Trust Chinese investors - banker
A Chinese business leader says Chinese investors are unfairly viewed as potential security risks in New Zealand.
Rabobank senior dairy analyst Michael Harvey says Chinese consumption of liquid milk rose strongly in 2020 and is expected to continue growing over the coming decade, creating export opportunities for dairy producers here in New Zealand and in other key dairy-production regions.
Speaking on a recently-released RaboResearch podcast, Harvey says there has been really strong consumer demand for liquid or ‘white’ milk in China during 2020, despite the impact of the Covid-19 pandemic.
“Chinese demand for dairy has plenty of space to grow long-term – largely attributable to long-standing key drivers such as low per-capita consumption and strong private and public investment into the sector due to the health benefits of dairy products,” he says.
“And with many of the big dairy companies in China now starting to provide their 2020 full year results, what’s really interesting is we’re seeing that many are reporting rapid revenue growth for ‘white milk’.”
Major Chinese dairy players like Yili and Mengnui are reporting double-digit growth in ultra-high-temperature (UHT) long-life milk sales. The companies are putting this down to the health and wellness benefits their consumers are seeing.
Harvey said liquid milk has been a long-standing growth market for a lot of dairy exporters around the world over the past decade with exporters from New Zealand, Australia and the EU the major beneficiaries.
“Liquid milk imports into China notched up a couple of major milestones in 2020, with September last year the first time more than 100,000 tonnes of liquid milk have been imported in a calendar month.
“Last year was also the first time that China has imported more than one million tonnes of liquid milk in a calendar year,” he said. “When you compare this to 2008 — when only 8000 tonnes of liquid milk were imported into China — it does give you an indication of how strong growth has been, with this increase representing a compound annual growth rate (CAGR) over this period of around 50%.”
Of the big three key liquid milk exporters into China (New Zealand, the European Union and Australia) the EU had recorded the biggest increase in export volumes in 2020.
Chinese liquid milk import volumes from the EU’s 28-member bloc rose 26% last year, and in particular there was really strong growth out of Germany — the largest exporter in the EU bloc — which increased volumes by around 31%.
New Zealand liquid milk volumes into China also grew strongly and were up 9% while Australian volumes were flat.
Harvey says the strong growth in liquid milk exports out the European Union was primarily down to changes in local market dynamics.
“In the EU, there have been a number lockdowns and other measures related to the pandemic which have reduced consumption within the EU bloc. Several of the EU’s major markets in the North Africa region have also had significant Covid-19 issues and these, combined with political and civil disruption in this region, has impacted the flow of exports into these markets,” he says.
“And this has resulted in the EU directing an increased volume of liquid milk into China and picking up share in this market.”
New Zealand’s proximity to China and the strong trade ties between the two countries placed it in a strong position to further grow liquid milk imports into China, but it would need to be wary of rising EU competition.
