Most negative reporting lacks an appreciation of the gargantuan challenges China faces to balance economic growth and social development with continued reform and regulation of its key industries, particularly in light of the complex challenges China now faces as it attempts to change from a "made in China" to a "made for China" economic paradigm.
In addition, China's most vocal detractors are quick to forget that the country’s resoundingly positive trade balance is the result of huge global demand for the products of its secondary economic sectors, specifically chemicals and other heavy industry outputs which are the backbone of China's economy and the very cause of its pollution woes.
Here, I will take a look at China’s environmental issues as they relate to its food industry, the major progress China has already realised and the pipeline changes that are in the offing as it attempts to regulate itself free from the current environmental quagmire it finds itself bogged down in.
Given China’s remarkable economic growth and the rapid elevation of a significant portion of its population into relative affluence in just a few decades, it is easy to forget it is still a developing nation and should be afforded the opportunity to evolve and learn from its mistakes.
In the late nineteenth and early twentieth centuries, while Londoners were choking and dying on the fumes of their own "success", China was still comparatively backward and reeling from the impact of imperial oppression.
Fast-forward a century and the problems of the west during the industrial revolution are now the problems of China, magnified by huge population stresses and the largest industrial engine the world has ever seen.
The issuance last December of Beijing’s first ever red-light air pollution warning, and the massive hazardous chemical explosion that rocked Tianjin in August, have refocused attention on China’s woes and the administrative nightmare it faces to effectively regulate, supervise and enforce laws and regulation across its sprawling landmass and diverse socioeconomic landscapes.
On a domestic front, China’s citizens also vilify their own government (although this is slightly muffled behind the breathing masks that cover their faces, and slightly obscured behind the post-apocalyptic permasmog that envelopes the majority of China’s industrialised cities).
China’s bourgeoisie are quick to point an accusatory finger at their government and quick to demand higher standards for their environment. At the same time that they are happily living the Chinese dream, dropping kids to school in imported SUVs, oblivious of their indirect but intimate relationship with the petrochemical, chemical, steel and other heavy industries and their own direct contribution to the PM 2.5 particulate levels.
It’s also extremely naive to assume that, as China attempts to push its economy towards consumption and away from manufacturing, that its environmental problems are going to get better in the short-term.
Behind the pristine packages of all finished consumer products is the ugly truth that almost every component has been touched in some way by one of China’s biggest contributors to pollution, namely its chemical industry.
China may pay lip service to solving these issues in the form of regulating for sustainability but given current economic models and current technical capacities these efforts will in the short term remain tokenistic at best.
What are China’s biggest problems? If I had to pick three, I would say environment, food and public health (I haven't mentioned the economy because China's economic problems are really the world’s economic problems).
If I was so inclined, I would even go a step further and suggest that these things really amount to a single issue that relates directly to China’s environmental issues.
In essence, all food supply chains can be ultimately regressed to the basic inputs of air, water and soil. Widespread perturbations in these foundation elements make it literally impossible to produce food that fosters health in humans, animals or plant life.
The complex interrelations between the ecosystem, farming practices and the food supply in China are extremely complicated and offer up infinite variables and interdependencies.
We know feeding a population nearing 1.4 billion with just 9% of the world’s arable land is challenging.
We know chemical-based, intensive farming practices damage soil and produce unhealthy plants with weakened immune systems which are more susceptible to disease and pests.
We know in China that the use of chemical farming techniques has developed into a vicious cycle in which continued farming requires increased use of pesticides and chemical fertilisers which further exacerbates the situation.
Demand for pesticides and fertilisers is met by the chemical industry, whose activities further pollute and often irrevocably damage the soils used to cultivate China's crops and the water its uses for irrigation and in animal husbandry. Animals are fed local feed, drink local waters and, like humans, are subject to diseases caused by environmental stresses.
We know sick and stressed animals produce inferior meat, reduced yields and produce milk with lower protein levels and higher somatic cell count (and in the past have even been adulterated with melamine to meet nationally regulated protein levels).
With such simple extrapolations from the root cause of environmental issues, we can see how China's food industry is built on extremely shaky foundations and how solving its environmental issues will be a huge step towards solving its food safety issues.
