China Demand for fresh food is expected to increase
The ‘New Silk Road’ - the Yu’Xin’Ou Railway, connecting Chongqing and Rotterdam by rail, provides an exciting new route to market for European exporters as it reduces transport times by over 30 days compared to shipping. However, to build China’s supply chains for fresh, or perishable food, an improvement of its cold chains is also needed. In a joint report Freight Trains and Cold Chains, Rabobank together with the world’s leading agricultural university of Wageningen UR, analyses what building China’s new supply chains for perishables will entail. The report fits perfectly in Rabobank’s Banking for Food vision that encompasses all links in the food chains, in and outside the Netherlands, and tackles global food security challenges such as accessibility to food, food waste and balanced nutrition.
Increasing consumption in China is being driven by continued economic growth and urbanisation. China’s economy is expected to grow by 6-7% annually in the coming years, pushing a further 38 million households into the upper middle class. Fresh or perishable food is increasingly reaching Chinese consumers through modern distribution channels, including supermarkets, hypermarkets and online. Food safety is one of the driving forces pushing shoppers away from traditional wet markets and it is expected to remain one of the biggest concerns for the Chinese population.
The demand for fresh safe food, bought through convenient modern channels is driving the country’s investment in cold chain infrastructure. Over the past five years, storage capacity has grown from 12 million cubic meters in 2007 to roughly 100 million cubic meters in 2015.
However, China’s cold chain sector is still lagging and needs to improve in terms of both quality and capacity. The associated investments are huge: an estimated USD 85 billion is needed in the next ten years. The country’s cold chain sector will be able to improve once cold chain companies start adapting their business models into higher-value strategies in response to the higher service needs of their clients.
The benefits to China of an improved cold chain sector can hardly be overestimated. The presence of a high-level cold chain sector would: reduce the waste of perishables by 14%: a worth of USD 7.5 billion, create a 10% reduction in food prices and hunger: Rural income would also increase as farmers transport their crops in refrigerated trucks.
Improved cold chains would reduce the 90 million annually recorded cases of food-borne diseases, 10-20% reduction of emissions: modern, energy efficient technologies and new refrigerants can reduce emissions of both vehicles and warehouses by 10-20%.