China's consumption trends
April 01, 1994
by Teresa Acklin
Patterns changing in grain-based foods sector:
China is the world's largest producer and consumer of wheat, and about 97% of that consumption is for food.
In the past 10 years,China's wheat production increased by more than 50% to slightly more than 100 million tonnes, according to U.S. Department of Agriculture estimates. At the same time, non-feed consumption advanced by 39% to about 108 million tonnes, according to U.S.D.A.
On a per capita basis, China is among the leading countries in consumption of wheat for food. The International Wheat Council has estimated China's per capita use of wheat for food at 86 kilograms (kg), the highest in Far East Asia and nearly equal to North American consumption of 87 kg.
China's per capita wheat use has been relatively stable in recent years. But consumption is expected to increase as rising incomes stimulate more substitution of wheat-based foods for rice. Because China' s annual wheat use already outstrips domestic production, growth in consumption should result in an increasing volume of wheat imports, U.S.D.A. projected.
The nature of China's wheat imports also is expected to change. Amid rising living standards and demand for higher quality foods, wheat quality considerations are becoming more important to millers and bakers. U.S.D.A. indicated that Ceroilfoods, the state agency responsible for wheat imports, already was permitting some joint-venture mills to import wheat with specific milling qualities.
A new appreciation of wheat quality is one sign of the changes taking place in China's milling industry. Although official data are seldom available, a few statistics have surfaced, and anecdotal information sheds some light on the industry and its future.
The Ministry of Internal Trade controls a number of China's flour mills. A Ministry official, quoted in a Sept. 20, 1993 edition of the newspaper China News, said China in 1992 had 1,900 mills with a total annual processing capacity of 46 million tonnes. As many as 6,000 additional small- to medium-size mills exist outside the control of the Ministrv and were not included in the official's estimate.
Many of China's mills are not operating, or are operating at 50% or less of capacity, making flour production difficult to ascertain. The I.W.C. reported that China in 1983, the last year for which the I.W.C. provided figures, produced 58.5 million tonnes of wheat flour; others have estimated recent annual production at about 65 million tonnes.
Major European mill equipment suppliers have been active in China in the last few years, and it is apparent that China has embarked on a major program to modernize its milling industry. According to the China News report, a new "comprehensive flour production system" includes research and design of production technology. China also has established three institutes to study flour and is developing a domestic mill equipment manufacturing industry, the report said.
In the past, China's mills typically blended wheat before tempering, used a flow system with three or fewer breaks and produced a single standard flour. Modernization is bringing longer flow diagrams, flour blending to meet different end user specifications and various degrees of mill automation.
China's flour production typically has been used for noodles, steamed bread and other steamed goods and dumplings, with the predominant product varying by location. But demand nationwide, and particularly in urban areas, is increasing for Western style bread. biscuits, pastries, cookies, crackers, cakes and convenience and snack food. Overall, China's baking industry mostly consists of small shops With backroom processing and storefront retailing. Increasingly, entrepreneurs, including those from neighboring Asian nations, are opening baking facilities that can supply up to 10 retail outlets. Most of China's cities have industrial bakeries for mass producing a variety of loaf-type goods. But the trend is moving toward fresh-daily retail products sold in smaller shops.
The marketing system for wheat is subject to constant change. Because wheat, like rice, is considered essential to the maintenance of social stability, the state retains more control over wheat marketing than marketing in many other agricultural commodities.
The wheat system currently exists as a hybrid of centralized intervention and free-market pncing, with few concrete rules. In theory, subsidies on wheat remain only for producers, although mill subsidies have been reported and occasional price controls have been implemented to protect consumers. Some wheat is freely traded among mills, producers and trading agents, while some is procurred by and purchased from the state.
Flour apparently has moved farther along the transition curve to a market-oriented system, as it generally is priced according to cost of production, transportation rates and similar economic factors, with no direct state procurement. But even here, the government from time to time has ordered price controls on lower-quality flour to keep it affordable for all consumers.
End users can buy flour directly from mills, from private trading agents or from quasi-government agencies operating as profit-making entities.
The modernization of China's milling and baking industries is likely to continue, especially as long as foreign investment is encouraged. Many of the mill moderriization projects have been assisted by direct investments from overseas joint-venture companies, and such investments are predicted to continue.
In addition, private investment also is being drawn to industries in China that supply mills. In the last year, Buhler Ltd., Uzwil, Switzerland, entered two joint venture agreements with Chinese companies involved in grain processing, bagging and packaging.