China’s growing requirement for fresh food offers huge opportunities for imports from Europe, the agri-business bank highlights in a report in which it says the Yu'Xin'Ou railway, which and connects Chongqing to Rotterdam, is providing an exciting new route to market for European exporters.
The freight route, which opened in 2011 and is part of the “New Silk Road”, reduces transport times by over 30 days compared to shipping.
However, to build China's supply chains to accommodate more fresh and perishable foods from abroad, a drastic improvement is needed, the Rabobank report, which was co-authored by Dutch agricultural university, Wageningen UR, stated.
"China's demand for fresh, safe and high-quality food is outstripping its capacity to produce and deliver domestically. Europe is able to address this need," said Paul Bosch, a supply chain specialist at Rabobank.
"However, the growth in consumption of perishable food in China will only continue if supply chains deliver on quality and safety. To a large extent this depends on the proper cooling of products during storage handling and transport."
Wiebe Draijer, chairman of the Rabobank executive board said with 20% of the world population, but only 10% of its arable land and 6% of its water, China faces enormous challenges on food security and safety.
“The New Silk Road provides tremendous opportunities for Sino Dutch agricultural trade,” Draijer said.
Increasing consumption in China is the result of continued economic growth and urbanisation. China's economy is expected to grow by 6-7% annually in the coming years, pushing a further 38m households into the upper-middle-class.
The demand for fresh safe food, bought through convenient modern channels, is pushing the country's investment in cold chain infrastructure. Over the past five years, storage capacity has grown from 12m cubic meters in 2007 to roughly 100m cubic meters in 2015.
But the report warns that the warehousing and logistics sector is still lagging and needs to improve in terms of both quality and capacity.
The associated investments are huge: Rabobank estimates US$85bn is needed for this over the next 10 years, adding that the cold chain sector will only improve once companies start to adapt their business models into higher-value strategies in response to the higher service needs of their clients.
It estimates that the presence of a high-level cold chain sector would could reduce the wastage of perishables by 14%, worth US$7.5bn
This, it says, could also create a 10% reduction in food prices and hunger while increasing rural incomes as farmers transport their crops in refrigerated trucks
In turn, improved cold chains could reduce healthcare costs by preventing 90m annual cases of food-borne diseases. Meanwhile, modern, energy-efficient technology and new Once mature, the New Silk Road has the capability to stabilise China's food system by enhancing international trade and reducing the vulnerability to regional events, such as crop disease and extreme weather, the report predicts.
In time, it also has the potential to enhance competition, changing the competitive positions of current trading partners like the US, Brazil and Australia, as well as improving the price stability of the food system, Rabobank says.
More news from China...
Corn surplus threatens prices and productivity
China's corn industry is experiencing a surplus crisis after years of preferential policies caused rapid expansion and excessive corn supply, Xinhua, has reported.
With orders to reduce production next year, the country’s official news service has reported concern among farmers in the country’s most fertile regions over prices and productivity.
China began buying corn in the northeastern region, the nation’s breadbasket, for state reserves in 2008 to protect local farmers from the global financial crisis. For years, the policy kept corn prices stable and high.
Now with government reserves too high, the Ministry of Agriculture announced plans in June and September to slash production in 2016 and partly remove favourable policies which have caused corn prices to tumble. Weak demand and increased cheap imports have also added to the problem.
Experts have forecast further price slips after China cut the purchasing price of corn for state reserves by 10.7% in September, the first such move since the policy went into effect.
Official statistics show that the area of corn cultivation in the northeastern provinces of Heilongjiang, Liaoning and Jilin expanded from about 6.3m hectares in 2003 to about 11m last year.
Currently, corn fodder processing, cornstarch processing and corn ethanol production are all reporting losses. The capacity utilisation rate has fallen to 46% in factories, a historic low.
Meanwhile, corn in storage in the northeast stands at 160.4bn kg, accounting for 78% of the country's total.
Increasing western food imports to China have been mostly safe
A fraction of food imports to China were found to be unsafe between 2010 and 2014, according to China’s inspection force.
In a report, the General Administration of Quality Supervision, Inspection and Quarantine revealed that imports worth US$150m failed to meet national food safety regulations.
In 2014, total food and agricultural shipments to China were worth US121.5bn—an increase from US$11.8 billion in 2001. Since 2010, such imports have seen annualised growth of 17.4% from 213 countries.
This rate of growth for imported food is in line with an increasingly wealthy population that is seeking more exotic products, the report mentioned.
China found substandard food from 112 countries and regions, including 1,692 batches in 2010, 1,857 batches in 2011, 2,499 batches in 2012, 2,164 batches in 2013 and 3,505 batches in 2014.
The items were mainly imported from the United States and Japan, countries in the European Union and Asean states.
The unsafe imported food included cakes and biscuits, beverages, grains, dairy products and alcohol.
Lin Wei, director of the Bureau for the Safety of Imported and Exported Food, said Chinese authorities were in the process of ramping up their inspections.
Lawmakers mull revision to seed law
The standing committee of China’s top legislature is considering a draft amendment to its seed law.
Sitting in its bimonthly session, the group agreed that the revision would help protect farmers' interests and safeguard food security.
The draft amendment, which suggested dropping barriers for companies applying for seed production licences was submitted for a second reading last week. It also included called for a more prudent attitude toward GM seeds.