Skip to main content
Agricultural industry in China: Overview

Agricultural industry in China: Overview.

Written on . By .

China has a long history of farming and a tradition of intensive cultivation. Its rural population is reported to be over 500 million strong. China’s modern agricultural industry was under strict local and national government control until the late 1980’s when the reform and opening policies led to a more market-based approach to the agricultural industry in China. Particularly, in recent years the government has abided by giving priority to the work of agriculture, rural areas, and farmers.

China has succeeded in producing one-fourth of the world’s grain and feeding one-fifth of the world’s population with less than 10% of the world’s arable land. This is not only a great achievement in the pursuit of food and nutrition security in China itself but also globally. Currently, China ranks first in the world in terms of the production of cereals, cotton, fruits, vegetables, meat, poultry, eggs and fish.

Import and export trends in agricultural industry in China

Currently, the agricultural industry in China is responsible for producing 18% of the world’s cereal grains, 29% of the world’s meat, and 50% of the world’s vegetables. Overall, the country is responsible for creating roughly 20% of the world’s food, making it the largest agricultural economy globally.

According to the latest statistics from the Ministry of Agriculture and Rural Affairs of the People’s Republic of China, in 2021, China’s imports and exports of agricultural products amounted to USD 304.17 billion, an increase of 23.2% compared with 2020.

Among them, agricultural products with a cumulated value of approximately USD 84.35 billion were exported from China, an increase of 10.9% compared to the previous year. Generally, the value of agricultural imports to China is considerably higher than export, with a trade deficit of USD 135.47 billion, an increase of 42.9% compared to the previous year.

Recent developments in the agricultural industry in China

Agriculture remained a core part of the 14th Five-Year Plan of the Chinese government. Aside from focusing on quotas for grain and other staples, the five-year plans point to trends that will benefit the farming class in the future. For example, diversification of the rural economy was a core point of the 14th Five-Year Plan.

The government will boost the combination of farming, breeding, and processing and the reengineering of the industrial chain, advance the development of the agriculture products processing industry and agricultural producer service industry, and expand characteristic industries such as leisure agriculture, rural tourism, and homestay economy.

Furthermore, the focus on  green initiatives continues nationally. The five-year plans have stated the need to integrate environmental concerns into the agricultural industry in China.

By increasing the utilisation efficiency of fertilisers and pesticides, agricultural waste and sewage treatment and agricultural plastic film recycling, China hopes to see more successful harvests while also preserving the land that supports their robust agricultural industry. The focus on green initiatives continues nationally; thus, it is likely that similar campaigns can be seen in the upcoming 14th Five-Year plan as well.

Another key point to note is China will encourage technological innovation to boost domestic supplies of high-quality seeds, dubbed agriculture microchips. It will make a push to accelerate biological breeding, gene editing, and synthetic biology by Chinese firms through R&D and acquisition to produce Chinese seeds for Chinese soil.

Modernisation, digitalisation, and innovation

Agriculture has always been a driver of innovation in China, and the goals are to achieve a self-sufficient food supply, increasingly centralised production and improve the quality of the products. Chinese policymakers fully understand that the future of China’s agriculture sector lies in agricultural modernisation, and the key to advancing agricultural modernisation lies in the development of technology. China subsidises measures to farmers purchasing machines continuously, while agricultural mechanisation is realised for three kinds of grains, in the mechanisation level of wheat reached 95% in 2020.

To create several Agricultural Silicon Valley and improve the regional economy, China has also established several national-level agricultural technology innovation centres promoting modern agriculture in Nanjing, Taigu, Chengdu, Guangzhou, and Wuhan.

Private business has also started promoting agricultural innovation and AgriTech solutions together with local governments to advance agricultural digitalisation in China. In 2018, Alibaba launched a program called ET Agricultural Brain that leverages big data to help farmers plan their planting methods effectively and maximise crop yields.

Alibaba’s product helps to share information about new technologies and methods that have helped produce a high yield. Further, the Ali platform plan to promote agriculture products in 100 counties in China for branding in 2021. Tencent Security has released a new strategic product Tencent Security Platform, which customises an exclusive ID Card for each agriculture commodity, allowing the whole process of the products is traceable.

