China's polluted soil boosts food imports
DENISE HRUBY, Contributing writer
SHANGHAI -- Scanning a wide selection of apples in the fresh produce aisle of a modern supermarket in a shopping mall, Elise Qian focuses more on the fruit's country of origin than its price, variety and appearance.
She prefers to shop for food imported from Australia, Japan or the U.S. Chinese produce, she said, could not be trusted. "There have been too many scandals. And the water and soil here isn't good either," she said. Produce from New Zealand, Australia, the U.S., Japan and Taiwan can be readily found in modern grocery stores in Shanghai.
Polluted soil has become the latest concern for Chinese consumers. Since a 2008 scandal in which toxic melamine in formula milk killed six babies and hospitalized some 54,000, Chinese consumers have grown increasingly wary of locally produced food.
Other scandals have followed, from noodles tainted with industrial dye and ink to cat and rat meat being sold as lamb or rabbit, making consumers especially worried about the use of illegal and inferior ingredients by unethical food producers.
Chin's State Council has described the soil pollution as "grim" and in May released an action plan under which it aims to make 90% of polluted arable soil safe for humans within the next four years. In a 2014 study, China found that more than 19% of arable land is contaminated with toxins such as cadmium, nickel and arsenic, which can cause cancer and birth defects.
Organizations such as Greenpeace have cast doubt on the ambitious cleanup goals. Local governments that will be responsible for implementing it could lack the capacity and expertise to do so, Greenpeace said.
But even if the 300 billion yuan ($45.2 billion) campaign is successful, it could be hard to win back the trust of consumers. Ada Kong, Greenpeace's East Asia toxics campaign manager, said, "It would be difficult [for consumers] to distinguish" between polluted and clean products.
Even organic products are not fully trusted, said Chen Tai'an, chief agricultural scientist of Mahota Farms, an organic farm on the outskirts of Shanghai. Mahota, regularly checked by authorities, invites customers to visit. Zucchini and tomatoes are some of the produce grown there. The farm also breeds chickens and pigs.
"We work hard to prove that what we do is real, but there are a lot of tricky ways, and things are passed off as organic that aren't," Chen said.
Although his organic produce is grown according to international standards, imported food is still more popular. Even Chen turns to imports if he cannot source ingredients from his own farm. "People believe that imported food is safer and of better quality," he said.
In 2000, China accounted for 3.3% of world agriculture imports, according to the World Trade Organization. But by 2014, that figure had grown to 9.1%. The Association of Food Industries predicts that China will be the world's largest consumer of imported foods by 2018.
Agricultural exports from the U.S. to China have grown by more than 200% in the past decade. Last year, farm and food exports to China were worth more than $20.2 billion. Exports of soybeans were valued at $12.7 billion, the second-highest level on record, according to the U.S. Department of Agriculture. Horticultural goods, especially almonds, citruses and apples, also grew.
For Australia, China is already the biggest importer of its agricultural, forestry and fisheries products, worth 9 billion Australian dollars ($6.95 billion) in 2014-2015, up from A$5 billion four years before. Since 2009-2010, horticultural exports have grown more than fivefold, from A$20 million to A$113 million, according to a report from the Australian government. The report also found that fruit exports grew the most, from A$6 million to A$64 million.
European Union exports to China grew to 10.34 billion euros ($11.56 billion) last year, up 39% from 2014. Pork, citrus fruits, and cereals other than rice and wheat were in high demand. China now accounts for 9.5% of all exports from the EU.
Affluent Chinese will always choose imported products over local ones, said James Roy, a business analyst at China Market Research Group. Brands are almost no longer important to the Chinese consumer when it comes to food, as long as the product's origin is foreign.
"For foreign food and agriculture brands, it's really important to emphasize where they are manufactured, and to show where it comes from," said Roy.
Governments are encouraging their exporters to take advantage of such demand. During a visit to promote agricultural products in China earlier this year, EU Commissioner for Agriculture Phil Hogan said that an estimated 3 million jobs in Europe already directly depend on export sales to China, many of them in the agriculture sector.
If farmers and agribusinesses "build on their high-quality reputation to sustain competitiveness and profitability," that figure could grow substantially, Hogan said. During the visit, the EU launched a "Tastes of Europe" campaign to increase awareness of the quality and safety of food from Europe.
Food exporters have identified China as a growth market, from small producers like Germany's fruit exporter Elbe-Obst and the U.K.'s Daioni, an organic dairy producer that exports milk through a distributor in Shanghai, to large-scale enterprises like Harvest Road Group, the agricultural division of Australian commodities giant Minderoo.
Billionaire Andrew Forrest, Minderoo's chairman, sees agricultural exports to China as a major opportunity for growth and set up the ASA100, a group tasked with promoting Australian foods in China, after he met Chinese Premier Li Keqiang in 2014. In April this year, ASA100 announced that it had agreed to establish a free trade zone for Australian food and agriculture imports near Ningbo city, close to Shanghai.
The trend has also benefitted local importers like FruitDay, an online retailer of fresh produce, which largely sources from the U.S., New Zealand and Chile. The company doubled its turnover in a year to 500 million yuan in 2014. Last year, it received a $60 million investment from JD.com, China's second largest e-commerce company.
Smaller online retailers have also seized on the gap in the market. The Kate and Kimi online grocery delivery store, which focuses on healthy products, was set up by two expatriate mothers concerned about their children's health. Initially, the website was used mostly by foreigners, but it now has an expanding Chinese customer base. The market has now grown so much that Kate and Kimi created a Chinese version called Meal and Fun.
The demand for imported food is unlikely to abate anytime soon, said Fred Gale, a senior economist at the U.S. Department of Agriculture.
"The [local] supermarket chains and restaurant chains are making improvements. Of course they are not perfect and they have problems from time to time, but it's a gradual process and they can put pressure on their suppliers," he said.
The U.S. once faced similar issues, he said. "In the U.S., it took over 100 years. China needs to develop a system of building trust in food, and that's going to take a long time," Gale said.
In the meantime, affluent consumers like Qian will continue to shun Chinese products. "They look OK," she said of the shiny Chinese apples in front of her, before grabbing three Fuji apples from Japan. "But I just don't know if they are safe."