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Market Profile

On 17 November 2014 Trade and Investment Minister Andrew Robb and China’s Commerce Minister Gao Hucheng signed a Declaration of Intent regarding the landmark Australia China Free Trade Agreement (ChAFTA) in the presence of Australia Prime Minister Tony Abbott and Chinese President Xi Jinping at Parliament House in Canberra. Both countries are now in the process of conducting legal reviews of the concluded text and they will prepare Chinese and English language versions to be signed in 2015.

ChAFTA will unlock substantial new benefits for Australian businesses in the years ahead. The agreement gives Australian businesses unprecedented access to the world’s second largest economy and greatly enhances our competitive position in key areas such as agriculture, manufacturing exports, services, investment, resources and energy. Along with the trade deals the Government has already concluded with Korea and Japan, ChAFTA forms part of a powerful trifecta of agreements with Australia’s major trading partners in North Asia. ChAFTA greatly improves Australia’s position relative to major competitor economies such as New Zealand Chile and ASEAN, whom have already concluded FTAs with China.

ChAFTA is a game changer for Australian companies and institutions involved with China. An understanding of the agreement is important to any Australian company planning a China strategy. For more information, visit Department of Foreign Affairs and Trade.

Trends and Opportunities
Agribusiness To China

With an estimated 200 million small farms (Source: Food and Agriculture Organisation of the United Nations, ‘What do we really know about the number of farms and family farms in the world?’, Apr 2014), China is the world’s largest agricultural and food producer, feeding 21 per cent of the world’s population on only 8.5 per cent of the world’s arable land. As consumer incomes continue to grow, it is predicted that world demand for agrifood products is expected to double by 2050, much of it in higher value added “western diet” foods such as beef, lamb, dairy, fruits and vegetables. (Source: Australian Department of Agriculture, Fisheries and Forestry, 'What China wants, Analysis of China’s food demand by 2050', 04 March 2014)

In certain sectors, such as wine and soybeans, there remains a clear gap between demand and the ability of the domestic industry to efficiently and profitably supply these products. Increased demand for imports of these and other agri-products will deliver opportunities for Australian exporters. The majority of additional food demand will come from productivity improvements in domestic agriculture.

To take advantage of commercial opportunities, China’s agriculture and food sector is attracting capital, technology and partnerships to improve the value and volume of agricultural output. In sectors such as dairy, vertical integration by “national champions” is driving greater agricultural consolidation and industrialisation.

For Australian agribusiness companies, these developments represent opportunities to supply inputs such as animal feeds and genetics, as well as productivity enhancing education, services and technology. Capitalising on these opportunities requires a long term approach to educating and understanding the market and building relationships with key players. Specific areas of opportunity include:

  • animal feed and nutrition, particularly barley and sorghum

  • supply of genetic material and breeding cattle for dairy and beef

  • design and management of meat processing facilities

  • environmental management

  • agricultural and veterinary chemical management

  • by-product utilisation and disposal

  • veterinary and biosecurity services

  • tracking, traceability and risk management

  • aquaculture design and management

  • dryland cropping efficiency

  • sorting and processing equipment and software.

Food And Beverage To China

With a population of over 1.3 billion, China has emerged as the world’s largest consumer market for food and beverage (F&B), surpassing the United States in 2011. According to a recent study conducted by The Economist, China is the second fastest growing F&B market in Asia, with an average annual growth rate of 30 per cent in the past five years, according to China’s Ministry of Commerce. The Chinese National Bureau of Statistics reported that the average annual growth rate of F&B imports was around 15 per cent during the last five years, reaching an aggregated value of approximately US$98 billion by 2012, according to the World Bank.(Source: Asia Perspective, ‘China’s Increasing Appetite for Imported Food and Beverage’, 19 March 2014)

Food consumption patterns in China have changed significantly as living standards have risen and more consumers are exposed to a greater diversity of choice, both locally and in travel abroad. Chinese consumers are becoming increasingly discerning and more are seeking the following qualities when making purchases:

  • confidence in food safety and ingredients’ integrity

  • higher quality

  • better nutritional value

  • better lifestyle through more varieties of food and beverage

  • modern packaging

  • freshness

  • convenience.

Increased interest and demand for Australian F&B is being driven by China’s strong economic growth and its rising per capita income. Emerging second tier markets, wealthy coastal cities and not just the hubs of Beijing, Shanghai and Guangzhou, are providing opportunities for Australian companies to access a share of the market.

Australia is recognised by local consumers as having a clean and green environment with good quality products and brands. Many Australian exporters have taken advantage of this competitive edge by establishing a position as suppliers of meat, dairy products, fresh fruits, seafood and other products.

Market feedback has shown interest in Australian suppliers of:

  • Milk powders (including infant formula), UHT and pasteurised milk, cheese and butter

  • Seafood (particularly saltwater shell fish such as oysters, crabs and live/frozen lobster and abalone)

  • Fresh fruits (e.g. citrus, table grapes, cherries)

  • Wheat and barley

  • Chilled or frozen meat (limited to red meat, there is currently no protocol in place for white meat and game meat)

  • Processed foods

  • Wine and Beer

  • Natural fruit juice

  • Convenience and ‘instant’ foods

  • Confectionery and snack products

  • Condiments.

Market access for Australian agribusiness products to the mainland Chinese market remains a significant issue. In general, it is easier for processed foods and wine to access the market.

The China Australia Free Trade Agreement (ChAFTA) will significantly reduce the tariff barriers affecting bilateral trade in goods, including agricultural and F&B products. F&B suppliers are urged to study ChAFTA carefully, given the effects it will have on exporters plans. For more information, visit Department of Foreign Affairs and Trade website.

For fresh produce, quarantine and protocol requirements act as hurdles to the market. Australia has legal market access for citrus, mango, cherries, apples and table grapes and is currently seeking market access for summer fruit.

Exporters are encouraged to confirm the eligibility of their product to enter the Chinese market before engaging in commercial activities with Chinese customers or directly investing in a business opportunity. Exporters can make initial enquiries to their local Australian Quarantine and Inspection Service (AQIS) office or Austrade.

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