Foreign investment pours into China

Related tags China Investment

As food ingredients suppliers take a stake in the burgeoning
Chinese market new figures released by the United Nations confirm
foreign direct investment (FDI) inflows to Asia and the Pacific
rose by a massive 55 per cent in 2004 on the year before.

FDI flows hit €126 billion, up from €81 billion in 2003, largely due an improved economic performance, a more favourable policy environment, higher corporate profitability and a rise in M&A activities in the region.

"However, flows to the region remain unevenly distributed, dominated by a few countries. North-East Asia - particularly China and Republic of Korea - still accounts for the lion's share,"​ claims the UNCTAD​ report.

Opportunities for global ingredients players have opened up in China on the back of a soaring Chinese food industry that has witnessed an explosion in sales. Valued at under 100 billion yuan in 1991, sales reached well over 400 billion yuan just ten years later.

Driving the market is the increased spending power and changing eating habits of China's 1.3 billion people who are transforming the country's food sector, both domestically and in foreign trade.

Foreign brands of soft drinks, yoghurt, sausage, crisps, breakfast cereals, jellies, wine, and other foods and beverages comprise about 5 per cent of products in Chinese supermarkets, but many of those products are also manufactured with local ingredients, claims the US department of agriculture.

Ingredients firms have found they need to break into the local market in order to effectively compete. In 2003 Danish giant Danisco increased investment in the region, linking up with a Chinese xanthan firm.

And last year leading colours and cultures firm Chr Hansen cracked into the Chinese market constructing its first colour production facilities in the country.

The Danish firm said at the time it expects the move to lead to considerable savings because has up until then it had supplied the Chinese market from facilities in Italy, Denmark and India, consequently involving higher sourcing and freight costs.

"The main driver in China is the agility and flexibility we will have to serve the local market,"​ group vice president Jan Boeg Hansen told at the time of the announcement.

The fact that we have a facility in China means we can source the local materials to produce the food colours to feed this local market, he added.

Related topics Ingredients Emerging Markets

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