China contains the largest population of any country in the world. All those mouths drive demand for your farm’s products.
“Chinese domestic policies have consequences for the global market,” says Wendong Zhang, Iowa State University Extension economist.
Zhang grew up in northeast China (his rural county was home to more than 1 million people and more than 100 million people share his last name). To set the stage for what farmers should know about China, he provides a few key facts:
- Mainland China and the continental U.S. are about the same size and cover similar latitude ranges.
- The U.S. is home to 329 million people, while China is home to 1.4 billion.
- The U.S. has around 17% of all the arable land in the world, with 4% of global population. China has nearly 20% of the population and 11% of the world’s arable land.
EXPORTS TO CHINA ARE LOSING STEAM
While the sheer size of China’s population drives the global economy, Zhang predicts these trends will slow the country’s food demand from key trade partners, such as the U.S.
“Exports to China are very consequential; they‘re one of the key factors why we started seeing $5 and $6 corn since the fall of 2020,” Zhang says.
In 2020, U.S. ag exports to China hit $26.4 billion, up $12.6 billion from 2019. In 2021, ag exports hit a record $33 billion.
“A lot of people would only attribute this increase to the phase-one deal,” Zhang says. “But the bigger force is related to the hog recovery and rebuilding following African swine fever in China. They were also having protein gaps, so they bought a lot more pork and beef.”
CHINA IS DIVERSIFYING ITS TRADING PARTNERS
Even though China has increased its ag buying from the U.S., the country is building more trade linkages with competitors of the U.S., Zhang says.
While China has increased tariffs on U.S. products, it has lowered tariffs for other countries.
Zhang says China has shown greater interest in expanding trade deals: “In a way, this is China’s way of saying it embraces free trade.”
CHINA’S POPULATION IS AGING AND GROWING RICHER
In 2020, China’s population hit 1.41 billion, with an average annual growth rate of only 0.053% since 2010. China’s population structure is also changing.
“With an aging population and a declining fertility rate, China’s population pattern increasingly resembles developed countries,” Zhang says. “Its population shift and income growth will increase demand for consumer-oriented products. It‘s the income, not the population, that really drives the quantity and the configuration of the exports.”
CHINA IS FOCUSED ON HIGH-SPEED TRANSPORTATION
The Belt and Road Initiative was partially put on hold due to the pandemic, Zhang says. But China is still focused on creating a more efficient transportation system. For example, a high-speed railway was just completed between Kunming and Loas. It cut travel time from two days to three hours.
China is also improving its trucking system with cold-chain technologies and equipment so they can transport meat versus live animals.
China is winning the global race in high-speed rail thanks to large funding from the Chinese government in the past 15 years.
U.S. AND CHINESE POLITICS ARE KEY
Analysts predict President Xi Jinping to be in office for at least a decade, if not more, Zhang says.
Xi and President Joe Biden had their first virtual meeting last November. “The first meeting typically happens in the first few months of when a new U.S. president in office, not almost a year later,” he says. “We‘re probably expecting a bumpy relationship for the next decade.”
Watch Wendong Zhang’s 2022 Top Producer Summit online presentation: 5 Transformations Happening in China That Will Affect Your Farm
Read more coverage and other sessions from Top Producer Summit.
