Gm Food In China

An Assessment of China's Market in

Regards to Genetically Modified Food

This paper will provide an overview of the potential market for genetically Modified Food (GMF) in China. The China Genetically Modified food market is rapidly becoming one of the largest in terms of production, consumption, export and import prospects.

China has the largest population in the world. It is home to 1.3 billion people or 20% of the world's total population and is likely to exceed 1.4 billion by 2050 (Population Reference Bureau, 2002). China's gross domestic product (GDP) is growing about 8 times as fast as the population. With inflation currently under control (projected to be about 5% in 1997), real income per capita is increasing rapidly. In addition the official policy of the Chinese government has been to promote biotechnology as one of the national priorities in technology development since the1980s (SSTC, 1990; Huang, Rozelle, Pray and Wang, 2002). China is an important destination for US agricultural exports and has an ever-increasing demand for western-style convenience foods. In addition Chinese consumers have a favorable attitude towards GM food and in some cases willing to pay a premium for such foods (In press). Finally, farmers are in favor of the use of biotechnology to grow pest-resistant crops which requires fewer chemicals (Environics International, 1999). Combine that with import restrictions in EU countries, china has the potential to be a great market for GM food products.

In the past decade the advancement of recombinant DNA technology along with genome sequencing for hundreds of different organisms has lead to many new products. These new "genetically engineered," products slowly are becoming intergraded in our daily lives. Genetically modified food (GM) is a special set of technologies that alter the genetic makeup of such living organisms as animals, plants, or bacteria (Wikipedia, 2005).

Today genetically engineered food is subject to a wide controversy. There are the unknown environmental and health consequences of GM crops (McFadden, 2005). On the other hand, GMOs (genetically modified organisms) have the potential to be healthier, and more nutritious and productive than organisms derived through conventional means. In the past, two methods were used to boost the food production. First, it was by increasing the amount of land under cultivation; at one point the space available for cultivation will run out. Second, it was to increase the yield of the crop. This was achieved by mixture of seed improvement and technological inputs. But the projected yield improvement has hit a wall. Many scientists believe that the only way to meet the food demand is to genetically engineer crops that are more resistant to nature's ravages (McFadden, 2005). This is potentially a great market size for GM foods.

China has the largest population in the world. It is home to 1.2 billion people or 20% of the world's total population. The total population is expected to peak at about 1.45 billion around 2030 (US, 1997). China's GDP in 1996 grew about 8.1% and its GDP is forecast to grow by about 8% per year through 2005, and 7% annually thereafter through 2015, (See Table 1). Agriculture contributes about 20% of china's GDP. Also the Consumer income is on the rise in China. The result is a growing middle class, composed primarily of singles and two working spouse households. This allows consumers to buy more expensive products, leading to greater demand for variety and quality of produce. In addition, agriculture contributes about 20% of china's GDP (US, 1997). Li, Curtis, McCluskey, and Wahl (in press) concluded that consumers surveyed in Beijing, on average, were willing to pay a 16% premium for GM soybean oil and a 38% premium for GM rice over the non-GM alternatives.

In 2001 only 3 percent of the total global area of GM crops was in China. (Huang, Rozelle, Pray and Wang, 2002). But this number is on the rise. Also, China is an important destination for US agricultural exports and china has favorable attitude toward GM food. In addition, rice and wheat resistance to drought have a tremendous demand particularly with the growing concern over water shortages in northern China; and although China is self-sufficient in food, but the loss of arable land (due to erosion and economic development) is a serious concern (US, 1997).

Moreover the official policy of the Chinese government has been to promote biotechnology as one of the national priorities in technology development since the1980s (SSTC, 1990; Huang, Rozelle, Pray and Wang, 2002).

Studies have shown that farmers have less health problems because of reduced pesticide use in GM plants. In a recent survey insect and disease resistant GM rice reduced pesticide use per hectare by 17 kg, or nearly 80 percent (McFadden, 2005). The potential value of GM crops was highlighted earlier this year with the publication of the results of a Chinese study that demonstrated a 10% increase in yield for farms that planted an insect-resistant GM variety of rice (McFadden, 2005). China's government has placed special emphasis on developing the country's agricultural sector. The officials hope to reduce the wealth gap between urban and rural areas (SSTC, 1990; Huang, Rozelle, Pray and Wang, 2002). They believe that the introduction and development of more commercially robust agricultural practices will drive the development of the supply industry, creating increased supply to the market, and thus better marketing of products. Chinese official believe that plant biotechnology will significantly boost China's agricultural productivity.

In addition, according to a recent survey of attitudes towards biotechnology, Chinese farmers appear to favor the use of biotechnology to grow pest-resistant crops requiring fewer chemicals (Environics International, 1999).

The demand of producers and consumers, the current size and rate of increase of research investments, and past success in developing technologies suggest that products from China's plant biotechnology industry are likely to become widespread inside China in the near future (James, 2002). Agricultural biotechnology research and development in China is predominantly financed and undertaken by the public sector but in recent years they are becoming more privatized; and as a member of the World Trade Organization (WTO) since December 2001, China must comply with amended regulations covering domestic and foreign retail competition (US 2005).

Companies trying