Agribusiness to China
Trends and opportunities
China’s is one of the world’s top producers of livestock, grains, rice and other agricultural goods. It is the world’s second-largest agricultural goods importer and seventh-largest exporter. Agriculture employs 40 per cent of China’s citizens (Source: FAOstat, 2013 data. Ranking includes EU as world’s largest importer and exporter).
As outlined in its 13th Five-Year-Plan, China continues to reform its agricultural sector. The industry benefits from strong government support, continued investment and farm consolidation. Securing food supply, boosting farm productivity and increasing product diversity are high on the government’s agenda. Demand growth is expected to remain high, particularly for value-added products such as meat and milk. Challenges for the sector include meeting growth objectives with limited new arable land and minimal environmental cost.
For Australian agribusinesses, there is a window of opportunity to develop long-term supply agreements and build relationships with Chinese enterprises along the entire agribusiness and food-value chain, including services, education and training.
For Australian agribusinesses, areas of opportunity include:
- animal feed and nutrition, particularly oaten hay, barley and sorghum
- supply of genetic material and breeding cattle for dairy and beef as well as sheep and goat meat
- design and management of meat-processing facilities
- dairy industry equipment, technology and services
- 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.
China's market for commodities and agricultural inputs is dominated by state-owned enterprises, particularly in staple foods. However, there are good opportunities for foreign firms to supply inputs along the entire value chain including final products. A number of foreign firms have invested in the market including in joint ventures.
Australia has a strong reputation for quality and safety and Australian agricultural businesses are well placed to capitalise on this. However, they face strong competition from North and South American and European countries with similar credentials, both in commodities and in value-add areas such as genetics and breeding, feed and machinery. Exporters without strong supply partnerships remain vulnerable to changes in buyer demand, price and currency.
The Australian Government continues to work closely with Chinese authorities to negotiate more favourable market access and reduce non-tariff barriers. Market access challenges for Australian businesses include contamination issues, uncertainty regarding customs trials and approvals, and regulatory changes.
National, provincial and local governments have a strong interest in the sector and may offer favorable conditions to foreign firms. However, some projects have strong government support but an unclear commercial basis.
Chinese investment in Australia’s agribusiness sector is expected to drive further growth in production and exporting. Investors in Australian agriculture include major importers with an interest in securing supply to meet Chinese domestic market demand, strengthening their research and development capabilities, and gaining access to new markets.
While the stock of Chinese investment is still relatively small, Australia is seen as an attractive investment destination, particularly in the dairy, meat, seafood, grains, wine, sugar and food processing sectors.
Major Chinese companies with trade and investment interests in Australia’s agriculture sector include Beidahuang Group, COFCO, New Hope Group, Bright Food, Shanghai Zhongfu, Shandong Ruyi Group, and Luzhou Laojiao.
Tariffs, regulations and customs
Since its accession to the World Trade Organization (WTO) in 2001, China has made strides in liberalising agricultural trade.
The China Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015, and is reducing and eliminating tariffs on Australia’s agricultural exports. Fact sheets and the full text of the agreement can be found on the Department of Foreign Affairs and Trade website, and a Free Trade Agreement Portal allows companies to search for products by name of Harmonized System (HS) code to determine the preferential tariff rate.
A Value Added Tax (VAT) of 17 per cent is applied to all imports, except to those specifically used in manufacturing for re-export. Low tariff rates are applied to certain products in sectors where the government encourages development.
Australian exporters to China still face non-tariff barriers including quarantine challenges, quota restrictions and some complex administrative procedures.
Basic import procedures
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 that interprets the customs tariff to decide tariff classifications and to assess the dutiable 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, canola oil, palm oil, sugar, cotton, wool and fertiliser are imported under Tariff-Rate Quote (TRQ) arrangements, largely by state-owned trading enterprises.
China maintains strict documentation requirements for imported agricultural products, especially in relation to quality, quarantine, origin and import control. Exporters should pay attention to applicable tariffs and quarantine measures.
