Country Profile

China Country Profile

Discover more about the Chinese market including overviews about the retail, food service, and food processing sectors. Events, resources, and more are linked throughout the profile.

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China: Expanding to New Regions in the Market

Market Overview

#1
importer of agricultural products in the world with $133.1 billion in imports in 2019
4th
ranking country for importing U.S. consumer oriented foods
5th
largest market for U.S. process food markets in the world

Euromonitor reports that although the Chinese economy was among the first affected by the coronavirus pandemic, the country has fared better than other major economies, due to effective containment measures and comprehensive macroeconomic policy actions. Due to heightened uncertainty related to the COVID-19 pandemic and rising global protectionism, the Chinese economy is expected to shift its focus from international trade towards the domestic market and innovation in the upcoming years.  Growth in Gross Domestic Product (GDP) was 2.3% in 2020 and is forecast to grow by 8.6% in 2021.

 

  • The Chinese economy is forecast to expand by an average annual real rate of 4.5% over 2021-2027, supported by the comprehensive macroeconomic policy actions and rapidly recovering domestic demand.
  • Inflation is projected to remain subdued over the 2021-2025 periods, leaving it below the pre-crisis target of 3%.
  • Although China is forecast to remain the largest export market globally in the upcoming years, the country aims to reduce the role of international trade in its economy over the long term.
  • Foreign investment inflows are anticipated to increase in the foreseeable future, as China witnesses a strong economic rebound from the pandemic and increasingly open its market to foreign investment.
  • Public debt rose from 52.8% in 2019 to 62.4% of GDP in 2020 and is expected to increase further over the medium term, as a result of fiscal stimulus measures.

In 2019, China’s population was almost 1.4 billion – an increase of over 135 million since 2000.  Population, however, is growing at a decelerating pace.  China is rapidly urbanizing.  As recently as 1980, less than 20% of China’s population lived in cities but today more than half of all Chinese live in urban areas and up to 70% are expected to be urbanites by 2030.  China is ageing at a rapid pace.  In 2019, the median age was 38.5 years – 8 years greater than the figure for 2000 – and it will be 42.5 years by 2030 (well above the regional average).  In 2019, the number of Chinese over 65 years totaled 166 million.  This figure represented 11.9% of total population.  In 2030, a projected 17.4% of all Chinese (almost 248 million) will be over 65 years.

 

On January 15th 2020, the U.S. and China reached an historic and enforceable agreement on a “Phase One” trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.  The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years.  Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.  The U.S. has agreed to modify its Section 301 tariff actions in a significant way.

 

The Agriculture Chapter addressed structural barriers to trade and will support a dramatic expansion of U.S. food, agriculture and seafood product exports, increasing American farm and fishery income, generating more rural economic activity, and promoting job growth.  A multitude of non-tariff barriers to U.S. agriculture and seafood products are addressed, including for meat, poultry, seafood, rice, dairy, infant formula, horticultural products, animal feed and feed additives, pet food, and products of agriculture biotechnology.  So far, even with the pandemic, the export results from the U.S. have been substantial.

 

USDA’s Agricultural Trade Office (ATO) in Beijing hereinafter referred to as “Post” reports that China is now the world’s largest agricultural importer, surpassing the European Union and the United States in 2019 with US$133.1 billion in imports.  As a relatively land-scarce country, land-intensive bulk commodities, such as soybeans, sorghum, and cotton drove China’s agricultural imports over the past 20 years.

 

Around 2012, however, the country’s bulk import value reached a turning point and stopped growing, which coincided with a slowdown in China’s economic growth.  In contrast, imports of consumer-oriented products continued expanding, led by meat, dairy, and horticultural products.  Rising demand, slow growth in domestic supplies and growing costs of feed, labor, and land are pushing domestic meat and dairy prices higher, which makes imported meats more competitive.  Consumers are upgrading their consumption habits, which is driving demand for imported tree nuts, wine, spirits, prepared foods, snack foods, live seafood, and many other products. U.S. exports within the following consumer-oriented and intermediate sectors.

 

U.S. Agricultural exports to China increased significantly in 2020, with growth of 91% to US$26.4 billion.  This lifted them into the top market once again, having passed both Mexico and Canada.  China had been the top U.S. agricultural export market as recently as 2016 with an export value of US$21.4 billion.  U.S. consumer oriented foods exported to China increased an impressive 69% to an all-time record US$5.4 billion, a ranking of 4th highest overall. 

 

China also remains the 5th largest market for the export of U.S. processed foods, totaling nearly US$1.7 billion in 2020, and an increase of 12% from the prior year.  Top processed food products exported to China in 2020 included:

 

  • Food Preparations & Ingredients
  • Processed/Prepared Dairy Products
  • Prepared/Preserved Seafood
  • Prepared/Preserved Meat
  • Processed Vegetables & Pulses
  • Syrups And Sweeteners
  • Canned, Dried & Frozen Fruit. 

