Chinese Food Industry and Market Report

Chinese Food Industry and Market Report
Ying Bin
& Xia Ni, Tong Wentao, Hu Linqing, Du Peng, Lu Liaoyuan, Yan Jihong

LIFS, Lund University, Sweden Zhongnan University of Economics & Law, China

July 1st, 2006

Introduction
China is a country in transition that is developing rapidly. Although China became a net export country of food after 1980’s, the import and export scales of foods keep growing for many years. In 2005, the food trade scale has reached 44.28 Billion US$ with a growth rate of 18.4% from 2000 to 2005. According to IGD, China will become the world’s second largest food retail market by 2020 behind the US. With increasing income and changing lifestyles, the food consumption pattern and meal structure both changed a lot recent years. The report will analyze the development of Chinese food industry and food market, Chinese food culture and characteristics of food consumption behavior. The report has five parts: Part One analyzes the food culture of China, which is the basic of understanding all the things related to food and meal in China. It includes the traditional food culture, the differences between different areas in China and the differences between China and western countries. Part Two introduces the development of Chinese food industry, including the history and the future of Chinese food industry. It also analyzes the import and export situations of Chinese food market. Part Three introduces the development and characteristics of Chinese food market. It analyzes five important food markets in China, including functional food market, green food market, fast food market, children food market and grey food market. Part Four analyzes the characteristics of Chinese’s consumer behavior when buying foods after introducing the changes of food consumption pattern in China and the new trends of the food consumption. As part three has analyzed the food consumption of children and elderly people, this part focus on the food consumption of youth people. Part Five introduces the situation of Chinese food safety, analyzes the causes and solutions of the food safety problem. It also analyzes the GM food in China deeply.

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Contents
Part One Chinese Food Culture 1.1 Chinese Traditional Food Culture ······················································· 2 1.2 Domestic Differences of Chinese Food Culture ······························ 8 1.3 Difference between China and the West·········································· 11 Part Two China Food Industry

2.1 Definition and Classification of Food ·············································· 27 2.2 Development of Chinese Food Industry ·········································· 29 2.3 Import and Export of Chinese Food Market··································· 40 2.4 The Future of Chinese Food Industry ·············································· 48 Part Three China Food Market

3.1 Current Situation of Chinese Food Market ····································· 61 3.2 Chinese Functional Food Market ······················································ 81 3.3 Chinese Green Food Market ······························································ 97 3.4 Chinese Fast Food Market ································································ 113 3.5 Chinese Children Food Market ······················································· 126 3.6 Chinese Grey Food Market ······························································ 137 Part Four Consumer Behavior Research 4.1 Introduction to food consumption ·················································· 150 4.2 Trends of Chinese residents’ food consumption ·························· 153 4.3 Characteristics of Chinese’s Consumer Behavior ······················· 154 4.4 Food consumption behavior of young people ·························· 161 iii Part Five

Chinese Food Safety Status

5.1 The status quo of Chinese food safety problem ··························· 145 5.2 The causes of Chinese food safety problems ······························· 151 5.3 The solution of the safety problems of Chinese food ················· 169 5.4 Genetically modified food in China ··············································· 169 Appendix Appendix 1.1 Eight Cuisines in China ··················································· 23 Appendix 3.1 Chinese Inhabitant’s Nutrition Meal and Nutrition Condition Report (1998- 2002) ···································· 77 Appendix 3.2 Regulatory Control of Functional Foods in China ····· 95 Appendix 3.3 An Chinese Children Food Consumption Report····· 131 Appendix 5.1 An Investigation on GM Food ······································ 180

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Part One

Chinese Food Culture

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Chinese Food Culture

Represented by the Han nationality, Chinese food Culture owns a long history for thousands of years, and has very distinct national characters. In recent years, Chinese food Culture has become more and more popular, receiving the high praise from western health worshipers.

