CHINA AS A KEY FUTURE MARKET Future Fare June 8, 2011

China Overview The People’s Republic of China is one of the fastest growing economies in the world With 20% of the world population, China is the most populous country, and one of the largest producers and consumers of agricultural products China’s prospects, performance and role in international agricultural trade have implications for agri-food producers, consumers, and policymakers in Canada

Current Trade Relationship Canada has a long-standing and comprehensive relationship with China which operates at many levels, and includes political, commercial, scientific, cultural and academic ties Although bilateral trade has grown rapidly during the last decade, it is still thought to be below its potential YEAR Total Exports to China (CDN billion) AGR Share (%) Total Imports From China (CDN billion) Total Trade Balance (CDN billion) AGR Total Trade Balance (CDN billion) 2010 2009 2008 2007 2006 12.870 9.771 9.925 8.907 6.880 22.4 24.4 16.9 13.4 12.2 43.119 34.950 39.893 35.920 30.453 2.2 2.4 2.1 2.3 -30.250 -25.179 -29.968 -27.012 -23.573 1.94 1.55 0.844 0.404 0.147

China’s Agricultural Trade Environment China is a major global producer of agricultural products, especially fruits, vegetables, rice, cotton, and pork China’s agricultural trade has grown rapidly, particularly since its market liberalization Exports increased by more than 88% from 2005 to 2008 Agri-food imports from Canada roughly tripled since mid 1990s to $3.1 billion in 2009 The Chinese agri-food sector is now larger than EU 27 and double that of the U.S.

China’s Agricultural Policy Drivers Food security policy aimed at social stability Changing consumption patterns due to growth Culture of relationships and respect Recognition as a significant player on the world stage

Identifying Agricultural Opportunities for Canada In general, demand for fruit, vegetable oils and traditional high protein foods favoured by Chinese – pork, poultry and fish – is expected to grow most rapidly Several factors of production, such as low labour costs and government support, enhance the competitiveness of Chinese agricultural products Other factors, such as its land tenure system and its fragmented transportation and cold storage infrastructure, weaken its competitiveness

China’s Beef Market Beef consumption has been growing at just under 5 percent annually for the past 2 decades China’s beef industry has only recently begun to segment into different value chains The consumption of mid-value beef has shown strong growth since 2000 The high-value market, where Canada can compete, accounts for less than 5% of total consumption

China’s Dairy Industry Demand for milk is rising rapidly and supply is not keeping pace Considerable inefficiency remains in the Chinese dairy sector There is great potential for improvements in productivity per cow, feeding practices and management China’s 2009-2013 National Development Plan for the Dairy Industry outlines ambitious production and herd size goals by geographic area Canadian genetics can play a role in achieving these goals

China’s Pork Market China consumes half of the world’s pork and is roughly self-sufficient China may increasingly rely on imports to offset shortfalls in domestic production as they did in the 2008 Blue Ear Outbreak Chinese pork imports were equivalent to 19% of Canadian production in 2008 Environmental challenges and food security considerations may lead to more stable and growing pork imports

Canadian Advantage Canada is a reliable producer of diverse agri-food products Canada is a leader in technological innovation in agriculture Bilateral cooperation between the two countries is strong, operating at many levels, including political, commercial, scientific, and academic ties Many major Canadian industry associations are active and/or have a presence in China Major ports in British Columbia are a relatively short shipping distance from major import hubs in China such as Shanghai and Tianjin

China as a priority market China is one of 10 priority markets identified by the Government of Canada, the provinces and territories and industry, and we will continue to work together to harness potential opportunities The Beef and Cattle Market Access Committee and Value Chain Roundtables are forums to further discuss opportunities in China Exporting success in China requires a more sophisticated, integrated approach