Advantages and Challenges for U.S. Food Exporters in China

Advantages

  • U.S. agricultural products are generally perceived as high quality and safe. U.S. exporters can offer a wide selection of products.
  • The United States is generally considered a trustworthy and reliable supplier.
  • New retail distribution channels and improved logistics have increased the number of potential consumers of U.S. imports.
  • The U.S.-China Phase One Trade Agreement addressed non-tariff barriers to U.S. agriculture and seafood products, including meat, poultry, seafood, rice, dairy, infant formula, horticultural products, animal feed and feed additives, pet food, and products of agriculture biotechnology.
  • U.S. food and agricultural exporters have a long history of engagement in China.
  • Increased demand for food imports, especially animal proteins, to offset rising food prices.
  • Chinese consumers, especially the younger generation, actively seek out international experiences and products

Challenges

  • The quality of domestic products continues to improve.
  • Potential importers of U.S. products report uncertainty due to global shipping challenges, bilateral tensions, and increased government oversight (especially for imported products requiring refrigeration).
  • Consumers increasingly trust domestic brands and products. Lower disposable incomes, especially among the second-, third-tier city, and rural, consumers.
  • Higher tariffs relative to imports from other countries; a sensitive bilateral relationship.
  • Domestic supply chains are fragmented and inconsistent, especially outside of large cities.
  • Import requirements for food and agricultural products are sometimes unclear, unjustified, and unevenly enforced.
  • China has signed at least 17 free trade agreements with other countries.

“All of Food Export's programs were a tremendous help getting us export ready, understanding the challenges that come with international business, and learning how to navigate them.

Katz Gluten Free

Food Export-Northeast Participant since 2018      

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Retail Sector

$283.9 Billion
estimated total of retails sales in 2020
23.1%
expected growth rate in retail sales by 2035
11%
increase in online sales in China in 2020

According to Euromonitor, retail sales in the packaged food market in China had been estimated to reach US$283.9 billion in 2020.  That represents a growth rate of 24.3% or US$55.5 billion since 2016.  The forecast for growth in this market is outstanding.  By the year 2025, the retail sales in the packaged food market in China is expected to reach US$366.7 billion, a growth rate of 23.1% or US$68.7 billion.  High growth products in the forecast include:

 

  • Pet food
  • Cheese
  • Breakfast cereals
  • Baked goods
  • Savory snacks
  • Processed Fruit & Vegetables
  • Processed Meat & Seafood  
  • Sauces, Dressings and Condiments  

Post reports that in 2020, China’s overall retail sales decreased 4% while online retail sales increased 11% due to the pandemic’s effects on consumer habits.  In the first four months of 2021, retail sales of consumer goods rebounded, increasing 29.6% compared to the same period in 2020. Online food and grocery sales increased an impressive 31% in 2020 as residents dined out less and online platforms met consumer demand for contactless delivery.

 

Major retail trends include the continued move toward unifying e-commerce and brick-and-mortar retail, enhanced food and grocery delivery services, the growth of live streaming, and the rapid development of the community group buying platform.  In 2020, imports of consumer-oriented food products from the world reached US$82 billion, an increase of 13.7% compared to 2019.  Imports of U.S. retail food products gained significant ground and broke new records in 2020 because of the U.S.-China Phase One Economic & Trade Agreement.

 

In 2020, consumers reduced their purchases of premium products as disposable household income decreased.  Imported food products are generally easy to find in higher end grocery stores and specialty shops in first tier-cities such as Beijing, Shanghai, Guangzhou, and Shenzhen.  In recent years, ecommerce platforms operating offline grocery stores in second- and third-tier cities have increasingly stocked imported products in these smaller markets to meet consumer demand for novel products. However, in 2020, middle-income consumers in these second- and third-tier cities appeared to switch from premium imported products to more economical but relatively high-quality domestic foods, including infant dairy formula, fresh fruit, and beverages.  In response, some retailers and distributors have begun to offer smaller packages of imported products to attract consumers with reduced unit prices in ready-to-deliver family-sized packages.

 

As a result of COVID-19, many retailers realized that the supply stability of brands, especially imported ones, can be easily affected by forces outside their control.  Global shipping disruptions and new regulations issued by the government on imported food products in response to the pandemic led to depleted inventories at Chinese retailers.  As a result, retailers have increased their private label offerings, especially for beverages, tree nuts, dried fruits, and dairy products.  In 2020, the private label market increased an estimated 23%.  U.S. tree nuts, dried fruits, and snack foods have potential to be exported to retailers seeking to bolster their private label offerings.