1.1 Chinese Traditional Food Culture

Food is closely related to culture. Different nations create different food Cultures. So the food Culture has strong national characteristics and diversified idiosyncrasy. The global foods can be divided into two major systems of eastern foods and western foods. Among the eastern foods, Chinese food is one of the most representatives, of which the food way, the food culture, the development history, and the relative national conditions and customs have a very great difference from the western foods represented by America and Europe.

1.1.1 What Is Food Culture

Food Culture is a general concept relating to natural science, social science, and philosophy. It is a culture category without a clear edge, lying between the culture’s narrow sense and board sense and circulating the two. As our consideration—Food Culture means skill, science and art in the process of developing and utilizing food raw materials, making food and consuming food, as well as the customs, traditions, thoughts and philosophy which are based on the food. That is, Food Culture is the sum of all food matters which are made up of the way, process and function of people’s food production and food life.

Food Culture is the knowledge about under what terms the human beings (& a nationality) eat, what to eat, how to eat it, and what conditions will be after eating. Therefore it forms its own particular fields, such as the food raw
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materials (production, development, selection, and classification etc.), processing technology and making techniques, preserving, keeping fresh, food commerce and service, processing tool and food utensil, and the relevant customs, system, psychology, thought, etc.

1.1.2 The Characteristics of Chinese Traditional Food Culture

Ⅰ. Nutrition and health care are organically combined in the food Nutrition and health care are the basic assurance of human survival and life quality. Absorbing, digesting, and utilizing food or nourishment, maintain the human life and life activity. Health care (or called hygiene), acting on individual or collective medical preventing and health epidemic prevention, protects the health and longevity. The traditional food Culture of China has been organically combining the two aspects all the time, combining the nutrition which keeps life and human activity with the health care which protects the health and longevity. Certainly, the health care aspect has a lot of items such as medicine health care (treatment) and sports health care (treatment), but food health care (or called dietetic hygiene) is an essential one. The fact indicates that nutrition organically combined with health care, has not only external convenience but also inherent actual effects.

According to Chinese traditional culture, the mankind and nature are a whole system. The improvement of people’s survival insurance and life quality mainly rely on the foods growth in nature. So Chinese people attach importance to harmony between people and TIAN, and said that Food is TIAN for people. TIAN means the nature or the most important issue in one’s life. These age-old understandings still have great influence power on today’s people. There are seven kinds of materials that maintain human’s life and activity -- protein, fat, carbohydrate (carbohydrate), mineral (inorganic salts), vitamin, cellulose, water
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and electrolyte. These materials (generally called nutrient) all stem from the nature, mainly contained in the food. After entering into the human body, the nutrients play a nutrition and health care role in people’s organism, by physical, chemical and biological function. Essentially, whether people are healthy or not are decided by whether the variety, quantity and quality of the above nutrients can keep a dynamic equilibrium in human’s body, and whether they can meet human body’s constant need in metabolism. That is to say, carrying on a rational regulation to these nutrients is quit important.

The core of Chinese traditional food Culture is stressing the food hygiene and food regulation. Here we quote two original texts in classical books as a means of explaining. One is from the works of Confucius in the Spring and Autumn Period (more than 2,500 years ago). Confucius, surnamed Kong, is the chief master of Chinese traditional culture, usually called the greatest sage and teacher. He says in Analects of Confucius-- Eat no rice but is of finest quality, eat no meat but be chopped into small pieces. Don not eats moldy rice and stench fish. Don not eats food with bad color and smell or without being boiled. Don not eats other things outside three main meals a day. Don not eats meat cutting carelessly. Don not eats fish without removing the fishy smell. Never eat and drink immoderately. How much to drink is not stipulated, but the principle of not being drunk should be followed. Don’t eat inferior wine and jerky bought from market.

