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FAS China

FAS China. U.S. Agriculture’s Advocate in the Middle Kingdom. Economic Overview. Economic Overview World’s Second Largest Economy (PPP) GDP Growth 2006: 11.1 % 2007 Forecast: 11.5 % World Bank estimated 2007 GDP per capita $9,800 (PPP) Unemployment: 4.2% (2006, official).

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FAS China

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  1. FAS China U.S. Agriculture’s Advocate in the Middle Kingdom

  2. Economic Overview Economic Overview • World’s Second Largest Economy (PPP) • GDP Growth 2006: 11.1 % 2007 Forecast: 11.5 % • World Bank estimated 2007 GDP per capita $9,800 (PPP) • Unemployment: 4.2% (2006, official) Source: CIA Fact book, EIU, 2007

  3. Economic Overview • Slightly Smaller Area than the United States • Total: 9,596,960sq km Source: www.flora.huh.harvard.edu/china/images/floramap.gif

  4. Economic Overview • Only a third of economy is state controlled • Accounts for just 17% of gross industrial output value • Excludes many state-controlled firms such as joint ventures with foreign capital high enough for the company to be classified as a "foreign-funded" • Joined WTO in December, 2001 • $1.3 trillion in foreign exchange reserves • Unprecedented migration • 150 million people moving to cities • Increasing inequality • Promotion of “Harmonious Society” Source: EIU, 2007

  5. U.S. – China Trade Overview • Fourth largest market for U.S. exports • Expected to overtake Japan in 3rd place in 2007 • The United States exported $55.2 billion in goods and services to China • The United States imported $287.8 billion in goods and services from China • U.S. trade deficit at $232.6 billion in 2006, the deficit with China is our largest • Expected to rise to $270 billion in 2007 Source: CY 2006 Data, Census Bureau, Post Forecast, 2007

  6. U.S.-China Trade Overview U.S. Total Exports, China Forecast to Overtake Japan in 3rd in 2007 Billion $U.S. Source: USITC 2008 Data

  7. U.S.-China Trade Overview U.S. Total Imports, 2007 Deficit with China Forecast at $270 Billion Billion $U.S. Source: USITC 2008 Data

  8. Total Exports from China China’s Exports Continue to Grow Rapidly China Exports Source: Census Bureau, 2007

  9. Inflation: Retail Food Price Increases Especially for Staple Consumer Goods in China Prices in $U.S./Pound Source: MOA and industry data

  10. China’s Agriculture From Self-Sufficiency to Global Integration

  11. China’s Agriculture in Context • Agriculture contributes 11.9 percent of GDP • Industry (48.1 percent) • Services (40.0 percent) • Agriculture employs 45 percent of labor force • 340 million people • 10 persons to feed per hectare of arable land, more than twice the world average of 4.4 Source: CIA, USDA/ERS, 2007

  12. China’s Agriculture in Context Annual GDP Breakdown of the Labor Force vs. Agriculture 12% Services 40% Services 31 % Agriculture 45% Industry 48% Industry 24 % Source: CIA, USDA/ERS, 2007

  13. China’s Agriculture • World’s largest ag producer by volume • Planted area and total production in decline • Increasing environmental pressures • Improving yields will not match domestic demand • Increased demand for higher value products for processors and domestic consumers • Growth in cash crops, livestock, and fisheries sectors and other labor intensive crops unlikely to match consumer demand Source: CIA, USDA/ERS, 2007

  14. China’s Land Use Most of China’s Land is Non-Arable Desert, Dry Savanna & Mountains Source: CIA Fact book, 2007

  15. China’s Grain Production Stagnant Million Tons Source: China Statistical Handbook, 2007 and FAS Beijing forecasts

  16. China’s Meat Production Growing Million Tons Source: China Statistical Handbook, 2007 and FAS Beijing forecasts

  17. China: World’s #1 Aquatic Producer Production growth driven by strong domestic consumption Million Tons Source: MOA China Agriculture Statistics Report; * estimated by FAS Beijing

  18. China: Top World Producer of… Apples Peanuts Pears Pork Source: USDA PS&D Data

  19. China: Top World Producer of… Cotton Rice Source: USDA PS&D Data

  20. China’s Agricultural Production China is World’s #2 Producer of: • Poultry (17%), second to U.S. (26%) • Corn (19%), second to U.S. (41%) • Wheat (16%), second to the EU-27 (21%) • Citrus (19%), second to Brazil (24%) • Rapeseed (27%), second to the EU-27 (34%) Source: USDA PS&D Data

  21. China’s Soybean Market Production Slightly Declining, but Demand Increasing Million Tons Source: FAS Beijing PS&D data by MY, 2007-08 forecast

  22. China’s Consumption China Broiler Consumption Grows Strong Amid Slow Recovery in Pork Million tons Source: FAS Office of Global Analysis

  23. China’s Agricultural Investment • Improved agriculture mechanization, post-harvest treatment, & distribution • Upgraded agriculture processing & manufacturing facilities • Large domestic investment in biotechnology & other research

  24. China’s Agricultural Future • China as a Competitor • High-value products (fresh and processed horticultural products, meat/poultry, etc) • Rapid quality improvements and distribution infrastructure are major factors • Large scale investment in export-oriented agricultural production suggests increased threat to U.S. growers • Can China continue to boost agricultural production enough to satisfy a booming domestic market and still increase exports?

