China update

6 September 2021

The Australian Government is aware of reports that trade disruptions have affected some goods entering China from Australia. For more information contact Austrade on 13 28 78 or via the export enquiry form.

This page is updated routinely with the latest market insights and is not intended to provide exhaustive coverage of each sector. Business should continue to make commercial decisions based on a thorough assessment of risk and opportunity, and obtain professional advice where necessary.

 

How can Aussie exporters embrace the new e-commerce trends in China?

Key insights

Supply chains: Shipping companies are urging their customers to book containers as soon as possible in preparation for China’s ‘Golden Week’ National Day holidays in early October. Three to four weeks before the 7-day national holiday is traditionally the peak period for shipments. Delays are expected on most major routes given current disruptions to logistics. Australian importers are reporting the current shipping charge for a 40-foot container has increased to 3 times the normal rate.

Industry. Growth in earnings at China’s industrial firms increased 16% on an annual basis in July, slowing for the fifth straight month, according to data released on 27 August by the National Bureau of Statistics (NBS). This compared to a 20% gain in June. The NBS attributed the July result of RMB 703 billion (A$149 billion) to elevated raw material prices, supply chain constraints, extreme weather and sporadic coronavirus outbreaks.

Credit. China’s central bank (PBoC) pledged to boost credit support to help finance rural development, according to a statement issued on 26 August after a high-level meeting between the PBoC and the Ministry of Agriculture and Rural Affairs. Boosting rural lending to small businesses aligns with the push to promote ‘common prosperity’, a term increasingly prevalent in official documents. According to China’s latest census around 36% of the population - nearly 500 million people - still live in rural areas.

Market Opportunities and Challenges

Food, Beverage and agriculture

  • All overseas manufacturers of imported food will be required to be registered with China Customs (GACC) under new Chinese regulations scheduled to take effect from 1 January 2022 (Decrees 248/249). All trading partners are awaiting further guidance from China Customs on how this will be implemented in practice.
  • A growing appetite for plant-based protein is driving demand for pulses. According to China Customs data, China imported 3.1 million mt of pulses from other countries in 2020, up 47%
    y-o-y. Canada and the US hold 92% of the market share for pulses. Australia ranks 6th with 1% of the market share and a volume of 36,682 mt. Australia’s total pulses exports are valued at A$1.2 billion, with China representing 4.5% of that export value, worth A$55 million.
  • Chinese importers have expressed interest in mung beans and peas. Australian companies currently have market access for both products. Austrade is working with grain importers and the pulses sector to leverage opportunities in the plant-based protein sector. Austrade will lead a related industry workshop at the end of September.
  • Investments in Foodtech in China reached US$6 billion (A$8.3 billion) in 2020, according to Agfunder’s 2021 China Agrifood investment report. This represents a growth of 66%, y-o-y. China is turning toward foodtech to boost productivity and efficiency in the food and agriculture supply chain. Australia’s capabilities in farming automation and bioengineering could generate export opportunities.
  • Opportunities to export agricultural machinery are growing as farming becomes more mechanised. China imported A$1 billion worth of agricultural machinery in 2020, according to data from China’s General Administration of Customs (GACC). This represents a year-on-year increase of 15% from 2019. Opportunities exist in some high value-added sectors including precision harvest machinery, advanced irrigation, drainage and storage systems, grain-drying equipment, IoT technology, and supply chain- and farm-management systems.
  • China will become the world’s largest ice cream market in 2021, according to the 2021-2025 Ice Cream Industry Market Research and Development Strategy Consulting Report. Market size reached A$25 billion in 2020, a y-o-y increase of 6.5%. Foreign brands, including Wall’s, Nestle and Meiji, have a combined market share of approximately 26%. Opportunities exist for Australian suppliers of premium healthier ice cream options, such as all natural and zero additives products. Ice cream is not categorised as a dairy product for the purposes of China Customs’ import requirements.
  • The number of Chinese people who consume dairy products daily is around 360 million, according to the 2021 China Milk Quotient Report issued by the China Dairy Industry Association. Demand is growing for dairy foods (including cream biscuits and cream cakes), yogurt, liquid milk, milk powder and cheese. According to the report, 37% of Chinese consumers credit dairy as providing health benefits, up 7.7% from last year.
  • The volume of spirits imported to China grew significantly from January to May 2021. Spirits are now the largest imported alcoholic beverage category, worth A$1.1 billion, according to a recent report released by the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal (CFNA). Imports of brandy and whisky increased by 148% and 123% respectively.
  • Spirits from France and the UK represent about 80% of spirits imports into China. Australian spirits to China surged 40% to A$8million and now rank ninth. Major distribution channels include KTV, bars/pubs, private clubs and high-end restaurants, and particularly e-commerce. Home consumption is only just taking off.
  • Australia exported almost A$800,000 of gin to China in the first six months of 2021. This marked a tenfold increase y-o-y. Australia’s 10 % market share ranks third after the UK and South Africa. Australian whisky exports to China increased sixfold y-o-y to A$437,000, according to China Customs data by Global Trade Atlas. Australian spirits should do well if positioned strategically as high quality, sustainable and cost-effective. Investment in effective social media marketing is critical to success in the China market.