The other is from Chinese ancient medical book The Medical Classic of the Yellow Emperor which is probably a works in the Warring States (about 2,300 years ago). It says—people in ancient times who knew the way to keep in good health, enjoy their daily life following the nature law of balancing the negative and positive, and regarded exercising as the correct health care methods. They eat a controlled daily food, have a regular daily life, and never work hard excessively, so they could be physically and mentally healthy,
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reached limitation of mankind’s natural life time, i.e. can live over one hundred years. However, people living in our times do not hew to the law of nature, regard wine as beverage, and have sexual life after drunk, indulging their sexual desire to exhaust energies. They are not concerned on sustaining healthy and spirit, but only pursue happiness at the moment, violating the way to keep in good health. So they’ll have been already getting old and feeble since 50 years old or so.

Ⅱ . Stressing on food’s color, smell, taste, shape, tableware and function simultaneously This is another essence of Chinese traditional food Culture. On the dining table in a lot of specific occasions, the furnishing foods are not merely delicious foods in which nutrition and health care coexist, but also like displaying artistic works with superb image, making people feel slaver and pleasing. Therefore, a lot of poets and writers, for instance, Han Yu, Li Bai in the Tang Dynasty, Three Su—Su Shi, Su Xun, Su Zhe in the Song Dynasty, etc., like to create poetries and essays when eating delicious foods and drinking alcohols.

Chinese ancient sages had made a lot of efforts to enable foods with bright color, strong fragrance, infinite taste, graceful image, beautiful container, and good nutrition and health care functions. They pay much attention on choosing food raw materials, operating on various food ingredients, processing and cooking methods.

Foods come from agriculture. In China, people always think that Agriculture is the foundation of the national economy, and they extraordinary hope that Good Harvest, the domestic animals are all thriving, hoping that foods abundant and increasing constantly. In China, there were more than 10
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kinds of vegetables grown in the Shang Zhou Period (about 4,000 years ago), increased to more than 20 kinds in the Han Dynasty (202BC-220AD), more than 30 kinds in the Northern and Southern Dynasties (386AD-556AD), and more than 40 kinds in the Sui and Tang Dynasties (581AD-907AD). People cultivated bean sprouts and hotbed chives which are still welcome so far. Subsequently, the variety of vegetables increased to some extent constantly in each dynasty. By the beginning of the 1980s, the national grown vegetables had developed into more than 160 kinds, and developed faster in the last few years.

While standing on self-reliance policy, Chinese ancestors started international exchange long time ago, introduced foreign fine varieties into China actively. When serving as an envoy to western areas, Zhangqian introduced garlic, cucumber, bulb onion, coriander, grape and pomegranate etc. from countries such as Iran in the period of the Han Dynasty. Spinach, lettuce and ox-hide vegetable were introduced at the time of the Northern and Southern Dynasties. Tomato, potato, hot pepper, onion, cabbage, kidney bean and Dutch beans were introduced in the period of Ming and Qing Dynasties. Chinese people had already been raising horse, ox, sheep, chicken, dog and pig in the New Stone Implement Period. China is the first country that cultivates mule with hybrid methods, and is one of the earliest countries that raise pig, chicken, duck and horse. As early as in the Northern and Southern Dynasties, people began to use domestic animals castration technology. Since China was always a large agricultural country, and always pays much attention to the development of food, it is so known as Food Kingdom.

On the cooked foods, Chinese always stress 4 characters and 5 tastes (4 characters-cold, hot, warm, and cool; 5 tastes-sweet, sour, bitter, spicy, and salty). Different places in China have different local flavors, and thus many kinds of food series are formed, such as Xiang (Hunan), Lu (Shandong), Yue (Guangdong), Chuan (Sichuan). Thus, the production skills of foods throughout
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the country are distinctive different. But in general, the production skill of Chinese food can be described as follows:

In the preliminary processing phase, the nutrition should be maintained in the food, raw materials should be kept clean and used reasonably, and wastes should be reduced.

In the materials compounding phase, main materials, supplement materials and condiments should be carried out with reasonable quantity coordination—the coordination of taste, the coordination of quality and the coordination of shape.