  25. China’s Agricultural Future • China as a Market • Despite challenges, no market matches China’s potential, especially for high-value products • China has been our best performing export market recently -- led by oilseeds, cotton, hides, meats, and grains • Continued rapid economic growth will create unprecedented expansion in China's food demand • Over next 15 years, as incomes expand, product mix of China’s agricultural imports should become more diversified • How will water supply and energy demand affect the outlook?

  26. Agricultural Trade The World’s Most Dynamic Market

  27. Agricultural Trade with China • Imported $30.6 billion in 2006 • World’s sixth largest food importer • Exported $20.9Billion in 2006 • World’s 11th largest food exporter • In 2006, $7.2 billion U.S. Ag Exports • In 2007, expected over $8 billion • 30 years of 10 percent Avg. Ann. Growth Source: FAO, FAS Beijing, USDA/ERS, 2007

  28. World Trade with China In 2006, China was a $9 Billion Net Importer China Imports China WTO Accession China Exports Source: FAS Beijing, USDA/ERS, 2007

  29. U.S. Trade with China Rapid Rise in U.S. Exports after WTO Accession China is now Fourth Largest Market for U.S. Ag Exports U.S. Exports China WTO Accession U.S. Imports Source: FAS Beijing, USDA/ERS, 2007

  30. U.S. Agricultural Exports to China Total 2006 Exports were $6.7 Billion Total 2007 Exports Forecast at $7.1 Billion China’s WTO Accession Billion $U.S. Source: FAS Beijing, USDA/ERS, 2007

  31. U.S. Agricultural Exports to China Economic Growth & Enhanced Processing Capacity: Soybeans, cotton, and hides and skins are leading exports Million $ U.S. Source: U.S. DoC, Census Bureau, 2007

  32. U.S. Agricultural Exports to China China’s Beef Imports – Impact of Market Closure 1,000 $U.S. United States Australia New Zealand Brazil Source: World Trade Atlas, China Customs

  33. China’s Trade in Soy Complex China’s Rising Soybean Imports have Changed the Balance of Trade Source: FAS PS&D Tables

  34. U.S. Hardwood Lumber Exports China’s Imports Rapidly Increase Million $U.S. Source: U.S. Trade, DoC, U.S. Census Bureau

  35. China’s Agricultural Exports China’s Total Agricultural Exports Million $U.S. Source: Census Bureau, 2007

  36. China’s Ag Exports to the United States Horticultural Products have Shown the Greatest Growth Source: Census Bureau, 2007

  37. China’s Apple Juice Exports China is the World’s Largest Producer and Exporter of CAJ Million $ U.S. (Jan.-Nov.) Source: China Customs Data 2007

  38. Policy Issues Market Access for U.S. Agriculture

  39. Opportunities and Challenges • Importance of China’s WTO Accession • U.S.-China Bilateral Relationship • Policy (especially related to Food Safety) • Market Development • Capacity Building • Evolving Agricultural Trade Environment • Consumption and import growth potential • China as a competitor

  40. China’s WTO Accession • By joining the WTO, China committed to Trade Liberalization. It agreed to: • Lower tariffs (lowered by 17% by 2004) • Abide by International Standard Setting Bodies (IPPC, OIE, CODEX) • Weaken state trading monopolies • Increase license and quota transparency • Base SPS measures on science • Notify and allow comment on new regulations

  41. Bilateral Trade Issues • Mainly SPS-Related • Beef trade has not yet resumed, pending negotiation of a protocol • Pathogen and drug residue standards threaten to disrupt pork/poultry trade • Numerous plant health issues • Biotechnology • Slow review of applications • Soy and corn trade at risk

  42. Bilateral Trade Issues • Export Subsidies • China believed to subsidize corn exports, but may soon become a net importer. In 2006, first major U.S. shipment to China in ten years • Quarantine Inspection Permits (QIP) • Required of any product needing inspection • Used as a de facto import licensing system • Tariff-rate Quotas (TRQ) • Trade is flowing • TRQ distribution system not transparent

  43. Bilateral Trade Issues • Intellectual Property Rights (IPR) • Rampant problems with trademark infringement involving western brands (e.g. Wisconsin Ginseng), creating financial, legal, and food safety concerns • Value Added Tax • Refund for local producers • Possible national treatment issue

  44. SPS Issues • Non Science-based restrictions on trade • Lack of notification/transparency • Lack of risk analysis • Lack of adherence to international standards • Use of trade as bargaining chip • Affects many products including • Beef, poultry, pork, and horticultural products

  45. Biotechnology Issues • Registration difficult • No opportunity for foreign direct investment • Regulators’ research branches involved in commercial research and development • Technical/Political discussion driven by U.S. regulators have had limited results

  46. Biotechnology & Seed IPR Issues • Synchronized registration • Stacked trait policy • Detection methods • Revision of bio-safety regulations • Application window period • Patentability • Genetic source material • Plant variety protection

  47. WTO Compliance: Issues • Import Licensing • QIP • Import reporting system for soybeans • Poultry Automatic Registration Form (ARF) • TRQ • Lack of transparency affecting quota fill

  48. IPR: The Problem

  49. IPR Issues • Foreign companies lose 20% of the value of all sales in China to counterfeits • 20% of all consumer products are counterfeits, including well known brands, e.g., Gucci, Rolex, P&G, Kraft, Sunkist, Wisconsin Ginseng, etc • By some estimates, U.S. industry lost $84 billion in value in 2006

  50. IPR Issues • Of the 35 cooperators operating in China 9 are registered properly and 4 have pending trademarks • 12 are registered in the U.S. but are not registered in China, nor have they applied • 9 are registered neither in the U.S. nor China • Informal surveys of tradeshows indicate approximately 30% of companies are trademarking their brands

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