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China inspires economic envy

China inspires economic envy

BEIJING: The ex-traordinary transformation of the Chinese economy has the world agog. For companies like Alltech, which manufactures feed ingredients and additives, the agriculture revolution is equally exciting. The company has been in China for 25 years and observed the growth of a youthful urban middle class as well as changes on farms. “It is the biggest transformation that any economy has ever gone through,” said Mark Lyons, Alltech global vice-president and head of its operations in China.

China is going through a period of transition where costs and incomes are going up, he told the National Institute of Animal Agriculture annual meeting held April 3-6 in Columbus, Ohio. Since 2008 labour costs are up 62 percent, raw material prices are up 70 percent and energy is up 10 percent. Transportation has increased by 45 percent and real estate values are up 59 percent. China and the United States opened diplomatic ties in 1979, and since that time trade has grown to US$519.6 billion, an increase of 207 times in nearly 40 years. China was previously considered to be the factory of the world, but today it is the banker of the world. Also, its economy is shifting toward a consumption market. A bellwether of progress for Alltech is monitoring the world animal feed market. Earlier this year the company reported the world produced a record one billion tonnes of animal feed. Ten countries produce two-thirds of that feed and Asia is the number one producer. Change in China is not limited to demographics or broad scale economics. It is also massively reforming its agricultural sector.

The Chinese government annually issues an agricultural position paper called the Number One Document. The goal is to protect farmland and lend more money to farmers to narrow a wealth gap between rural and urban areas. The government is pursuing self-sufficiency, quality improvements, larger scale production and environmental protection. Larger farms are promoted because the government believes it is easier to manage bigger operations and will will give more attention to food safety and quality, Lyons said. While feed production is flat, there are more feed mills in China than in the U.S.

China produces about 80 million tonnes of meat each year. It is the leading producer of pork. The livestock generate millions of tonnes of sewage. There are areas where farms are being closed because of run-off risk when they are located too close to water. The government is also concerned about antibiotics getting into soil through animal urine and feces. It wants hog producers to bring in the latest technology to address the pollution. “In five years, they want no more residues off these farms. This is something we have seen in some places in Europe and they are really pushing the adoption of new technologies,” Lyons said. As the hog industry undergoes a major transformation to encourage a greener countryside, it has struggled to keep up with growing demand for pork. That has led to increased im-ports from Canada, the United States and the European Union. The U.S. in 2016 exported about $1 billion worth of pork to China, up from $700 million the year before and $271 million in 2007. “Mexico is the only country where (the U.S.) exports more pork but that is probably only going to be for the next couple of years.” The Chinese are also pushing for more homegrown innovation. “It is not going to be ‘made in China’ anymore. It will be invented in China. There is huge focus on innovation in every major sector and the government is really pushing companies in the way they are innovating,” said Lyons.