CHINA, as the second-largest global economy, is rapidly charging ahead as the world-leading market, with a sharp rise in its middle class that now drives the global food marketplace.
Dr. Mark Lyons, vice president of corporate affairs for Alltech, explained to the recent Alltech International Symposium that China considers itself the host of the 21st century, replacing the U.S., the host of the 20th century.
Some economists forecast that China will surpass the U.S. as the world's largest economy over the next 10 years. While China's real gross domestic product climbs, the disposable income of its residents also is improving.
Lyons, who is based in Beijing, China, said China is taking center stage of the global market.
Consequently, as a country that highly affects global business, it is important to recognize the current "mega-trends" in China.
Fueled by Chinese government policy, more people are moving to urban cities. In fact, this movement into urban areas over the past 30 years has lifted 1 billion people out of poverty in China. As a generation that will grow up with the conveniences of living in the city versus rural areas, young people plan to stick to city life.
Furthermore, an additional 200 million people will enter the Chinese middle class by 2026. China has more than $15 trillion in bank deposits — growth of $2 trillion per year — and Chinese consumers' income and available money to spend on food items are also on the rise.
In addition to the income growth in China, investment in education, which has doubled since 1998, and access to information on the internet contribute to an ever-changing marketplace.
However, the rise in living standards, coupled with the rate of urbanization, will boost China's meat consumption, domestic production and imports.
As indicated by data from the U.S. Department of Agriculture's Economic Research Service, China's meat imports have risen steadily since 2010 and are projected to continue to climb.
According to USDA, China's pork imports are forecasted to show the greatest increase, rising from 750,000 metric tons in 2013 to 1.2 million mt by 2023. The U.S. joins Canada and the European Union as the main suppliers of pork to China.
Nevertheless, China will continue to produce most of its own meat — but not without challenges. The Chinese agriculture sector is facing the issues of rising costs, finding employees as older workers outnumber younger ones, access to arable land and water, environmental regulations, increasing incidence of livestock diseases and improving food quality without sacrificing food safety.
Although it has 50% of the world's sows, because of the vast amount of pork consumed domestically, China is still a net importer of pork. In order to reverse this trend, the pork sector will need to continue to increase production and improve efficiency.
Dr. Defa Li, dean of the College of Animal Science & Technology at China Agricultural University, told the Alltech symposium that the average mortality rate in Chinese hog production is 10-12%, which compares to 5% in competing countries like the U.S.
Moreover, land in China is limited, which hinders expansion in order to produce enough feed for animals to sufficiently meet the robust demand for meat. As a result, the country will need to either import more grain for feed or import more meat until it can sustain its current pace of growth.
Li said increasing efficiencies in pork production, including for animal nutrition and health, will be dependent on new breakthroughs that must include biotechnologies.
Solutions in China will start with the government. Presently, the Chinese government is focusing on anticorruption and environmental regulations and food security as its top priorities.
According to Lyons, China is viewed as either a peril or a partner; his company sees China as a major partner.
Still, the business climate in China is vastly different from the U.S. In order to be successful in China, businesses must focus on relationship building.
For example, while a company sales representative in China may make one call a day, a U.S. salesperson is expected to make a minimum of five calls per day.
Based on lessons learned from the private sector, increasing trade opportunities for U.S. agricultural products, including meat, to the world's largest middle class will take time, especially in northeast China.
U.S. agricultural exports to China have tripled over the last decade. Traditionally, northeast China — an area of farming and manufacturing — was a difficult market for U.S. companies to access. However, thanks to current economic growth and development, the region's agricultural imports are outpacing the rest of China, according to USDA.
Michael Scuse, USDA undersecretary for farm and foreign agricultural services, noted that nine state departments of agriculture and 28 companies recently participated in a USDA trade mission to the region to explore the opportunities for U.S. agricultural exports.