When a Wal-Mart Supercenter moved into the remote Chinese city of Loudi, it sent a signal to the world ag economy: China's food demand is not only growing, it's shifting.
Supermarket chains moving from wealthy Beijing and Shanghai to second-tier cities in China's interior means middle class incomes are on the rise. The country's unstoppable economy has armed households with greater spending power and created demand for higher-priced dairy products, poultry, fish and processed foods.
"The rapidly shifting nature of China's food economy simply defies description,” explains Scott Rozelle, Stanford University ag economist and longtime expert on China. "It is complicated, diverse and changing fast. China has moved from a socialist country that once banned markets to the largest market in the world.”
China's eye-popping gross domestic product (GDP) growth is helping drive food demand through the roof, Rozelle says. Even on the heels of worldwide economic crisis, China's GDP growth was 8.9% in the third quarter of 2009,
according to the World Bank. By contrast, U.S. GDP was up 2.8% in the same time frame.
As the incomes of China's more than 1.3 billion people rise, food demand beyond traditional staples of rice and wheat will jump 50% during the next seven years, according to Rozelle's analysis. "This is a food demand pressure the world has never seen before,” he adds.
Can China feed itself? For more than a decade, economists have been probing the issue of who will feed China. Lester Brown, an economist with the Worldwatch Institute, wrote in his 1995 book "Who Will Feed China?” that "when China starts importing, there may not be enough grain in the world to meet that need.”
With 20% of the world's population and less than 10% of the cropland, China has been surprisingly successful at feeding itself without relying heavily on imports, according to Fred Gale, senior economist with USDA's Eco-nomic Research Service.
On the domestic front, China has an agricultural economy supported by 200 million farms that are the average size of a football field, Rozelle says. "There remains a lot of subsistence farming in China,” he adds. However, there are also increasingly specialized farm operations, such as pork production, milk and aquaculture.
China's agricultural productivity has been rising by about the same rate as in the U.S., Rozelle says. He credits rapid adoption of technology. Chinese farmers put in new varieties every year, for example, and quickly adopt high-tech production techniques.
As a result, Chinese corn yields are continually increasing. "China is putting all of its eggs into the biotech basket,” Rozelle says.
- February 2010