In the cooking phase, there are varied cooking techniques and methods, because the cooking process of different dish is different from each other and the same dish also has different shapes and mouth feel requirements in different places. It can be summarized as eight categories—(1) fry and braise, (2) mix, cook in soy, and salt, (3) fry and paste, (4) deep fry, quick-fry/stir-fry, and steam, (5) stew, cook in a covered vessel, and bittern, (6) burn, simmer, boil, and steam, (7) roast, smoke, and putty roast, (8) wire drawing, sugar-coated, and syrup.

Ⅲ. Eating activities become the bridge of social communication Social communication is a major issue in people’s life. But how to launch social communication? Forms and methods are varied, yet Chinese people gradually regard the activity of eating and drinking as an important bridge and tie in social communication, which has become one of the important functions in Chinese traditional food Culture. There is an interesting example, “Have you eat?” has become people’s courteous greeting term when they meet each other.

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Chinese are sick of the negative effects in the activity of eating and drinking, such as some corrupt officials utilizing the eating activities to form cliques and take bribes. The social communication asserted in Chinese traditional food Culture is the courteous reception behavior which is legal, fair and sensible in interpersonal relationships. It is helpful to promote the development of the society, economy and culture, and helpful to establishing good relationships within the people. For example, the communication among friends and relatives, among neighbors, among business partners, and so on.

1.2 Domestic Differences of Chinese Food Culture

There are some differences on food structure and food habit among various areas and nationalities in China because of the differences in natural environment, climate conditions, and national customs. Thus the Chinese food Culture presents complicated domestic differences.

1.2.1 Region Difference of Chinese Food Culture

In the plain area of east China, people plant rice in the south and plant winter wheat or spring wheat in the north. The southerners take rice as their staple food, while the northerners take wheat flour as their staple food. As for the climate, the temperature in the north is lower than that of the south, especially in winter. So the large proportion of northerners’ food is full of fat and protein. Especially in pastoral areas, the herdsmen take milk products and meat as the main foods. Southerners take plants as the main food and they are used to take vegetable soup and porridge. On the high and cold Qinghai-Tibet Plateau, the highland barley is people’s main crop and staple food. At the same time, in order to adapt the plateau climate, butter and highland barley wine, which promote blood circulation, become indispensable edible oil and beverage in Tibetan’s lives.
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The saying of Chinese food habit—sweet in the south, salty in the north, hot in the east, and sour in the west—fully reflects the regional diversity of Chinese food. China is diverse in districts, so does the food flavors and food customs. Chinese style of cooking reflects the characteristic deeply. There are eight or ten styles of cooking in China (see appendix 1.1). The raw material, craft, and flavor are different among the styles. Sichuan Cuisine is famous for being hot (Spicy). It is extensive to draw materials—chilli, three peppers and strange smell materials. Food in Jiangxi Province, Hunan Province and Sichuan Province is all famous for being hot. It is closely related with local people’s need to resist moist and rainy climate. Guangdong Cuisine takes seafood as the primary food while contains pig, sheep, chicken, etc. So it is famous for being strange and mixing, and “they can eat everything”. Shandong Cuisine is sumptuous and good at modulating birds and animals and controlling the heating degree. The characteristics of Shandong Cuisine make it the representative style of northern cooking—skilled at frying, cooking, sauce stew and keeping the nature of people of Shandong—liking eating shallot. In addition, Huaiyang Cuisine, Beijing Cuisine and Hunan Cuisine occupies one party separately, differs from one another, and fully reveals the complexity and regionalism of Chinese food system caused by the different local product, climate, and local conditions and customs in different places.

Different local custom, different food habit. For example, the regional food habit differs significantly in the Spring Festival. There are abundant fish in the south. People there often eat plenty of meat and fish and must eat fish at dinner on New Year’s Eve, including the meaning of having enough every year. People in north China eat dumplings on New Year’s Eve, having the meaning of good beginning of New Year.