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.
Exporters intending to take advantage of ChAFTA tariff rates are advised to check on any additional documentation required.
Detailed information on China’s quarantine requirements is available in the Department of Agriculture’s Manual of Importing Country Requirements.
Exporters can also refer to the China Inspection and Quarantine Services’ Regulations on Implementation of Law on Entry and Exit Animal & Plant Quarantine (S.C. Decree No. 206).
Marketing your products and services
Australian businesses are advised to take time to understand the China market including customer decision drivers, price influencers, the role of state-owned enterprises (SOEs) and government and regional differences.
There are a large number of potential end-users of agribusiness services and technologies, with different levels of sophistication.
Businesses are advised to take their time and be selective in forming partnerships, and seek legal advice before commencing and concluding commercial negotiations.
Tips for success:
- Early protection of intellectual property rights is vital.
- 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 a presence at local industry trade shows to raise an awareness and get to know industry and business contacts.
- Pay attention to regional, provincial, and local differences – China is more than one market.
- Have a basic understanding of import regulations and procedures.
- Conduct due diligence of your customers.
- scams or unqualified leads
- due diligence and non-payment issues, for example letters of credit
- intellectual property issues, for example in genetics and technology transfers.
Austrade can provide practical advice and support, as well as referrals to specialised service providers.
Selected major China agriculture-related trade events include:
China Dairy Exhibition, organised by peak industry body China Dairy Industry Association, held in early June in different cities each year. The expo includes dairy farming technologies and services, dairy products processing and other supply chain elements.
International Dairy Expo and Summit, held in Heilongjiang, an important region for dairy production, in the provincial capital Harbin. Hosted by China Dairy Association.
Grains and Feed
JCI China hold a conference on the Chinese feed raw materials market twice annually in September and March. Attended by importers and end users.
Bakery China is an annual Shanghai event covering the entire value chain for the bakery and confectionery market annually. It is attended by major Chinese flour mills. Attendees are also interested in dairy ingredients, so is also of interest to the dairy sector.
China International Cereals and Oils Industry Summit, an annual event attended by importers and end users.
Asia Fruit Logistica (Hong Kong) is an annual regional event attended by international buyers including from mainland China.
Meat and Livestock
China Animal Husbandry Expo, held in May in different cities each year, covers livestock including cattle, sheep and goats, and pork. Organised by the China Animal Agriculture Association.
China Cattle Conference, an influential national cattle conference held annually in a different city each year. In 2016 it was held in Sichuan in September. Organised by the China Animal Husbandry Association.
China Fisheries & Seafood Expo, in Qingdao, is a large international seafood show. Privately organised, it has been running for over 20 years.
Links and industry contacts
Government, business and trade resources
China Ministry of Agriculture
China Ministry of Commerce
Department of Agriculture - Export
Department of Agriculture - Overseas network
General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China (AQSIQ)
Industry and business associations
Australian industry and business associations with a China office can provide advice and marketing support.
Meat and Livestock Australia
The Australian Chambers of Commerce in China have food and agriculture working groups and conduct regular networking events. For more information, please contact the Beijing, Shanghai, South China (Guangzhou) and West China (Chengdu) chambers.
China Fisheries Association
Cereals, feed and fodder
China Feed Industry Association
Food China (E-Commerce, B2B)
China Dairy Industry Association
Dairy Association of China
China Dairy Information
Horticulture, cropping, plant nutrition, fertilisers and pest management
China Flower and Gardening News
China National Seed Association
China Vegetable Association
Chinese Society of Plant Nutrition and Fertilizer Sciences
Livestock and veterinary science
China Veterinary Drug Association
Trade, research and development
Center of International Cooperation Service (CICOS), Ministry of Agriculture, People’s Republic of China
China Chamber of Commerce of Foodstuffs and Native Produce
Chinese Academy of Agriculture Science
Wool, cotton and hides
China Cotton Association
China Leather Industry Association
China Wool Textile Association
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