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02/09/2017

Chinese demand for food products set to rise: report

Growing middle class and stable employment create ‘tremendous trade and investment opportunities’ for Canadian business

The growth of the Chinese middle class is one of several factors expected to create increased demand for imported agricultural products such as cereals, vegetables and live animals, as well as processed foods including meat, fish and fruits, according to a new report from the Conference Board of Canada

The 72-page report, Chinese Demand: What’s Growing and Open to Canadian Companies, says China currently boasts one of the world’s fastest-growing economies, offering “tremendous trade and investment opportunities” for Canadian businesses in the goods and services sectors.

“ Chinese middle class and its taste for things such as meat, quality seafood, grains and vegetables will likely continue to expand,” says report author Julie Ades. “Indeed, the gap in consumption between the low and higher-income earners and between rural and urban consumers suggests there is significant potential for the Chinese food market to expand as urbanization continues and the income level of the poor gradually increases.”

It predicts Chinese consumption will continue to see “fast growth” in coming years, supported by a combination of stable employment and rising income. The world’s most populous country currently accounts for more than 17% of the global economy.

Improving economic relations with China is a “key policy focus” of the Canadian government, the report notes. Last year, Canada joined the Chinese-led Asian infrastructure bank to launch exploratory talks towards a Canada-China free trade agreement.

The value of Canadian exports to China grew at a double-digit pace between 2006 and 2015, and it is now second only to the U.S. among Canada’s leading export markets.

In addition, six of the top 10 fastest-growing Chinese import categories (based on compound annual growth rate) between 2013-2015 were food related: Cereal, flour, starch, milk preparations and products; cereals; miscellaneous edible preparations; meat and edible meat offal; milling products, malt, starches, inulin, wheat gluten; and edible fruit, nuts, peel of citrus fruit and melons.

Oil seeds, oleaginous fruits (part of a plant used to produce a vegetable oil, such as olives or walnuts) and grains currently comprise 14.3% of Canada’s total exports to China – second only to pulp of wood, fibrous cellulosic material and waste – with the market valued at US$2.62 billion.

Canada also exports US$509 million worth of seafood, US$496 million worth of cereals and US$377 million worth of meat and meat products to China.

The report also notes strong import growth for meat and seafood products; dairy products, eggs and honey; beverages, spirits and vinegar; cocoa and cocoa products; coffee, tea and mate (a South American drink), and spices.

It says several factors suggest strong future growth for Chinese imports of food products, including a 2013 change to the country’s food policy that acknowledged the need for imports to supplement domestic production. China did not historically import large amounts of agricultural products such as meat and dairy, owing to the country’s policy of stockpiling key products in state storage facilities.

Chinese companies have also been buying farms in countries including the U.S. and Australia to meet growing consumer demand for products like dairy and meat. In late 2013, for example, the Chinese company Shenghui purchased Smithfield Foods, the largest pork producer in the U.S.