China’s Food Processing Machinery Industry
With expanding domestic consumption, rising standard of living and government support as driving factors, PIM’s China market research division observes that the Chinese food processing machinery industry has experienced a double digit growth rate since the 1980s.
The president of PIM, Tom Ward, believes that food processing is one of the largest sectors in the Chinese market in terms of production, domestic growth and exports. Food processing in China includes rice milling, flour milling, oil refining, animal slaughtering and aquatic product processing, with processing of seafood, meat, dairy as the mainstays of the industry. However, the industry is continuing to produce more varieties and better quality foods, and PIM’s research finds that the food processing machinery industry in China is still in its nascent stage compared to more developed countries.
In 2011, the production value of the food processing machinery industry in China achieved approximately $9.55 billion, and is projected to grow over the coming two years at an annual rate of 16%. Currently, around two-thirds of the market uses domestically produced machinery, while imports take up the rest. Compared with those produced by foreign competitors, PIM’s research concludes that the disadvantages of Chinese produced equipment include production inefficiency lack of energy savings, product appearance and reliability. Over the coming years, it is most likely that China will continue to rely on imports for most of the advanced and specialized equipment over domestic alternatives.
The above noted $9.55 billion of Chinese production, according to The China Statistical Yearbook 2011, was produced by around 2,500 manufacturers. As PIM observes, this high yield was mainly due to the growth in demand and government support for better processing systems. As can be seen in Figure 1, there has been a constant increase in investment in the agricultural food processing industry from 2007 to the present.
Figure 1 Fixed Industrial Investment in Agricultural Food Processing Industry 2007-2011
Source: National Bureau of Statistics of China
In March 2011, various legislations related to food safety, food processing and the food industry in general were promulgated. These include:
The Key Work Arrangement of Food Safety
The Implementation Plan on Food Safety
The 12th Five-Year Plan for the Food Industry
Individual 12th Five-Year Plans for the Meat Processing Industry, Potato Processing Industry and Grain Processing Industry
Access Conditions for Concentrated Fruit and Vegetable Juice Processing Industry and Wine Industry.
PIM’s finding reveal that the increase in regulatory and policy implementation suggests broadened business opportunities for international involvement by imports, technology transfers, consulting and foreign direct investment. Furthermore, the Foreign Investment Guidance Catalogue continues to list food processing as a government “encouraged” industry. This essentially means that qualified foreign invested enterprises in the sector may enjoy certain tax incentives, favorable land use rights, lower infrastructure and utility fees.
During the research, PIM detected that Chinese consumer lifestyles are in a rapid transition. Factors including the increase in disposable income, health-consciousness and urbanization have been the most important drivers behind the growth in China’s food processing industry. The government has been supporting urbanization in China for several years, with the goal of generating more employment for an increasing number of surplus rural laborers as a result of modern agriculture and shrinking arable lands. The clear trend towards urbanization can be seen in Figure 2.
As consumers increasingly value the convenience and variety of processed foods, the industry is expected to continue to expand. Currently, only about 30% of food in China is processed, compared to 60-80% in Western countries. The current level of adoption suggests significant room for growth in the domestic market.
Additionally, food safety has also been playing a big part in demanding high quality food ingredients. PIM has noted that the Chinese government is paying attention to this particular issue. The Food Safety Laws have started to regulate the food processing industry since June 2009 and the government established a Food Safety Commission in February 2010.
Figure 2 Urbanization Trends 2007-2011 (Million)
Source: National Bureau of Statistics of China
With the market growing and still highly dependent on foreign technology, PIM’s research shows that most Chinese food processing machinery manufacturers have a limited product range. Though the overall quality has improved in recent years, their products are still plagued by high energy consumption, sanitation and safety issues, and a low degree of environmental friendliness.
Foreign manufacturers tend to serve the large food processors, including those that are foreign-invested. According to China Customs, China mainly imports from Europe (Germany, Italy, Denmark, etc.), Japan, and the US. Unlike Chinese manufacturers, they offer turn-key solutions across a wider range of products with pricing at least 40% higher than Chinese machinery.
China Food and Packaging Machinery Industry Association
National Bureau of Statistics of China