culture will be key to unlocking future market opportunities.
Re-post of blog by Aled Jones first posted on Twitter this morning @AledTyllwyd
Original link: http://aledrhysjones.com/2015/03/28/the-global-balance-of-power-is-shifting-to-asia/
MARCH 28, 2015 / ALEDRHYSJONES
Having returned from a two week agribusiness tour of China, Hong Kong and Singapore, I have been left in no doubt whatsoever that the growing affluence of Asia will have a major impact on global agriculture. Not a revelation, I know, but I’ve now seen it for myself.
What hits you in the face when you travel around China is the sheer scale of development occurring in the major cities and the determination of the government to drive large infrastructure projects through. The urbanisation policy of China has seen mass migration from rural areas to the cities and now the country boasts over 180 cities with a population of over 3 million.
When you see the volume of high rise buildings being built, you can’t help but think whether this vast expansion and construction boom will lead to a potential property bubble? However, there’s no sign of that yet and China continues to be one of the fastest growing economies pushing hard to overtake the USA as the world’s largest.
There is a growing disparity between the urban areas and the rural hinterland, but the continued urbanisation flow has seen a growth in the Chinese middle class, estimated to be in the region of 300 million which is equivalent to almost a quarter of the country’s population. Forecasts predict that China’s population will peak at 1.5 billion by 2030, double that of Europe!
What does a growing middle class mean? An increase in disposable income and a shift in consumption patterns towards a high protein diet. You could clearly detect a westernisation occurring and a significant demand was predicted for red meat, particularly beef. Staggeringly, beef imports are estimated to reach 5 million tonnes within 5 years.
Food security is therefore high on the political agenda but long term self-sufficiency for all commodities is an unlikely aspiration. Whilst effort is being made to increase the productivity of Chinese agriculture, there remains some significant barriers to overcome including limited amount of cultivable land (only 15%), limited water supply and quality, lack of consumer confidence and a fragmented land management rights system. If any nation has the ingenuity to innovate a solution, then it’s China. However, in the meantime, reliance on imports will remain.
The challenge for the government is to strike a balance between protecting the domestic agricultural industry, who are currently at a competitive disadvantage on efficiency, cost of production and public perception compared to other countries, and source a secure supply of foreign food to satisfy the growing consumer demand.
The Chinese government is keen to develop the skills set of its farmers and offers a technical support service, including seminars, field demonstration days and on-farm advisors. There is not a tradition of agricultural shows as we know them, but there is an emergence of technical trade exhibitions, normally led by the government where farmers are specifically invited to attend. I spent some time with a British couple living in Hong Kong who were importing seed drills into China on the back of an increased mechanisation of farming practises. They explained the challenges of trading in China and achieveing government support was key to any success.
What also struck me amid the need to produce more was the lack of confidence by the Chinese people in their domestic products. The milk scandal of 2008 where powdered baby milk was found to contain dangerously high levels of the chemical melamine struck a massive blow to the industry, which they are yet to fully recover from. Foreign imports, particularly from New Zealand and Australia, therefore carry a far better perception of being cleaner, greener and safer amongst the Chinese people.
There is still some way to go to restore confidence in domestic food supplies and the tightening up of food safety regulations was very apparent. This has really highlighted to me the importance of communication with the consumer, a role which agricultural shows do so well. It is sometimes difficult to quantify the positive engagement achieved by shows, but when you see the lasting impact a food scandal can have on an industry, this role becomes ever more important.
Perhaps shows can also offer a platform to conduct international trade talks? In a meeting with the Australian Embassy in Beijing, I was most impressed by their proactive approach which led to a successful negotiation of a Free Trade Agreement with China. Discussions commenced in 2005 and went through 21 rounds of negotiation before the agreement was finally completed.
Having visited several wholesalers and importers over the past two weeks, I gained an insight into the volume and diverse range of products Australia exports to China.
From a European perspective, I am anxious to establish what similar efforts are being made by the UK and its devolved administrations to create more trade links with China. Whether we manage to get full market access or not, I am confident we will benefit indirectly from Chinese demand for food, with the diversion of some non-EU imports away from Europe thus creating a stronger domestic market.
With all the positive demographic indicators so widely talked about in the press and media, competition for market share is fierce. Indicators suggest that as incomes rise, spending on food also rises, which is contrary to the pattern seen in other developed countries. Interestingly, China has over 800 five star hotels and a big culture of eating out. More and more multinationals are investing and locating in Asia, including Nestlé where we visited their new Dairy Farming Institute in Harbin.
There are almost too many meetings and visits to mention here, but I must acknowledge the work of Nuffield Australia, particularly Emma Fan and Michael Chillvers, for pulling together a fantastic programme. We met farmers, growers, importers, wholesalers, industry experts, bankers, manufactures, processors, to name just a few, and were hosted by several government officials. A truly remarkable couple of weeks!
Everywhere we went we received an excellent reception and the Chinese were all polite, humble and friendly people. The importance of creating strong relationships was made very clear to us and their unique culture has certainly left an impression on me. I was introduced to the term “Guanxi”, used to describe trusted business relations. In order to create lasting business connections, I must practice good “Guanxi”.
It is refreshing to learn that people still have a strong connection with the land and during the Chinese New Year people flock back to rural areas to celebrate with their families. Described as the world’s largest population displacement, it is said that the 22 million population of Beijing reduces to just 7 million during this annual festival.
I have also managed to make many new friends on the trip, all of which have offered valuable insights into my study topic and I hope to visit some of them over the next twelve months.
Finally, my preconceptions on China have changed. China is not one country and one market place, it’s a collection of a number of ethnic groups with huge diversity from East to West, from North to South. With a continuous culture for over 4,000 years, China has a rich history. It invented paper, discovered Pi and was the first to start mapping the sky. Understanding and respecting their culture will be key to unlocking future market opportunities.
Re-post of blog by Aled Jones first posted on Twitter this morning @AledTyllwyd
Original link: http://aledrhysjones.com/2015/03/28/the-global-balance-of-power-is-shifting-to-asia/