Retail

  • Older demographics in China are increasingly buying goods and services online. This trend has accelerated during the pandemic. More than 60 million over-50s made purchases during livestreams, according to CBNData. Over 1,000 regular Taobao Live broadcasts are reportedly marketing products for older audiences. According to the latest census, 264 million people in China are aged 60 or older. Australian companies looking to use livestreaming should be aware of new regulations that stipulate how goods can be marketed.
  • Quick and convenient food products are in high demand among China’s younger consumers. Healthy and microwaveable dishes are increasingly popular. The merging of health, taste and convenience creates opportunities for Australian companies that can successfully crack the premium ready- to-eat meals market. This requires careful planning, localisation, and partner selection to bring the best of Australian produce to busy consumers in under 30 minutes.   
  • The 2021 China Luxury Forecast, by Ruder Finn and the Consumer Search Group (CSG), reported that 41% of its 2,000 respondents in Mainland China said they would spend more on luxury goods this year compared to last year. Only 9% said they would spend less. Official brand websites have become the first choice for online shopping, accounting for 54% of online purchases. The priorities for spending were beauty and cosmetics, followed by clothing and shoes.
  • The members-only retailers business model is becoming more popular in first and second-tier cities. Established players include Sam’s Club (a Walmart subsidiary) and Metro China (now part of China’s retail conglomerate Wumart Group). Sam’s Club has over 3 million subscribers in China and makes nearly a third of its total sales from its private label products. This creates another avenue for Australian companies to connect with Chinese consumers.
  • Duty-free shopping is booming in Hainan The island is on track to become the largest duty-free market in the world in the next two years according to a report by KPMG China. Hainan applies preferential tax arrangements aimed at luring more Chinese consumers to convert overseas shopping to domestic consumption.

Health & medicine

  • The efficiency of drug application and registration processes is improving, according to the Annual Drug Review Report of China’s National Medical Products Administration (NMPA). The NMPA now allows part of the clinical trials process to be conducted outside of China. This creates opportunities for Australian contract research organisations (CROs) to facilitate clinical trials in Australia for Chinese (and other foreign companies) seeking to have drugs approved in the market.
  • Australia is still the leading exporter of complementary medicines to China, according to the recent CMA Industry Audit 2021. Imports were worth A$1.19 billion in 2020. 70% of Australia’s current complementary medicine exports are directed towards the Mainland China and Hong Kong markets according to the Industry Audit. 
  • Data from iiMedia Research shows that 80% of elderly consumers in China give priority to complementary medicines. Industry experts believe that products aiding bone density, sleep and digestion are most popular. Australian brand owners of complementary medicine products are in a good position to fulfill demand. However, the focus for current marketing is on women and children.
  • China’s smart aged-care market is growing. This presents opportunities for Australian enterprises. Areas include health data acquisition and analysis, health monitoring systems, smart nurse calling, anti-lost devices, robotics and smart wearables for rehabilitation
  • China’s e-pharmacy market is experiencing rapid growth. Value is forecast to surpass RMB 330 billion (A$69 billion) in 2024. The market is currently focused on B2B, which includes hospitals, medical centres and pharmacies. There is also a fast-growing online-to-offline consumer model. In effect, a growing number of pharmacies now source customers via products offered on e-commerce channels.  
  • China accounts for around 20% of the global medical devices market, according to Deloitte. Sales have risen from an estimated RMB 308 billion (A$63 billion) in 2015 to more than RMB 800 billion (A$162 billion) in 2020. Key trends in the sector include the development of more automated and disposable products. The size and growth trajectory of the market presents significant opportunities for Australian companies.

Energy, Resources and Infrastructure

  • Crude steel production fell in July to the lowest monthly level since April 2020 (87 million tonnes - down 9% y-o-y). Authorities have stepped up production controls that are designed to keep annual steel production at 2020 levels in order to meet carbon-peaking targets. China would need to reduce steel output by 64 million tonnes (or 12%) in the second half of 2021 to keep annual steel production at 2020 levels. Demand for steel has softened, and the volume of iron ore imports has fallen each month since April. FOB prices have been consistently sliding since beginning of July.
  • Australian exports of LNG to China hit a new record in 2020-21, with China overtaking Japan as Australia’s largest LNG customer. Shipments to China jumped 7.3% cent to 30.7 million tonnes in the year to June 30, according to a monthly report from consultancy EnergyQuest, which cited import statistics from major buyers.
  • The pace of adoption of renewable energy in China appears to be accelerating. Newly installed non-fossil fuel power capacity is expected to exceed newly installed coal-fired electricity generation capacity for the first time by the end of 2021, the China Electricity Council (CEC) said in a report on Friday. The CEC also forecast that China’s electricity consumption by the end of 2021 will have increased by 10–11% compared to a year earlier.
  • The National Energy Administration and the National Mine Safety Administration has released a new report that highlights opportunities for Australian METS companies. The 2021 edition was released in June and contains ‘Guidelines for Intelligent Construction of Coal Mines’. The document describes technologies and services needed for a range of intelligent mining systems, including in risk and safety management, consulting, design, exploration, monitoring and mine construction. There is also demand for advanced mining machinery.
  • The Chinese National Development and Reform Commission (NDRC) recently announced the 14th Five-Year Plan on Urban Wastewater Treatment and Utilisation. The Plan specified increased targets for recycled water, and treatment for sludge and wastewater. The Government has allocated A$1.5 billion for these and related environmental projects. This creates opportunities for Australian firms with environmental solutions.   

Education

  • China’s new implementation measures for the legislative instrument governing the country’s private education sector came into effect on 1 September 2021. The measures apply to all private education institutions in China, including international schools (except for schools for children of foreign personnel). The document emphasises prohibition on the teaching of foreign curricula to Chinese students in the compulsory years (grade 1-9) and a prohibition on the ownership or control of any private schools operating at compulsory education level by foreign entities. It also states that all private educational institutions must continue to operate under the overall leadership of the Communist Party of China.