China: opportunity for food processing ingredient exports.

Since its beginnings in the late 1970s, the Chinese food-processing sector has grown to become one of the most dynamic and modern segments of the economy, presenting a good opportunity for U.S. food processing ingredient exports, according a recent FAS report. Only 25 percent of China's food production is processed, compared with 80 percent in the more developed countries. The growing prosperity and ensuing changes in lifestyle of urban residents are the biggest factors driving the development of the Chinese industry, notes FAS. And while Western business people often look longingly at the perceived huge Chinese market, exporters should "try to drive the phrase '1.4 billion consumers' out of their heads," as more than half of the Chinese population is too poor to enter the market, says FAS.

Foreign invested enterprises comprised 14 percent of the Chinese food-processing sector in 2001, and continue to occupy an increasing percentage of the market, according to the report. These larger scale processors are more likely to use imported ingredients largely because they require more consistent inputs, which the Chinese agriculture system cannot yet provide. Currently, the report notes, Chinese production is not well integrated with the commercial processing sector. Additionally, the accession of China to the WTO ensures that exporters will face lower tariffs and import barriers, and increased access through market and legal reform.

Products that have the best prospects for exports include potatoes and products, specialty flour mixes, nuts and fruit used in industrial baking, and other food and beverage base ingredients. Vegetarian products or labor saving processes or ingredients, however, would not do well in the Chinese market, warns the report.