A new report from Dutch agri-finance group Rabobank has highlighted a need for China to improve its cold chain links if it is to increase it's perishable food options moving forward.
China's appetite for fruit and vegetables, dairy and meat is expected to increase by 17 per cent between 2015 and 2025, offering huge opportunities for imports from Europe's food industry. The 'New Silk Road' - the Yu'Xin'Ou Railway, connecting Chongqing and Rotterdam by rail, provides an exciting new route to market for European exporters as it reduces transport times by over 30 days compared to shipping.
However, to build China's supply chains for fresh, or perishable food, an improvement of its cold chains is also needed. In a joint report Freight Trains and Cold Chains, Rabobank – together with the world's leading agricultural university of Wageningen UR – has analysed what building China's new supply chains for perishables will entail.
The report was handed over today (28 October) by Wiebe Draijer, chairperson of the executive board, to Minister for Agriculture Dijksma in Rabobank's 'One Belt, One Road' conference in Shanghai.
'China's demand for fresh, safe and high-quality food is outstripping its capacity to produce and deliver domestically. Europe is able to address this need,' says Paul Bosch, F&A Supply Chains Analyst at Rabobank. '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.
Draijer added: 'The 'New Silk Road' provides tremendous opportunities for Sino Dutch agricultural trade. The role of Rabobank is to connect the relevant people across the 'New Silk Road' journey by providing access to knowledge, our networks and financing. With 20 per cent of the world population, but only 10 per cent of its arable land and 6 per cent of its water, China faces enormous,challenges on food security and safety. That's why Rabobank has to be here!'
Increasing consumption in China is being driven by continued economic growth and urbanisation, according to the report, and China's economy is expected to grow by 6-7 per cent annually in the coming years, pushing a further 38m households into the upper middle class.
Fresh or perishable food is increasingly reaching Chinese consumers through modern distribution channels, including supermarkets, hypermarkets and online, with food safety is one of the driving forces pushing shoppers away from traditional wet markets and it is expected to remain one of the biggest concerns for the Chinese population.
The demand for fresh safe food, bought through convenient modern channels is driving the country's investment in cold chain infrastructure. Over the past five years, storage capacity has grown from 12m cubic metres in 2007 to roughly 100m cubic metres in 2015.
However, China's cold chain sector is still lagging and needs to improve in terms of both quality and capacity, according to Rabobank. The associated investments are huge: an estimated US$85bn is needed in the next ten years. The country's cold chain sector will be able to improve once cold chain companies start adapting their business models into higher-value strategies in response to the higher service needs of their clients.
The benefits to China of an improved cold chain sector can hardly be overestimated, with the presence of a high-level cold chain sector potentially reducing the waste of perishables by 14 per cent (valued at US$7.5bn), creating a 10 per cent reduction in food prices and hunger, increasing rural income, reducing healthcare costs and cutting emissions.
Rabobank's report concluded that the 'New Silk Road' can be a strong driver of improvements to the cold chain industry, as it brings Chinese cold chain providers in contact with high-standard products. The reduced transportation time has several advantages for exporters with respect to product quality, pricing, and distribution options.
'Once matured, 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 crop disease and extreme weather,' Rabobank noted. 'In time, it 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.'
