China update

#DYK China is one of the world’s fastest growing markets for consumer health products, boasting over 350 million middle class consumers that are becoming increasingly health-conscious.

10 June 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.

Key insights

Australia-China relations – On 6 May, China’s National Development and Reform Commission (NDRC) announced it would indefinitely suspend cooperation with Australia under the 2013 Strategic Economic Dialogue.

Australia–China relations – The Australia–China Business Council hosted a national briefing with the Australian embassy in Beijing on 25 March. The briefing included updates on China’s economy, the 14th Five Year Plan and developments in Chinese digital trends.

Trade – On March 26, China’s Ministry of Commerce confirmed anti-dumping duties ranging from 116% to 218% on imports of Australian wine for five years. These duties commenced on 28 March. Punitive duties have made most trade in wine non-economic.

Economy – According to forecasts released by the World Bank, China is expected to lead the recovery of East Asian and Pacific economies this year. The World Bank’s recent East Asia and Pacific Economic Update predicts China’s economy will grow by 8.1% this year, compared with 2.3% in 2020, stimulating a 7.4% region-wide expansion. Retail sales have performed strongly so far during 2021.

Economy – China’s yuan has appreciated significantly in recent months. It gained 1.7% in May to trade at three-year highs. Factors influencing the currency include China’s strong recovery from the pandemic, a weakening US dollar and a positive economic outlook attracting inbound investment flows. An appreciating RMB makes imports more affordable.

Economy – The National Bureau of Statistics (NBS) released the results of China’s once-in-a-decade census on 11 May. It showed that China’s population increased to 1.41 billion in 2020. According to the census, China’s population in 2020 was 5.4% higher than in 2010. The average fertility rate was 1.3 children per woman, well below the replacement rate. The number of new births in 2020 fell for the fourth consecutive year. China’s population is expected to tip into decline between 2026 and 2030.

Investment – China’s FDI inflows surged at the fastest rate in more than a decade during the first quarter of 2021, according to Ministry of Commerce data released on 15 April. The South China Morning Post reported FDI in the first quarter grew by 40% to RMB 302 billion (A$60 billion), a 25% increase from the same period in pre-COVID 2019. More than 10,000 new foreign-invested companies were established in China during Q1, a 7% increase from the same period in 2019.

Market Opportunities and Challenges

Health

  • Under the national Healthy China 2030 strategy, the healthcare services industry will become one of the nation’s key future industries. Key areas for long-term development include:
    • medical services in high-end and specialty medical institutions
    • the use of internet technologies to bridge health services gaps and support communities
    • medical services for the elderly.
  • Digital health solutions in China continue to grow in scale and scope. China’s telehealth market is estimated by Qianzhan Intelligence to exceed RMB 80 billion (A$16 billion) by 2025. The National Health Commission has already approved over 1,100 ‘internet hospitals’, with plans for more. Internet hospitals primarily feature online medical consultations, bookings, payments and reports.
  • Opportunities exist for Australian companies and medical institutions to provide technology solutions for China’s hospitals. These include new online diagnostics and medical devices, hospital information systems and other healthcare-related IT solutions.
  • The National Health Commission has set guidelines for the management of public hospitals that emphasise the importance of quality over quantity in service delivery. Modernisation presents opportunities for Australian training providers that specialise in hospital management. Until now, providers have generally targeted China’s private hospitals when pursuing training opportunities.
  • The Chinese Government has stated that it is attaching greater importance to private medical institutions. This presents opportunities for Australian healthcare providers and support services. Chinese government support for private medical services has focused on nursing, mental health, rehabilitation and other allied health fields.
  • Recent marketing and sales performance data from China have reaffirmed the strong demand for health consumer products online. A recent health product-focused event delivered by e-commerce platform T-MALL attracted 3 million purchasers. Consumption of health products increased 60% on the first day of the event. Health food and traditional tonics/nutritional products increased in popularity by 78% and 54% respectively. Live streaming is a successful route to market.

