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Everyone wants a slice of China

In 2018 alone around 346 million people in China are projected to use food delivery services and the country’s surging middle class continues to demonstrate growing demand for high-quality, safe foods.  

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This has led many of China’s food and beverage suppliers, including e-commerce businesses, to look both domestically and abroad to satisfy demand. 

"Having access to the Chinese market will only become more important as competition increases.” 

The scale of this demand became increasingly evident during ANZ’s latest agriculture delegation to China, which examined the opportunities and challenges ahead for Australia’s horticulture sector.

“[China] is going to have a focus on making sure that products are safe,” Vito Mancini, delegate and third-generation blood orange farmer and founding director of Redbelly Citrus said. “Safety is priority.”

For many of Australian agribusinesses – including in horticulture – the issue of market access in China remains a challenge.

What’s not widely understood outside of the sector is that the China-Australia Free Trade Agreement (ChAFTA) does not provide automatic access to the Chinese market.

Instead, commodities are placed on a priority list with market access negotiated individually and over extended periods of time. 

Access

Although China applies some of its highest tariffs on horticultural products, the country still purchased more than $A10 billion worth of Australian agriculture exports in 2017 - making it the single largest market for Australian agriculture.

Having access to the Chinese market will only become more important as competition increases.

Market access was granted for Australian apricots, plums and peaches in December 2017, while in October mainland apples and blueberries were added to the priority list.

While Australia exported $A8.9 million worth of blueberries to almost 20 countries in 2016, the Chinese market - where blueberry imports grew from 692 to 8,722 tonnes from 2012 to 2016 -remains out of reach for Australian growers.

The vast majority of blueberry imports are supplied by Chile and China is increasing its own production with the domestic industry having already reached a surface area of 46 thousand hectares and an output of 115 thousand tons in 2017.

Pleasingly however, at a Produce Marketing Association conference in Shenzhen last week, the Deputy Director of Shenzhen’s Entry-Exit Inspection and Quarantine Bureau of the People’s Republic of China advised that the Chinese government is actively looking to make it faster and easier for more produce varieties to be imported. 

The process has also been recently streamlined given China’s tremendous demand for high quality produce.

On top

Already 127 countries consider China to be their number one trading partner. And while Australia was one of the top fruit exporters to China in 2017 (valued at $US3.4 billion) the competition and desire to do more business with China is intense.

Countries like Chile, New Zealand, South Africa and Peru are targeting the same seasonal window for produce such as table grapes, berries and citrus.

North-coast NSW blueberry producer Bob Benning from Benning Family Trust says competition in China “is great from every single country in the world”.

“They all want a slice of the China market,” he says. “We can’t be complacent in that, we need to make sure our products are up to speed.” 

Gaining market access and building a consumer base also brings with it challenges, with scale to supply such a large market often a concern.

It’s not an insurmountable challenge but it does require producers and exporters to be Asia ready - meaning they need to have structures and plans in place upfront for different scenarios and strong relationships in market.

It also brings forward the need for greater collaboration within the sector to bolster supply of desired varieties to better meet export and domestic markets.

While these are significant challenges, China and Asia still present lucrative and long-term markets that can see Australian horticulture grow to become an even more prominent part of our agri sector.

Ben Barrett is QLD Director, Corporate Agribusiness and Emerging Corporate at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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