Agribusiness to China

Trends and opportunities

The market

China is one of the world’s top producers of livestock, grains, rice and other agricultural goods. It is the world’s 2nd largest agricultural goods importer and 7th largest exporter.

China continues to place strong importance on its agricultural sector. As outlined in the 13th 5 Year-Plan and in President Xi Jinping’s report to the recent 19^th CPC National Congress, China plans to develop a modern agricultural system, new agribusiness organisations and improve agricultural services.

China’s strategy and overall focus on developing modern agriculture: China agriculture sustainable development plan 2015-2030 (Chinese).

The industry benefits from strong government support, continued investment and farm consolidation. Securing food supply, boosting farm productivity and increasing product diversity are high priorities for the government.

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, land degradation and environmental protection.

For Australian businesses, there are opportunities 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.

Opportunities

For Australian businesses, 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
• 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
• dry land cropping efficiency
• post-harvest treatment technology
• supply-chain development and management
• cooperation on innovative technology solutions and smart agriculture including agtech startups

Competitive environment

China's market for commodities and agricultural inputs is dominated by state-owned enterprises, particularly in staple foods. There are however opportunities for firms to supply inputs along the entire value chain including final products.

Australia has a strong reputation for quality and safety and Australian businesses are well placed to capitalise on this. There is 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 favorable 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. Some projects may have strong government support but an unclear commercial basis.

Investment

Chinese investment in Australia’s agribusiness sector is expected to drive further growth in production and exports. Australia is seen as an attractive investment destination, particularly in the dairy, meat, seafood, grains, wine, sugar and food processing sectors.

China is Australia’s 2nd largest foreign investor in agricultural land after the UK. In 2016, there were 12 major deals worth a total of A$1.2 billion, a three-fold increase in value compared to 2015.

These investments support long term export opportunities and innovation in Australia’s agribusiness sector. 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.

Chinese agri-food investors are moving to a more sophisticated and cooperative investment model. Project selection, planning and due diligence are more valued while agritech and R&D are emerging as attractive investment opportunities.

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 significant progress 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 many agricultural commodities including wheat, corn, rice, soybean oil, canola oil, palm oil, sugar, cotton, wool and fertiliser that are imported under Tariff-Rate Quota (TRQ) arrangements, largely by state-owned trading enterprises.

China maintains strict documentation requirements for imported agricultural products, especially in relation to quality, quarantine and 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 permits, licenses and registrations. Advice should be sought from specialised agents or distributors familiar with these requirements.

Exporters intending to take advantage of ChAFTA tariff rates are advised to check on any additional documentation required.

Further information

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

Market entry

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 also 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.

Beware of:

• 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.

Trade events

Selected major China agriculture-related trade events include:

Dairy

China Dairy Exhibition, organised by the peak industry body China Dairy Industry Association, normally held in 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.

Horticulture

Asia Fruit Logistica (Hong Kong) is an annual international horticulture event featuring international fresh fruit and vegetable supply chains attended by international buyers all over the world including from mainland China.

China International Tree Nut Conference is held annually in China. The Conference is aimed at improving exchanges between domestic and international enterprises to promote development of the nut industry.

Meat and Livestock

China Animal Husbandry Expo, held in May in different cities each year, covers livestock including cattle, sheep and goats, and pork, as well as genetics, feed, machinery and equipment, services and technology, etc. Organised by the China Animal Agriculture Association.

China Cattle Conference, an influential national cattle industry conference held annually in a different city each year. In 2016 it was held in Sichuan in September and Guizhou in 2017. Organised by the China Animal Agriculture Association.

Seafood

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 Customs
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)
Chinese Academy of Agriculture Science

Industry and business associations

Australian industry and business associations with a China office can provide advice and marketing support.

Dairy Australia
Meat and Livestock Australia
Wine 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.

Aquaculture

China Fisheries Association

Cereals, feed and fodder

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

Dairy

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
China Nuts & Roasted Seeds Industry Association

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

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.

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