Food & agriculture

  • Opportunities are increasing for spirits exporters. According to the International Wine and Spirit Research report, mainland China accounted for 22% of the global retail market for spirits in 2019. Domestically produced Baijiu is by far the most popular spirit consumed in China, holding 96% of market share. Brandy and whisky hold a 3% and 1% respectively.
  • International spirits are progressively gaining market share in China with brandy sales increasing 77%, followed by whisky (17%), tequila (2%), vodka (1%) and rum (1%). International spirits are perceived as premium and can be associated with luxury buying. Product differentiation is vital. Consumers are willing to try new brands that have won international awards. Product differentiation also helps imported goods to avoid the generic pejorative: “Yangjiu”.
  • The value of China’s cheese market is expected to grow from A$1.37 billion in 2020 to A$2.53 billion in 2025, according to GlobalData. This represents a compound annual growth rate of around 13%. About 32% of Chinese consumers are looking to increase their dairy intake. Approximately 53% of consumers cite dairy as a food they prefer to snack on. Children are a key market.
  • China is the fastest-growing global market for oats. Over the last 6 years, China has increased its oat production, imports and consumption, according to statistics from the US Department of Agriculture. Data from Global Trade Atlas indicates that between 2018 and 2020, Australian oats accounted for approximately 80% of China’s imports.
  • Tailor-made breakfast cereals represent a growing niche market in China. Popular choices include sugar-free cereal for elderly consumers and high calcium and vitamin options for children. Chinese consumers are increasingly aware of the health benefits of oatmeal and other cereals. Consumption of ready-to-eat and fibre-rich oatmeal continues to grow among the young and elderly. This trend presents opportunities for Australia as a reliable source for safe, green and premium oats.

Technology & e-commerce

  • China now accounts for almost one billion netizens and 40% of e-commerce transactions globally. According to the National Bureau of Statistics, in the first four months of 2021, aggregated online retail reached A$753 billion, a 28% increase, year on year. The online retail of physical goods increased by 23% to A$615 billion. Key opinion leaders are a vital tool for the promotion of brands, but require performance monitoring.
  • Subsectors achieving high growth in online sales in the year to March 2021 were: food (31%), apparel and footwear (6%), and non-food consumer products (16%). The online groceries market is expected to double to about RMB 820 billion (A$160 billion) by 2023, according to iResearch.
  • China’s market regulator introduced new e-commerce laws in mid-March that regulate livestreamed sales, user data privacy and forced exclusivity. The new rules address innovations in China’s e-commerce industry and complement the e-commerce law that came into effect in 2019.
    • The platforms must have users’ consent to collect and use personal information including biometric data, medical and health information, and financial accounts.
    • The new rules will ban services that engage in misleading practices such as falsifying sales volumes and audience numbers, or promoting favourable reviews.
  • At the end of May, new regulations came into effect governing livestreaming. These include enhanced rules around registration of livestreamers’ true identity, limiting traffic, popups and marketing tactics. Australian brands and products associated with platforms that sell via social e-commerce and livestream e-commerce, as well as merchants on these platforms, will need to comply with these new regulations.
  • Alipay will participate in China’s pilot tests for a sovereign digital yuan, according to Chinese state media. The company is China’s biggest third-party mobile and internet payment platform, and part of Ant Group. Alipay is the first private financial services provider to participate in the initiative and will appear in the central bank-backed digital wallet, alongside six state-owned commercial banks. China is accelerating the rollout of its virtual yuan, building on pilots from October 2020 in several major cities.

Energy & resources

  • China’s iron ore imports from Australia increased in value by 74% year-on-year in Q1 2021 to US$25 billion, according to China Customs data. In volume terms, China’s total iron ore imports from all countries in Q1 2021 rose by 8% to 283 million tonnes, worth US$42 billion. Australian iron ore accounted for 59% of China’s total iron ore imports by value, followed by Brazilian iron ore with 23% and South Africa with 4%.
  • China Customs data showed no imports of Australian coal in the first quarter of 2021. Over the same period in 2020, Australia accounted for 48% of China’s coal imports by value, worth US$3.4 billion. China's total coal imports for the first quarter of 2021 were down 29% year-on-year to 68 million tonnes. Indonesia became China’s largest supplier, accounting for 55% of China’s total coal imports by value.
  • The National Energy Administration of China stated that total installed capacity of renewable energy reached 930 million kilowatts by the end of 2020. This accounts for 42.4% of the country's total installed capacity. It marks a 14.6% increase from 2012.
  • China has said it intends to reach peak carbon emissions by 2030 and carbon neutrality by 2060. To achieve this, the Government wants more than 50% of total installed power capacity and two-thirds of the total increase in electricity consumption to come from renewables. This should create opportunities for expertise in solar, wind, micro-grid, smart grid, energy storage, hydro-electric generation, geothermal and bioenergy.

Freeports

  • Regulations to expand market access for foreign investment in Hainan Free Trade Port have entered into force. This creates openings in value-added telecommunications, education, mining and exploration for rare earths, radioactive materials and tungsten.
  • Hainan now enjoys duty-free status in addition to the island’s other taxation arrangements. This is an attractive proposition for a consumption-focused middle class who can’t holiday abroad. UBS analyst, Chen Xin, reported duty-free sales in Hainan doubled to surpass A$6 billion in 2020 and has forecast a compound annual growth rate of 40% up to 2025.