Chinese F&A companies play strategic Go game to capture dividends in the global food economy

China's food economy is entering a new phase of development. This new phase will have a profound impact on all players in the global food economy. The choices they make will have profound impact on the global food economy. This report zooms in on these choices.

For one, the global market for basic food staples, for which China has been the main growth engine during the last three decades, will see much lower growth rates. In the next decades, growth in China must come from added value products that cater to discretionary demand beyond subsistence and nutrition. And second, global competition in the food economy will intensify as Chinese companies are expanding their global footprint by leveraging their newly acquired competitiveness. Lacking the comparative advantage of natural resources, Chinese newly founded agribusiness companies relentlessly focused on productivity improvements to compete with international players in their home market. And to mitigate food security risks they built a diversified global agricultural commodity supply chain network. Enjoying the comparative advantage of a leading digital economy, Chinese food companies aggressively developed business models and product portfolios to cater to the online consumers.

China's food and agribusiness companies thus have captured large market shares in China's food economy. So, while collecting the past dividends offered by the trends that drove yesterday's food economy, - rapid economic expansion, deepening globalization, and the information and communications technology (ICT) revolution - these leading Chinese companies have also built the building blocks to capture the future dividends. They have achieved similar productivity levels as the leading international players, they have innovated their business models to thrive in the digital economy, and they are well integrated in resilient global supply chains.

Tomorrow’s dividends will likely be shaped by three trends that drive growth in the global food economy in the next decades: rising food security needs in countries in the Global South because of heightened geopolitical tensions, the unfolding of a newly defined global middle income class as global income redistribution progresses, and the reconfiguration of global supply chains as global farmers search for new markets. China's agribusiness companies must collect the 'food security dividend' in international markets as China's basic food staple market is saturated. China's food companies, however, have the opportunity to collect the dividends of the digital global middle class, both in their domestic market as well as in international markets. These growing Chinese food and agribusiness companies can rely on, and help shape - the supply chain network.