COVID-19 has disrupted farming since 2020, which reminds Chinese policymakers to push to develop agricultural technology to keep a steady supply of crops. For example, high-tech greenhouses have soared during the COVID-19 pandemic. Some emerging agriculture firms aim at solving issues with transportation and logistics by localising as much as possible food production.

Regional focus: Henan province

One cannot discuss the agricultural capabilities of China without also discussing Henan province. With 6.825 million hectares of arable land, Henan is a well-known big agricultural province and an important producer of agricultural and side-line products. It leads the nation in total grain output and the yields of wheat, sesame, jute, and bluish dogbane, specifically, its yields of wheat account for one-fourth of the total output nationally. It ranks first in China in pig stockpiles, and it ranks second in China in the total volume of meat, eggs and milk.

During the 13th five-year plan, the total grain production of Henan province has been climbing for four consecutive years, and its total grain output has been stable at more than 130 billion pounds. It not only solved the problem of feeding its own 100 million people but also transferred 60 billion pounds of raw grain and manufactured products each year, making an important contribution to ensuring national food security.

In 2019, Henan Province invested CNY 3 billion to support the construction of modern provincial agricultural industrial parks. At present, Henan Province has created eight national-level, 80 provincial-level, 187 municipal-level and 98 county-level modern agricultural industrial parks

Negative List: Restrictions on foreign investment in agriculture

The 2021 Negatives List released by the Chinese government continued placing restrictions on foreign investment in China’s agriculture industry. While there are still ways in which foreign companies can be successful in supporting the agriculture industry, it is important to note these restrictions on foreign investment.

  1. The share ratio of the Chinese party in the selection and breeding of new wheat varieties and seed production shall not be less than 34%, and the selection and breeding of new corn varieties and seed production shall be held by the Chinese side
  2. It is prohibited to invest in the research and development, breeding, planting, and production of relevant breeding materials (including good genes for planting, animal husbandry and fishery) of rare and precious varieties in China
  3. It is prohibited to invest in the selection and breeding of transgenic varieties of crops, breeding livestock and poultry, and aquatic seedlings and their transgenic seed (seedlings) production
  4. It is prohibited for foreign companies to invest in the waters under China’s jurisdictions and fish for aquatic products in inland China

In general, there are three different types of WFOEs, which are the following:

  • Standard/Consulting WFOE: Licensed to operate as a consulting business within the service industry
  • Trading WFOE: Licensed to conduct trading, wholesaling, retailing and franchising activities in China. These types of companies are required to make an additional registration at Customs to be able to import/export goods in/from China
  • Manufacturing WFOE: Licensed to manufacture products. The process of registering this WFOE is very similar to other WFOE registrations, but an environmental impact assessment must be completed before submitting the business license application.

If you would like to learn more about the registration of a WFOE and establishing your own company in Chinayou can request our white paper here.

Exporting agricultural products to China

Although China is the top food producer, China still relies on imports to feed both its livestock and growing population. Food products, such as meat and produce, often face regulations based on their country of origin and the bilateral trade agreement that the country of origin has with China. We have many years of experience in navigating the agricultural industry’s import regulations in China.

Agricultural technology, such as tractors, irrigation technology, and more, are also still imported to keep up with China’s quickly modernising industry. To import agricultural technology to China, it is important to create a strategy to protect your company’s intellectual property and tap into the relevant local distribution channels that will allow you to be successful. Regardless of whether this means opening up a Wholly Foreign-Owned Enterprise (WFOE) in China or finding a trusted local partner, thorough preparation is required.

Furthermore, businesses interested in entering the Agricultural industry in China should pay attention to the trends and regulations of the sub-sector they are interested in. Regulations vary significantly based on the country of origin and type of product your company sells. For companies interested in exporting or opening a business in China, we have a wealth of knowledge about the procedures for assessing your capability to do business in China. If you want more information about what is required to be cleared to import your product to China or have any questions, feel free to contact us.

About Acclime.

Acclime China helps established multinational companies and startups start and operate their business in China. By seamlessly navigating our clients through the complexities of the Chinese laws and bureaucracy, we allow them to reclaim valuable time and fully focus on growing and developing their business.

Written by
More from the author(s)