Agribusiness to China

Trends and opportunities

The market

China has been ranked as the 4th largest agricultural exporter and the 2nd largest agricultural importer in the world. It is predicted that China will account for 43 per cent of global growth in agricultural demand by 2050. In 2014 China consumed 30 per cent of world rice, 22 per cent of world maize and 17 per cent of world wheat. 50 per cent of world pork production was consumed in China.

China’s share of agricultural trade with Australia has now overshadowed our fellow long-standing markets in Japan, the European Union and the United States. China is Australia’s largest agriculture, forestry and fisheries export market, worth $9 billion in 2014-15, up from $5 billion in 2010-11. China’s demand for high-quality agriculture and food products is growing rapidly.

Australian exports into China 2006

Australian exports into China 2014-15

(Source: Department of Foreign Affairs and Trade, 'Composition of Trade', 30 December 2015)

The safeguarding of national food security is still the Chinese government’s primary goal. In the 12th Five-Year Plan (2011-2016), released in March 2011, there is a strong emphasis on accelerating the development of modern agriculture by restructuring the strategic model for agricultural development, as well as enhancing agricultural production capacity, risk resilience capacity and market competitiveness.

Also laid out in the 12th Five-Year Plan period, the Chinese government plans to optimise the layout of the agricultural industry by accelerating the establishment of a nationwide strategic model for agriculture across the country, which includes ‘seven zones and twenty-three areas’. These zones and areas include the Northeast Plain, Huanghuaihai Plain, Yangtze River Basin, Fenwei Plain, Hetao Irrigation Area, South China, Gansu and Xinjiang as the main agricultural production zones, and the other agricultural areas as important components. Areas of focus include:

  • Encouraging and supporting high priority areas in the development of grain, cotton, oilseeds, sugar crops and other staple agricultural products
  • accelerating the development of controlled environment agriculture
  • standardisation of vegetables, fruits, tea, flowers and other horticultural crop production
  • raising the level of livestock development, and increasing the proportion of animal husbandry output
  • promoting sustainable aquatic farming and deep-sea fishing
  • actively developing the forestry industry
  • promoting the industrial management of agriculture
  • supporting the processing and distribution of agricultural products
  • promoting specialised, standardised, scaled and intensive agricultural production and management.

Opportunities

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, oaten hay, barley, sorghum and lucern hay, subject to the final agreement on market access
  • supply of genetic material and breeding cattle for dairy and beef as well as meat sheep and goat
  • design and management of meat processing facilities
  • environmental management and sustainable agriculture systems
  • agricultural and veterinary chemical management
  • by-product utilisation and disposal
  • veterinary and biosecurity services
  • tracking, traceability and risk management
  • aquaculture technologies and services
  • dryland cropping efficiency
  • post-harvest treatment technology
  • supply chain development and management.

There is growing interest in two way investment between Australia and China. Australia is rated by Chinese companies as being one of the most attractive agri-food investment destinations.

The stock of Chinese investment in the Australian Agriculture sector is still comparatively small, but growing fast. For Chinese investors, investment is typically seen as a way to secure supply chains to meet Chinese domestic market demand, strengthen R & D capabilities or gain access to new markets. Other drivers include Australian dollar depreciation and encouragement of offshore investment by the Chinese government.

A number of major Chinese companies are investing in Australia’s agriculture sector, including Beidahuang Group, COFCO, New Hope Group, Bright Food, Shanghai Zhongfu, Shandong Ruyi Group, and Luzhou Laojiao.

There is strong investment interest in Australian dairy, meat, seafood, grains, wine, sugar, and food processing.

Key challenges for Australian business in China include:

  • Growing number of scams or unqualified leads to Australian companies
  • Due diligence and non-payment issues – e.g. letter of credit.
  • Strong government support but commercial basis unclear – gaps
  • Market access – contamination issues
  • Customs issues – trials / communication
  • Strong competition from other countries – genetics/feed/machinery (including those based on other countries aid/funding programs)
  • Tightening of regulations and non-tariff barriers
  • Intellectual property issues for some genetics and technology transfers
  • Cultural and language barriers
  • Increasing cost of doing business in China including HR, property and other operational costs including marketing and promotion.

Tariffs, regulations and customs

Though in China the average tariff was higher for agricultural products at 14.8 per cent than for non-agricultural products at 8.6 per cent, the import tariffs on agri-produce in China are less than 25 per cent of the world average. China has one of highest levels of market openness for agri-produce in the world and has become the 2nd largest import country of agri-produce.

China has significantly reformed its trade policies, reduced tariff barriers and has been conforming to international practices after its accession to the World Trade Organisation (WTO). However, there are non-tariff barriers that impede import of some agricultural products. In practice, Australian exporters continue to encounter quarantine challenges, quota restrictions and complex administrative procedures in China.

China adopts the practice of ‘quarantine inspection before customs declaration’ in customs clearance. Import Goods Clearance Slips and Export Goods Clearance Slips stamped with the special seal of inspection and quarantine authorities are issued for goods subject to entry-exit inspection and quarantine. Customs will examine and release the goods against the Import Goods Clearance Slip or Export Goods Clearance Slip issued by the entry-exit inspection and quarantine authorities at the place of customs declaration.

Customs is the authority to interpret the customs tariff to decide tariff classifications and to assess the duty paying values of goods entering the customs border. The dutiable value of an imported good is its cost, insurance and freight (CIF) value, which includes the normal transaction price of goods, plus the cost of packing, freight, insurance and commission.

