Food security in China: the opportunities for Australia

China’s internal food production will not be able to keep up with their growing population. Georgina Murray outlines Australia’s opportunity to capture a niche market producing clean, green and high-value products.

China, the world’s most populous country, will need to feed over 20% of the world’s 9 billion people in 2050. Therefore, as a consequence of limited internal production capacity, China’s food security and food safety concerns have infiltrated their trading relationships. This opens commercial opportunities for Australian agriculture whereby there are mutually beneficial outcomes as a result of strategic partnerships for both nations.

While China is already Australia’s top agricultural export destination accounting for 18.3% of total exports, there really are future opportunities opening up for Australia’s agricultural products. Australian agriculture is the next industry to benefit significantly from Asian-led growth where Australia stands to capture an additional A$0.7-$1.7 trillion in agricultural exports between now and 2050.

While Australian agriculture stands to face many challenges into the future, Australia’s competitive advantage lies in high-productivity industries, where modern technology and innovative management are utilised.

The Chinese Government has traditionally focused on a self-sufficiency policy, a priority that will remain in the future. However, it has become apparent that China’s internal production will not be able to keep apace with their growing population. Therefore, internal production will only prioritise essential grains, and China will rely more heavily on trading relationships and imports for other products that are becoming more important in the Chinese diet.

As a consequence of urbanisation and industrialisation in China, the globalisation of the Chinese diet has occurred. Chinese producers of food are now consumers of food and are demanding different and higher-quality import commodities. Therefore, Australia’s opportunity lies in the production of clean, green, high-value and safe products where Australian agriculture is already at an advantage. Australia’s economic incentive is to capture the high-value end where products should be focused in niche markets, pitched as clean and green.

Australia’s opportunities in China’s food sector are moving away from the traditional commodity exports of wheat, dairy and red meat. While these bulk commodity exports are still a major part of Australia’s export market, the future opportunity for Australia is in the diversification of commodities and processes. Niche commodities that should be focused on are alternative oilseeds, oats, cherries and vegetables. These products are essential to develop, as their quality is demanded in the Chinese market as a consequence of food safety concerns. To supplement this, process diversification is a fundamental opportunity where development of distribution and supply chain logistics are emerging. It is China’s food safety concerns that are shifting commodity opportunities, as China is now importing commodities that are not guaranteeing their food security, such as cherries.

Simultaneously, it is Chinese investments in supply chain and distribution channels in Australia that are opportunities for Chinese businesses but enhance Australian agricultural development. Australian media has coerced the public to believe that Chinese investment in Australia is primarily farmland based. In fact, quite the opposite is true as such investment offers Chinese businesses long-term financial viability, the prospect of knowledge gains in agricultural production and long-term relationship development. Chinese businesses are not interested in buying our farms but are interested in controlling or significantly influencing a supply chain. This offers Australia much-needed capital investment for the development of the agricultural industry.

It is the development of strategic partnerships between nations that enhance these opportunities along the value chain. They facilitate the development of supply chains and distribution channels through investment; the transfer of Australian farm management expertise to China; and technological development to overcome challenges.

The proposition is simple: by investing in food production, the Chinese are offering Australian farmers the opportunity for industry growth whilst halving costs. Chinese businesses benefit from sound financial investments that enable them to develop expertise from a reliable high quality agricultural producer. Furthermore, Australian agriculture develops more readily available high quality and high value products for niche markets in China.

The real challenge moving forward is how Australia can overcome internal challenges and capitalise on strategic partnerships with China in order to develop an economically viable, sustainable and high-value agricultural industry for the future.