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A Taste of the Future

Speeding up agricultural modernisation and developing the agro-processing industry is a key goal und  

Speeding up agricultural modernisation and developing the agro-processing industry is a key goal under the 12th Five-Year Plan (photo: EyePress)

 
The Chinese mainland’s food processing industry has been booming since 2005. With an average annual growth rate of nearly 27 per cent in the five years to 2010, these agriculture and spin-off product sectors rank among the most vibrant in the mainland economy, with foreign imports comprising some 21 per cent of the sector’s average annual growth. 

The processing industry’s expansion owes much to the government’s promotion and support. Since the implementation of China’s previous Five-Year Plan, through 2010, the Central Government has given top priority to the “Three Rural Issues” (agriculture, rural areas and farmers), modernising agriculture.   

This approach has involved promoting the industrialised operation of agriculture and boosting the processing, sales and circulation of products. 

To raise standards of food product marketing, the mainland government has encouraged links between the agricultural and commercial sectors, and explored and promoted a more viable business model. That, in turn, has integrated agriculture with industry and commerce, combining domestic trade with foreign trade. 

These changes have served to increase the number of sales channels for agricultural products, with closer links between production and the market.

Hence, major food enterprises, including Yili, Haoyue, Huiyuan and the United States firm Starbucks have developed a sophisticated domestic supply chain. 

Built through R&D, transfer and application of technology in cattle and sheep rearing, processing of milk and meat and quality improvements in fruit and coffee beans, the supply chain has contributed significantly towards optimising the mainland’s agricultural output, including upgrading its quality and processing levels. 

To support the participation of farming households and co-ops in the agriculture-commerce programme, mainland departments are providing backup and subsidies, standardising production, implementing safety management, production, quality certification, storage and freshness control, as well as logistics and distribution. 

Opportunities for Hong Kong  

The Chinese mainland is promoting advanced technology, from storage and freshness control to cleanin  

The Chinese mainland is promoting advanced technology, from storage and freshness control
to cleaning, grading
and packaging
(photo: EyePress)

 
Driven by the targets of the “Three Rural” policies, local governments have a mandate to speed up agricultural modernisation and raise the processing levels of agricultural products. 

As a result, they are offering comprehensive support and assistance to prospective outside investors. The advantages of Hong Kong’s food processing enterprises in such areas as product development, marketing and management are particularly well-suited to supporting industrialisation and quality upgrading. 

By applying better food processing technology and food safety management systems, high value-added food supply chains can open the sector on the mainland, in Hong Kong itself or even in overseas markets. 

The level of consumption continues to rise on the mainland, so the market size for high-end food is also expanding. The food consumption pattern of residents is changing: the amount of grain and other staple food directly consumed by urban and rural residents is decreasing gradually, while the consumption of such non-staple food as meat products, milk products, convenience food, snacks and condiments is rising sharply. 

  Technological advances are bringing new business opportunities to Hong Kong food-processing companie
 

Technological advances are bringing new business opportunities to Hong Kong food-processing companies, restaurants, even retailers
(photo: EyePress)

This means that the emphasis has switched to nutrition and taste, creating a huge market for the food-processing industry. 

Consumers are increasingly concerned with such issues as food safety, hygiene and environmental protection, so any food enterprise must increase its competitive advantage through such factors as technology, innovation and management. 

Food Safety Services

During the current Five-Year Plan (2011-2015), the mainland will continue implementing the National Superior Agricultural Produce Regional Planning (2008-2015) provisions and speed up the development of 23 industry belts in seven agricultural production regions: the Northeast Plain, the Huang-Huai-Hai Plain, the Yangtze River Basin, the Fenwei Plain, the Hetao Irrigation Area, South China and Gansu-Xinjiang. These industrial belts will be designated for nurturing superior crops, livestock and fish. Food processing and related enterprises will be able to source more and better agricultural products. 

Such advances are bringing enhanced business opportunities to Hong Kong food-processing companies, restaurants and even retail enterprises, including supermarkets. 

     
 

Targets Under the FYP

 
     
 

One objective of the current Five-Year Plan is to speed up agricultural modernisation and develop the agro-processing industry. Reflecting this, the target for the mainland’s agricultural product processing industry during the plan period is to achieve an increase of 0.1 point in the ratio of processing output value to agricultural output value, so that, by 2015, the ratio will reach 2.2:1. 

This would approach the level of 2.4:1 attained by developed countries. Specific actions include:

  • Raising the degree of concentration of the industry by developing a number of conglomerates with long industry chains, high technology content, influential brands and annual sales of more than Rmb10 billion.
  • In regions with advantages, nurturing a number of industrial clusters with output values upwards of Rmb10 billion, in accordance with the National Superior Agricultural Produce Regional Planning (2008-2015).
  • Raising the processing level of agricultural produce so that, by 2015, the processing rate would hit 65 per cent or above, and the proportion of intensive processing would be 45 per cent or above.
  • For every enterprise above a designated scale, developing a through-process, quality-control system and forming a quality safety and traceability system. By 2015, more than 65 per cent of agricultural product-processing enterprises above a designated scale should have achieved certification in ISO and other systems.

The mainland is also promoting and popularising advanced technology, from storage and freshness-control to cleaning and grading, as well as packaging. This is to ensure quality maintenance, damage control and enhanced efficiency for processing agricultural products. 

Technological innovation is encouraged; the R&D system for the agricultural product-processing industry during product processing will be improved and the level of intensive processing raised.

 

 
Hong Kong companies can take similar opportunities, linking up with mainland agricultural resources to establish value-added food-supply chains. 

Quality management and close monitoring of the supply chain would be crucial, particularly when it comes to storage, processing and transportation. So precautionary and traceability systems have to be established to ensure food safety. 

The intrinsic advantages of the products themselves are good reasons why Hong Kong enterprises would enter the international market or the food supply chains of multinationals. But the fact that the production and storage conditions and handling procedures for these products comply with the rules of GMP, HACCP and ISO, is also a key factor. 

Even if some enterprises are capable of setting up their own critical point control systems, training staff and carrying out laboratory analysis, the majority of enterprises still requires professional help. In the process of establishing food supply chain safety, professional services such as certification consultancy and product inspection and testing will play an important role. 

The Cold Facts

According to the China Logistics Development Report 2008-2009, of all goods requiring transportation by refrigerated vehicles, 80 per cent are transported by non-refrigerated ones. Between 25 per cent and 30 per cent of mainland agricultural products such as fruit and vegetables perish during transportation and storage compared to the less than five per cent loss rate in developed countries. 

There is increasing consumption of frozen and chilled food on the mainland, and the production of frozen and chilled food is growing at about 10 per cent annually. 

Nevertheless, the refrigerated transportation rate of food is only at about 10 per cent, compared to 80-90 per cent in developed countries, underscoring the mainland’s acute shortage of cold-chain logistics. Third-party logistics is the main direction for future development, but many enterprises provide their own logistics in order to ensure product quality during the transportation process. 

When a Hong Kong company procures fresh, frozen or chilled food from the mainland, whether or not it arranges delivery itself or through suppliers, this simultaneously generates logistics services for cold storage warehousing and transportation. In product development, Hong Kong is a gourmet’s paradise. It could also be a logistical “paradise” for companies aiming to enter the widening world of tastes on the mainland. 

For more details, please see the online article “HKTDC Research: The value food supply chain: a Hong Kong-Mainland collaboration.”

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