Chicago-based consulting firm A. T. Kearney has produced a report on dealing with the problems in China’s food system.
China’s food safety process is broken and fixing it will require a $100 billion investment in improved food safety standards, warehousing, transportation and training, according to research by global management consulting firm A.T. Kearney.
The analysis, presented at the CIES World Food Business Summit in Shanghai, forecasts China’s growing middle class will spend more than $650 billion on food by 2017, a combined annual growth rate of 17 percent from current spending of $150 billion. More than 75 percent of this demand will come from second and third tier markets.
“Reaching these consumers will require an effective national distribution network that does not exist today and that no single company can build,” said Jim Morehouse, senior partner at
A.T. Kearney and leader of the study. “It can only be accomplished with a cooperative effort among all the major manufacturers, retailers, restaurants and distributors. These groups need to agree on common standards with government support, ensure enforcement and attract private sector investment to build a national end-to-end supply chain for China.”
The PowerPoint presentation is here. PDF form is here. It makes interesting viewing.
It’s going to take more than investment. China’s agricultural production isn’t increasing as fast as demand is and isn’t likely to. China’s farmers already fertilize their fields at twice the safe sustainable level and widespread pollution of air, water, and soil take a toll on agricultural production (as well as on the health of the people). China needs to reduce some of the barriers it places in the way of agricultural imports. Food self-sufficiency, long a staple of Chinese political discourse, is growing farther out of reach and the rhetoric needs to change to meet that reality.
China’s internal market needs to grow. And that will require not only the logistical infrastructure changes advocated by the Kearney report but political, legal, and social infrastructure changes as well.
Interesting discussion of a panel on the Chinese economy at James Fallows’ “blog.” It’s argued that the economy will hit a number of roadblocks about 10-15 years out. And then there seems to be a deceptively simple thee-part solution.
http://jamesfallows.theatlantic.com/archives/2007/07/interesting_china_discussion_f_1.php#more
Thanks, PD. I had seen that earlier and most of the things in that are things that I’ve been noting for years (in some cases, decades). I’m surprised that they don’t mention the awful state of China’s banking and equities systems.
I, too, think that China is capable of coping with it’s problems but I’m not as convinced that they have the will. And, although the demographic issues will begin to take hold in 7-10 years, the possibility of China’s economy stalling may already be here. Two big problems: loss of confidence and rising wages. Western companies don’t deal with China for sentimental reasons. They do so because the prices are low and they think that China is stable and dependable. A crisis in confidence could lower the boom overnight.