China's urbanisation and household income growth are making fresh foods like meat, potatoes and dairy products more common in the Chinese diet. As fresh food demand increases in China, food and agribusinesses are searching for improvements in food safety, quality and more efficient paths to the Chinese consumer. Rabobank research is helping to find better, safer, faster ways for fresh agricultural products to travel from Europe to China.
Rabobank is seeing further growth of fresh food consumption in China which is being driven by continued economic growth and urbanisation. Although the rate of growth is slower and becoming more balanced, over the next decade the Chinese economy will push a further 38 million households into the upper-middle class. This segment of the population in particular is currently driving fresh food consumption.
'Food safety remains one of the biggest concerns for the Chinese consumer. China is improving their own food safety and security, reducing food waste, lowering healthcare costs and seeking better overall health improvements of the Chinese population. To meet the changing consumer needs, China is also looking at investments in the infrastructure and logistics of food transportation flows across domestic and international land routes instead of sea shipping lanes', says Wilco Hendriks, CEO of Rabobank China.
Freight trains and cold chains
Europe and the Netherlands in particular are major suppliers of food and agricultural products to China. Increasing prosperity and China's growing demand for fresh food offers huge opportunities for imports from European food industry, but also require huge investments in cold chain infrastructure.
China’s cold chain sector is still lagging and needs to improve in terms of both quality and capacity. The associated investments are huge: an estimated USD 85 billion is needed in the next ten years.
Rabobank analysed what building China’s new cold supply chains for perishables will entail in a report 'Freight Trains and Cold Chains'.
'China’s demand for fresh, safe and high-quality food is outstripping its capacity to produce and deliver domestically', says Paul Bosch, Rabobank Food & Agribusiness Supply Chains Analyst Researcher. '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.'
On the 'New Silk Road'
Together with Wageningen University, Rabobank has examined whether and how a new rail route for food products between Europe and China is a better and more cost and time efficient alternative. The New Silk Road is an international trade and infrastructure project based on the ‘Silk Route Economic Belt’ proposed in 2013 by Chinese President Xi Jinping to better connect China with Europe.
'When connecting Rotterdam and Chonqing by rail, the New Silk Road trip takes 13 days which is 30-40 days less than a Rotterdam-China ocean trip. Because of the shorter transportation time, less working capital is needed compared to sea transport. In addition, inland transportation costs from seaport to inland China are largely reduced', says Rabobank China CEO Wilco Hendriks.
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 diseases and extreme weather. 'In time, the Europe to China land route 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', says Hendriks.
Recent studies indicate that Dutch agricultural products such as cherry tomatoes, cherries and blueberries, flower bulbs, veal and baby milk powder are well positioned to be transported along the new railway to China. Rabobank China CEO Hendriks says: 'The strongest selling point of all these products is the reputation of the Dutch agricultural sector in China. The Dutch food and agriculture reputation is one of professionalism and modernisation, which translates into higher productivity and better food safety for the Chinese consumer.'
Establishing better transport for fresh food and cold chain improvements internationally and domestically in China could:
- reduce the waste of perishables by 14%.
- create a 10% reduction in food prices and hunger.
- reduce healthcare costs
- 10-20% reduction of emissions.
Rabobank's Banking for Food programme shows that the development of China’s cold chain would be part of an important set of solutions to feed the 9 billion world population by 2050.
Posted on March 21, 2016
by Edwin Kalischnig