Dairy Products Import in China-Major Influencing Factors and Prospects

With the development of China’s economy and the rise in Chinese people’s living standards, the per capita consumption of dairy products in China keeps rising. Despite the increasing demand for dairy products, the domestic production of dairy products sees a rather anemic growth. According to the data, in 2017, the apparent consumption of dairy products in China reached about 31.79 million tons, representing a CAGR of about 2.7% from 2013 to 2017.

However, the production volume of dairy products in China grew at a CAGR of only 2.1% during the same period, which means that the domestic production cannot meet people’s consumption needs.

There exist two main reasons for the sluggish growth:

the first reason is that the costs of domestic dairy production in China are higher than the global average which can be affected by the costs of feed, labor and land, and the low profitability inhibits the production growth as well; and the second reason is that Chinese people lack confidence in domestic dairy products as safety incidents occurred frequently in China’s dairy product industry in the recent decade. The above factors in my opinion drive the growth of dairy product imports in China.

According to China Customs, in 2018, the import volume of dairy products in China reached 2.74 million tons, up by 7.8% YOY; the import value reached USD 10.65 billion, up by 14.80% YOY. The import volume of dairy volume took up about a quarter of the whole import volume. It reflected that great needs of dairy products in China for its huge population. And these dairy products imported to China include milk powder, liquid milk, cheese, etc., with milk powder taking the major share.

In 2018, milk powder imports contributed nearly 70% to the import value of dairy products in China.

China needs to import a large quantity of infant formula milk powder because its consumers lack confidence in the safety of domestic counterparts. And raw milk powder is imported because of low prices and high quality. And the large proportion of milk powder also closely related with the two-child policy which came out initially in 2011. Chinese government is urging eligible couples to have two children amid concerns over an ageing population, the first time in decades that Chinese authorities are encouraging couples to conceive.

 

credit: Internet

The growing imports of dairy products have had some impacts on China’s domestic dairy producers.

For example, the decline in sales revenue and profit margins. Therefore, in order to protect the domestic producers, the Chinese government introduced restrictive policies on dairy product imports. For example, to restrict the import of infant formula milk powder, on Jan. 1st, in 2018, the China Food and Drug Administration put into force the Measures for Administration of Registration of Formulas of Infant Formula Milk Powder which stipulates that infant formula milk powder that has not been registered in China is not allowed to be sold in China, and the Certificate of Registration of Formulas of Infant Formula Milk Powder must be obtained according to the law for imported infant formula milk powder to be marketed in China.

On Mar. 14th, 2018, the Announcement of the State Certification and Accreditation Administration on Renewing the Registration of Overseas Manufacturers of Imported Infant Formula Milk Powder specified that the registration of overseas producers of imported infant formula milk powder would be valid for four years and should be renewed upon expiration. These policies are expected to drive away more than 80% of the over 2,000 imported brands (products) of infant formula milk powder on the Chinese market.

According to the researcher’s estimation, Chinese people will have a growing demand for dairy products as their income increases. However, domestic dairy production has limited growth potential as restricted by several unfavorable factors, and faces rising costs. Therefore, the annual import volume and import value of dairy products in China will continue to grow in the near future. Some Chinese dairy producers are acquiring overseas dairy enterprises to make profits from exporting dairy products to China. It is evident that the Chinese market presents huge opportunities for global dairy producers.

As a matter of fact, apart from dairy products, many other good commodities are greatly needed in China. For example, during the period of Spring Festival, many goods from other countries can be seen on home tables, steak from America, Cherries from Chile, lobsters from Australia and so on. With the development of people’s living standard, more and more people can afford to purchase many oversea commodities. So our new project, the New Foreign Trade and New Retail Start-up Incubator (New Trade Platform), officially initiated on Jan.11th, has bonded warehouses and logistics services, therefore upgrades supply chain of import products. We aim at importing many more good commodities from other countries. Up to now, we have imported the delicious cherries from Chile, cosmetics from Bulgaria and so on. In the near future, we will cooperate with many more countries to import more quality goods to China.

 

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