Organic Products in China And A Growing Chinese Middle Class

By Richard Hoffmann, ECOVIS Beijing China

Food Scandals in China and a growing Chinese middle class cause the increasing demand for organic products in China. These are mainly food products which are imported from different countries like Australia, Germany or the US. Consumers lost trust because of several food safety issues like the Melamin scandal in 2008. This can be seen as a chance for foreign companies to bring their own products into the market if they can jump the hurdles of the Chinese regulation system. It’s important to understand the laws and regulations that apply to your industry in China.

China has 1.4 Mio. hectares of certified organic land which is just 40% more than Germany’s 1 Mio hectares (2010). The Chinese organic food industry is huge and profitable as well, being valued at more than 2.5 billion US$. German revenue reached more than 7 Billion € in 2012 and it’s also growing year on year. Comparing these numbers it’s obvious that Chinese customers have just started to enjoy organic food. Exporting organic products might be the right choice for medium sized enterprises that are looking for new growth.

Imported food has the biggest share of all imported organic products including wine, chocolate and dairy products. As other countries’ exported organic products are usually more reliable than Chinese ones and are trusted by the Chinese customer, producer and seller can charge a high premium for that extra quality. Having the choice between products that could be tainted with pesticides or other chemicals and high grade foreign products is not hard to be made for the rising Chinese middle class. The big opportunities for foreign companies don’t only lie in the high margin of their products but also in the still not fully developed market. It might be understated to say that it could be possible for medium sized companies to find a niche and grow their business with the continuing increase of demand within China.

International Organic labels aren’t accepted in China which means that every product must get certified by one of the Chinese institutes. This is already done by big foreign baby formula producers as they want to take advantage of being allowed to legally praise their products in commercials. Many Chinese customers can already recognize some foreign labels but some products have the label, they are not allowed to be publicly advertised if not permitted by the Chinese authorities.

It seems to be a great if not the biggest chance ever for organic food seller who want to take advantage of current developments like health consciousness and rising disposable income of the Chinese population.

We can help you with legal and tax advice like e.g. choosing the right entity to engage into the Chinese market, facilitate  all necessary paper work and registrations, assist with tax issues etc.. For further information please contact us.