 

In 2019, sales from the top 100 supermarket chains reached US$140 billion, and accounted for 18.1% of food retail sales.  The number of stores for the top 100 supermarket chains reached 26,000.  E-commerce companies have diverted customer traffic from many of the largest traditional supermarket chains.  In addition, some international retailers have withdrawn from China or sold their stakes to domestic firms given increasing labor and rental costs.  In June 2019, Carrefour sold its operations to a local retailer, Suning.  In addition, Metro sold a majority stake in its China business to the domestic chain, Wu-Mart. Tesco, the largest retailer in the U.K. sold its Chinese business to CR-Vanguard.  Some international players remain optimistic about the market, including Costco from the U.S., which opened its first store in August 2019 and ALDI from Germany, which opened its first store in June 2019.

 

Convenience stores are everywhere, and their numbers keep climbing in response to a growing number of consumers who are looking to save time in making quick purchases. The leading chain in terms of outlets is YiJie with more than 27,000, many of which are collocated in vehicle filling stations across the country.  The only international convenience store is 7-Eleven.  Like retailers, some convenience store chains are more heavily concentrated in certain parts of the country.

 

In 2019, the convenience store sector grew by 13% with sales of US$36.5 billion, and the number of stores reached 132,000.  Convenience stores in Japan offer an average of 30% private label products, but private label products carried by Chinese convenience stores account for less than 5% of total SKUs.  Industry contacts expect that convenience store operators will increase their offerings of private label products in the future.

 

Best Product Prospects:


Post reports that due to insufficient supplies of domestic pork, imports reached historic levels in 2020 with a 118% increase year-over-year.  U.S. poultry and poultry product exports to China increased from US$10 million in 2019 to $761 million in 2020. The top U.S. consumer-oriented product exports to China in 2020 were pork and pork products, poultry and poultry products, tree nuts, fishery and seafood products, dairy products, prepared food products, beef and beef products, other meat products, fresh fruit, and processed vegetables.

Food Service Sector

$687 Billion
in sales from the HRI sector in 2019
57%
of the HRI market in 2018 was dedicated to Chinese cuisine
$37 Billion
worth of meals being ordered through ordering apps last year

Post reports that China’s Hotel, Restaurant, and Institutional (HRI) sectors recorded US$687 billion in sales revenue in 2019, a 9% increase from the previous year.  With the onset of COVID-19 in December of 2019, demand patterns for HRI sales underwent significant changes with first quarter sales contracting but rebounding in the second quarter of 2020.  On the positive side, China instituted a tariff exclusion process to waive the Section-301 retaliatory tariffs on imports of U.S. agricultural products.

 

The year for the latest data foodservice data is 2018, and the reports indicate that Chinese cuisine dominated the Chinese HRI sector with 57% of the market.  Light meal and quick-service restaurants follow behind at 16% and 10% respectively.

 

The solid growth continues for China’s HRI sector and it is driven by growing household incomes and the increasing popularity of dining out.  The China Catering Association’s latest report (2019) found that 51.8% of interviewees ate out more frequently than in 2018.  Moreover, the emerging middle-class born in the 1980’s and 1990’s having gradually become the main force of foodservice consumption.  Consumers are becoming more conscious about their overall health and are paying more attention to the nutritional value of dishes and food. 

 

The use of new technology is thriving in the Chinese food industry with foodservice operators using online reservations, mobile ordering, and payment apps.  Online food delivery maintained a strong momentum with nearly US$37 billion worth of meals being ordered through ordering apps, an 18.4% increase from the previous year, and 0.4 billion active online users.  On average, imported food products are considered safer, of higher quality, and more consistent than domestic food products.

 

Best Prospects:

 

The Shenyang Post reports that products in market with continued good potential include beef, pork fishery products (salmon, geoduck, lobster, Dungeness crab, cod fish), tree nuts (almonds, pistachios, pecans), dried fruit (cranberry, blueberry, raisins), fresh fruit (cherry, apple, citrus, strawberry, blueberry), milk chocolate, dairy products (butter, uht milk), sauces, spices, condiments,  especially for pizza. 

Food-Processing Sector

The Post in Beijing reports that China’s food processing industry is maturing, and growth is moderating.  Consumers have becoming increasingly interested in eating more natural and healthier foods, while valuing convenience and attractive packaging.  Food processing still accounts for 60% of the sector, however the fastest growth is now in the beverage sector, where the trend for natural, healthy, and convenient ready-to drink smoothies, yogurts, and juices represents China’s transition from “eating full” to “eating well.”  

 

Exporters are encouraged to consider China not as a singular market, but a country with regional differences and culinary traditions affecting how their product will be received.  U.S. fruit ingredients (processed, and some fresh), dairy, pork, and some specialty grains and legumes have the best food processing sales potential.

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