Why Chinese Consumers Want to Buy Australian Agricultural Products

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The new commodity boom

a2 Milk Company Ltd [ASX:A2M] has made an impact on Australian consumer milk choices. Many consumers would buy a2 milk due to its unique formulas, claiming that it truly tastes and feels different than other brands. It’s very smart and effective marketing and it works. Despite the marketing, the fundamental force driving Australian and New Zealand agriculture companies remain the same — China.

If the ‘Old Australia’ was all about mining, then it is already dead…But the ‘New Australia’ will continue to capitalise on the world’s largest population for another dramatic boom.

If you haven’t realised, the ‘New Australia’ will again rise from the commodities sector. This time, it won’t be hard commodities; it will be soft — Australian agricultural products.

But we are here to ask one important question — why do Chinese consumers want to buy Australian agricultural products? To answer this question, we need to pay attention to the socio-economic dynamics of China.

There are two dominant issues for Chinese agricultural products at this point. One is that China is a country with food scarcity; therefore it is a net food importer. Secondly, China’s own sources of supply often have quality issues which put consumers’ health at risk. This has prompted the increasing demand for safer overseas food products.
The number one issue with food is food security. That is what keeps Xi Jinping awake at night. It doesn’t matter how many factories China creates, it needs to be able to feed its own people. China has an apparent food supply constraint. As it urbanises, its arable land decreases. It also has water scarcity, particularly for farming.

So what does the State Council call for? Investment in farming, zero tax for agricultural businesses in China, subsidies and more. In addition, China needs to import more agricultural products. China became a top food importer in 2013–14.

Apart from food scarcity and growing demand, another big reason for wanting to buy overseas food products is brand value, safety value and the superior product value of imported products, especially products from Australia and New Zealand.

China’s own food products have had countless scandals over the years. I am not going to dig too much into how unsafe the Chinese food products are, but you can comfortably take my word for it.

The new middle class in China wants nothing less than Australian products. Simply put, that ‘quality seal’ from Australia is worth a lot of money!

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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Ken Wangdong

Having spent half of his life in Australia and the other half in China, Ken is a man of two worlds. He’s fluent in English and Mandarin, and has first-hand experience living, working and investing in both countries. As Money Morning’s emerging markets analyst he uses this cross-border intelligence to discover the best investment opportunities in not just China, but all emerging markets around the world.
Ken Wangdong is Money Morning’s emerging markets analyst. Having spent half of his life in Australia and the other half in China, Ken is a man of two worlds. He’s fluent in English and Mandarin, and has first-hand experience living, working and investing in both countries.

This rare cross-border insight gives Ken a powerful inside advantage when it comes to uncovering the best investment opportunities in China.

And that’s key. Because you cannot hope to invest successfully in this fast growing super power without a guide to help you navigate the cultural, political and historical factors that deeply influence the way they do business.

But China isn’t the only place Ken searches for big growth opportunities — he looks at all emerging markets around the world. Whether it’s Indonesia, Burma, Bolivia or Mongolia, Ken is passionate about hunting down exciting investments in the markets that will drive the next stages of global growth.

With two degrees in economics and finance from a prestigious Australian university, Ken has worked for a number of high-profile research, consulting and financial services firms both here and in China.

Now Ken brings his unique expertise in cross-border intelligence to Money Morning, where he helps readers discover the best investment opportunities in emerging markets across the globe.

Official websites and financial e-letters Ken writes for:

(You can find a list of recent articles written by Ken below.)

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Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@moneymorning.com.au