Most imported agricultural products enjoy a lower VAT rate of 13 per cent compared to 17 per cent for general goods. Many agricultural commodities including wheat, corn, rice, soybean oil, rapeseed oil, palm oil, sugar, cotton, wool, and fertilizer are imported under Tariff-Rate Quote (TRQ) arrangements, largely by state trading enterprises. Apart from the TRQ arrangements for many agricultural commodities imported by China, there are also some administrative and other forms of non-trade barriers that seriously impact on agricultural exports to China.

China maintains strict documentation requirements for the majority of agricultural products imported to China, in particularly those relating to quality, quarantine, origin and import control. Exporters of agricultural supplies should familiarise themselves with applicable tariffs and quarantine measures. Information on China’s quarantine requirements can be obtained from the Manual of Importing Country Requirements located on the Department of Agriculture and Water Resources website. Exporters can also refer to the Regulations on Implementation of Law on Entry & Exit Animal & Plant Quarantine (S.C. Decree No. 206).

The marketing of feed, additives and medicines for animal use is subject to required permits, licenses and registrations. Advice should be sought from a specialised agent or distributor familiar with these requirements. Austrade can provide referrals upon request.

The China Australia Free Trade Agreement (ChAFTA) came into force on the 20th of December 2015. It delivers to Australia significantly improved market access for agriculture and processed foods, providing Australian companies with access to China better than any of China’s other major trading partners. For more information, visit the Department of Foreign Affairs and Trade website.

Marketing your products and services

Market entry

Exporters should take time to understand key drivers and influencers affecting the market for their product and service, including how market prices are determined, the role of state-owned enterprises and local government policies. Austrade’s team of business development managers in the agribusiness sector can provide clients with advice and referrals and practical support with business contacts.

The sophistication and capabilities of businesses within any agricultural value chain can vary widely. Given the large number of potential end-users of Australian agribusiness services and technologies, identifying the most suitable business partners can be a time consuming process.

New exporters are advised to take their time and be selective in forming partnerships. Exporters should seek legal advice before commencing and concluding commercial negotiations.

There are several marketing tactics which are beneficial to succeed in the China market:

  • Have a basic understanding of import regulations and procedures
  • Conduct due diligence of your customers
  • Develop your company profiles and product information in Chinese
  • Identify the right partners to ensure your business interests and success in China
  • Appoint agents or distributors or have your own marketing staff in China
  • Have regular contact with relevant government, industry bodies and customers
  • Have presence at local industry trade shows to raise an awareness and get to know industry and business contacts.

Trade events

Attending trade shows is an effective way to generate business leads, gather market intelligence and engage with industry leaders. The following is a selection of key agribusiness trade events throughout the year. Please note that some exhibition space requires 12 months advance booking.

9 to 11 Mar 2016

2016 China International Seed Trade Show

Shanghai

22 to 24 Apr 2016

World Dairy Expo & Summit 2016

Harbin

11 to 13 May 2016

Hortiflorexpo IPM 2016

Beijing

16 to 20 May 2016

The 14th China Animal Husbandry Expo 2016

Qingdao

2 to 4 Jun 2016

China Dairy Exhibition 2016

Qingdao

6 to 8 Sep 2016

VIV China 2016 – Livestock & Poultry

Beijing

2 to 4 Nov 2016

2016 China Fisheries & Seafood Expo

Qingdao

Links and industry contacts

Government, business and trade resources

Department of Agriculture and Water Resources - Overseas network
Department of Agriculture and Water Resources - Export
China Customs
General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China
China Ministry of Agriculture
China Ministry of Commerce

Industry associations

Further advice and assistance with marketing in China may be obtained from Australian industry associations based in China.

Meat and Livestock Australia
Dairy Australia
Wine Australia

The Australian Chambers of Commerce have food and agriculture working groups and conduct regular networking events. For more information, please contact Beijing and Shanghai

Wine

Wine China

Dairy

Dairy Association of China
China Dairy Information
Holstein Farmer (media)
China Dairy Industry Association (milk/dairy processing)

Cropping, Horticulture, Plant Nutrition, Fertilisers and Pest Management

China Vegetable Association
China Flower and Gardening News
China National Seed Association
China Crop Protection Industry Association
Chinese Society of Plant Nutrition and Fertiliser Sciences

Feed and Fodder

China Feed Industry Association
Food China (E-Commerce, B2B)

Livestock and Veterinary Science

Horse (Thoroughbred) – China Horse Industry Association
China Animal Agriculture Association
China Institute of Veterinary Drug Control
China Animal Disease Control (Veterinary)
China Veterinary Drug Association

Wool, cotton and textiles

China Wool Textile Association
China Cotton & Textile Focus (Under CNCRC)
China National Cotton Exchange & China Cotton Index (CC Index)
China Cotton Association
China Leather Industry Association

Aquaculture

China Fisheries Association

Trade, cooperation, research and development

Chinese Academy of Agriculture Science
Center of International Cooperation Service (CICOS), Ministry of Agriculture, P.R.China
China Chamber of Commerce of Foodstuffs and Native Produce
China Agriculture for Trade and Economy

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

  • develop international markets
  • win productive foreign direct investment
  • promote international education
  • strengthen Australia's tourism industry
  • seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.