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The Warsaw Voice » Business » May 28, 2013
Business & Economy
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Feeding China
May 28, 2013   
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Jarosław Bratnicki, an expert on fast moving consumer goods, talks to Andrzej Markowski.

China has undergone massive changes over the past several decades. Have the Chinese people changed their eating habits as well?
The Chinese had a strong preference for their own cuisine for thousands of years, always going to local marketplaces to get fresh products, fish, meat, vegetables and so on. At present, people are flocking to thousands of new supermarkets, to McDonald’s and Starbucks and pizza and ice-cream franchises. To young Chinese people, including married couples with children and city dwellers from the country’s rapidly growing middle class, visits to these Western temples of commerce mean progress, modernity and keeping up with trends. Those people’s emotions are similar to how Polish people felt after communism collapsed here over 20 years ago.

There are certain logical implications of this new lifestyle. When someone in China buys a soda drink, they need to put it in a refrigerator, which they did not have before. Now that they own one, they will buy some ice cream—and the Chinese love ice cream—and all sorts of instant meals which are very popular among residents in Chinese cities. Traditionally cooked fresh vegetables in a wok dish are often mixed with canned meat from a local Carrefour or Tesco supermarket. Old customs and habits are changing. For example, the Chinese used to believe that cow milk was not healthy and consequently consumption of milk was very low. At present, milk drinks of all kinds are the in thing in China, coffee with milk included.

How big a market are we talking about?
Mass migration from rural areas to cities began in China over a decade ago. Cities are now home to almost 50 percent of China’s total population. An estimated 200-300 million people have sufficient income to allow them to enjoy all the benefits of the recent economic transformation. They are young, well-educated and well-off people and they are growing in numbers. But whether their living standards can remain at the present level depends on continued purchases of imported goods, especially ready-made and highly processed foods.

What about food produced domestically?
When you travel into mainland China, you will understand the country does not really have the conditions to grow grain and corn or breed cattle. Most of China is covered by inaccessible mountain ranges and rocky deserts and you will be struck by the absence of any meadows. This is coupled with a harsh, mountain climate in Tibet and the Himalayas, varying temperatures and areas with extreme humidity. Attempts were once made at breeding cattle imported from Europe and North America, but they all failed. At the end of the day, China will always need to import food and has to do so increasingly quickly because it could face a shortage of food within five years because of its rapidly growing urban population.

What opportunities does the Chinese market present for Poland?
China imports food from many countries around the world. Poland cannot compete with other countries when it comes to exporting grain and corn to China, because that is the domain of North America, South America and other parts of Europe. What Poland can do is become a major supplier of fast moving consumer goods (FMCG), especially highly processed foods. These could be dairy products, various kinds of meat preserves, frozen meals and confectionery. However, the confectionery products cannot be too sweet, as that is how the Chinese like them and what they are accustomed to. Aside from food, Poland could export cosmetics, such as creams, shampoos and scented soap, herbs, dietary supplements and vitamins. The Chinese love health-related products, and traditional Chinese medicine has been challenged by the newest trend to try different medical novelties. In total, the food which Poland could potentially export to China is worth at least several billion euros.

I should add that the Chinese have a special liking for Poland and a sort of confidence in Poles, which is largely a result of historical developments. To begin with, the Chinese remember how Poland was the first country to recognize the People’s Republic of China in 1949. Poland does not have a colonial past—that can be a major drawback as far as many European countries and the United States are concerned. Very recent history also works in Poland’s favor, because Poland has been the EU’s fastest growing economy during the financial crisis and was the only member state to avoid recession in 2009. China appreciates that.

In terms of its own interests, China also appreciates Poland’s strategic location in Central and Eastern Europe. According to the Chinese, Poland’s economic potential, large domestic market and successful anti-crisis policies make the country the natural, unquestionable leader in this part of Europe. They believe China needs to be focused on good economic relations with Poland if it aspires to be an important player in this part of the continent. The Central and Eastern Europe region has a population of 120 million potential customers, which is almost as big as the population of Russia, but their purchasing power is greater than that of Russian consumers.

What should Poland do to make the most of this economic opportunity?
Poland should hurry, to begin with. For the time being, a country only needs several million euros to create a strong brand for itself as a producer of one group of food products or another. But five to 10 years from now, the cost will increase to tens, if not hundreds, of millions of euros. In order to promote food exports to China more effectively, Poland should have a special program designed specifically and exclusively to support Polish food producers. The program should make it possible to establish a chamber of trade where different kinds of Polish products could be presented to the largest Chinese importers on a quarterly basis, or every other month, for example. The chamber of trade should also comprise an office to keep in touch with Polish companies operating in China, including the largest retailers. The office could provide them with comprehensive legal assistance in launching business operations in China. The most appropriate place to open an office like that is Shanghai, the business capital of China. The office should be financed using public funds.

Special emphasis needs to be put on personal contacts in business. Trade in all Asian countries is 99-percent based on personal contacts and interpersonal relations. Face-to-face contacts, trust in what your business partner is saying and confidence that this partner will never fail you are factors that build and strengthen good business relations and lead you to success. In China, the first question business people ask each other is: What is your guanxi? Which means, what are your references, connections, who do you know, what guarantees do you have?

Stability is the crucial word in China’s socioeconomic code. Despite temporary tensions caused by factors such as significant social stratification in terms of financial standing, Beijing is ensuring steadily improving standards of living for growing groups of people. As for the rest of the population, the authorities guarantee sufficient amounts of food, which is of fundamental importance to Chinese society, which repeatedly suffered famine in the past. After the experience of the Japanese invasion in the 1930s, followed by a civil war and cultural revolution, stability is largely synonymous with life for the general public in today’s China.
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