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China agriculture: customer or competitor?

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

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China agriculture: customer or competitor?

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  1. China agriculture: customer or competitor? Allan Rae

  2. 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

  3. 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

  4. How does urbanisation drive consumption? • Higher incomes • Sedentary life style • Supermarkets • Exposure to mass advertising • Refrigerated supply chains

  5. 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

  6. China can be both customer & competitor, depending on the commodity • Dairy products • Fresh apples • Kiwifruit

  7. China’s Imports of Dairy products: A continuing customer…

  8. China is world’s largest apple producer, & has 12% of global exports

  9. China’s kiwifruit output second only to Italy: rapid increase in exports over last few years

  10. New Zealand the major supplier to China: will China become a competitor in future?

  11. China increasing competitiveness in labour-intensive horticulture • Trade Competitiveness Index • TCIij=(Xij-Mij)/(Xij+Mij) • TCI = 1 if only export • TCI = -1 if only import

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

  13. 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

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