- Paul O’Brien is a specialist in Chinese food, chemical, cosmetic and agrochemical regulations and markets at Chemlinked.
More stories from China…
Starbucks unveils benefits plans, e-commerce strategy and increased store count
Howard Schultz has said the Chinese market is shaping the future of Starbucks after the opening of its 2,000th store in the country.
Speaking in Chengdu, the global coffee chain’s chief executive also announced several new initiatives for employees and e-commerce, along with plans for Starbucks to to operate 3,400 stores by 2019.
“As Starbucks’ second largest and fastest-growing market globally, China represents the most important and exciting opportunity ahead of us,” said Schultz.
“Over time, it’s conceivable that China could become our largest market, and I am grateful to our 30,000 dedicated China partners and their supportive families for the significant contributions they are making to Starbucks success.”
Starting this month, full-time Starbucks baristas and shift supervisors in company-owned stores across China will receive a monthly housing allowance subsidy that is expected, on average, to cover half their monthly housing expenditures.
Starbucks China will also recognise employees who have served in stores for 10 consecutive years by offering them 12 months of unpaid leave before being reinstated. Social and company benefits will continue during this period, the company said.
“Families play a tremendous role in the life and career choices for our partners in China and it’s important that we include their families in the conversation of who we are as a company and the investments we’re making toward supporting our partners’ future,” said said Belinda Wong, president of Starbucks China.
Last month, the company opened a flagship store on Alibaba’s Tmall, China’s largest open business-to-consumer and social gifting platform, to send the chain’s products digitally as gifts. It now has more than 300,000 registered fans and has become the number one performing brand on Tmall’s F&B category within its first month.
“Digital is highly relevant to our customers in China and we are committed to building a locally relevant Starbucks experience that seamlessly integrates our unique store experience and the digital space, while building moments of human connection for our customers,” said Wong.
“We will learn from the experiences in our other markets and explore new strategic partnerships with leading platforms to enable the Starbucks China digital flywheel.”
Packaged goods manufacturers must perfect online strategy
China’s consumer packaged goods companies will be forced to face a number of dramatic shifts in business over the coming years, a global management consultancy has warned.
In a report on the Chinese market, McKinsey&Company states that as overall growth of China’s economy has slowed to below 7% after years of double-digit expansion, physical retail channels will lose share.
By contrast, online platforms are positioned for explosive gains, with projected annual growth of 21% from 2014 to 2019. To this end, McKinsey is advising consumer packaged goods (CPG) companies to adjust to the “new normal” of share loss while shifting their channel dynamics.
Yet this new new emphasis on e-commerce will require agility and “new capabilities” from China’s CPG companies by partnering with retailers who are themselves expanding their footprints and targeting new segments, McKinsey says.
CPG winners will also develop new, multi-channel strategies that encompass both online and offline platforms and integrate an omni-channel approach that includes, in some cases, CPG companies that are going direct to consumers.
“Excelling in customer and channel management is difficult,” McKinsey says. “While 14 of the 23 companies surveyed ‘won’ in at least one module, only six ‘won’ in more than one, and only one company ‘won’ in all five.”
These modules refer to channel strategy, online strategy, route-to-market, pricing and trade and promotions.
ICL buys into Chinese phosphate major
Global speciality fertiliser manufacturer ICL has completed a 15% investment in China’s leading phosphate producer and the parent company of its partner in a joint-venture in China.
The deal with Yunnan Yuntianhua, worth US$250m, has been approved by Chinese regulators.
The move will deepen ICL’s strategic alliance with YTH, with which it formed with Yunnan Phosphate Chemicals Group last October, which is expected to provide ICL with a platform to penetrate growing Asian specialty phosphate markets.
Over the next five years ICL and YTH plan to build plants and triple the the joint-venture’s white phosphoric acid capacity. The partners have also established a phosphate R&D platform in Yunnan province that is focused on developing next-generation phosphate-based products and process technologies.
"Our strategic investment in YTH is a key element of our strategic alliance with Yunnan Yuntianhua,” said Stefan Borgas, ICL’s chief executive. “We believe that our representation on several YTH governing bodies will help facilitate our efficient management of the YPH JV.”
ICL will now nominate two of the 11 YTH board members. A phosphate business committee will then be formed to provide advice and recommendations on YTH's phosphate business.