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In addition, urban flavor food reflects the food regionalism too. Some food in history like Beijing Roast Duck, Tianjin Goubuli and Lanzhou hand-pulled noodles is of distinct local and national characteristic. With the development of tourist industry, urban flavor food, processed on the basis of original tradition, becomes an important component in tourist culture. Many visitors, especially foreign visitors, are looking for the local foods when they go to a certain city or scenic spot of China.

Beijing was once the national capital of the dynasty of old times. It was one of the most flourishing cities at that time, gathering the skillful craftsmen of the regional food, and forming its own flavor food gradually, such as Beijing Roast Duck, Shaomai, Instant Boiled Sliced Mutton, Sachima, etc., attracted all Chinese and foreign visitors. In Tianjin, besides well-known Goubuli Tianjin, there are fried dough twist of 18 streets and crust of cooked rice, etc. Urumchi is a place where people of the Uygur nationality concentrate, so its food has a strong Uygurs ambience. Their kebab, Kazakhstan dense melon, baking the whole sheep, rice eating by hands, and one hundred birds towards the phoenix are well-known by visitors.

1.2.2 National difference of Chinese Food Culture

There are 56 nationalities in China, in which the Han nationality mainly lives in the eastern plain area, and the numerous minorities mainly live in the northeast, northwest, and southwest areas. The geography and climate are widely different from each other. And more important, each nationality has its own characteristic in production activities and national belief, forming its own national characteristic of food.

The eastern plain, where the Han nationality live concentrated, with a good cultivation condition, abundant with rice and wheat, like some minorities
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relying mainly on cultivation industry as the Korean, Xibe, Dai, Zhuang, Dulong, etc, regard the five cereals as the staple food. The Koreans like eating rice and cold noodles. The Qiangs like steaming the mixture of rice and corn. The Mongols rely mainly on grazing. Their food is made up of white food and red food. White food means all kinds of milk products. Red food mainly means beef and mutton. People of the Uygur nationality like Rice Eating By Hands (made of rice, mutton and carrot), hand-pulled noodles and roast mutton.

Under the restraint of natural conditions, various nationalities have formed their own totem faith and worship towards the spirits of plants and animals. It influences the food to some extent. For example, the Owenks’ ancestor forbids hunting bears. Though they regard meat as the staple food, they will not eat bear meat. 1.3 Difference between the food culture of China and the West

Different nationalities and countries have their own food culture and characteristics. In the views of and attitudes to food, food content, food features and other aspects, there are significant differences between China and western countries. 1.3.1 Difference ideas

Ⅰ. Idealism vs. Pragmatism Confucius once said in The Book of Rites, “Appetite for food and sex is nature.” These words actually reflect the life of ancient views. Confucius thinks that two major events of all people: food, men and women. One is the question of survival, another is question of marriage and love.

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The so-called food is related to the people’s livelihood question, men and women’s healthy and blissful problems. And Gaozi also thought “food “and “sex” are the people’s natural instinct. These two things are core of life.

In China, food has become a kind of thing that almost more important than all other things. This is also reflected in the various aspects of people’s daily life. Among them, the most common greeting between Chinese people is “Have you eat?” Every day, the first thing that Chinese people do is usually eat, or prepare for eat. So-called the pieces of seven things after opening the door are: firewood, rice, oil, salt, sauce, vinegar, tea, of which no one is not about the food. Celebrating the birth of a child need to eat noodles, full moon need to eat moon cakes, getting married need to eat big dinners. People reaching 60 birthdays must have a big celebration with eating, even when people passing away, their relatives and friends also need to eat together. Guest’s coming need to eat, called “gives a dinner of welcome”; Guest’s leaving need to eat, called “give a farewell of dinner”; moving house need to eat; the promotion in career need to eat. So-called White Good and Black Good in China refer to wedding and funeral, in each situation, a big dinner is also necessary.

Through eating, people can communicate, exchange informations, express the mood of welcome or cherish, even emotional dissension can be calmed through food and wine. The form of eating contains a kind of psychology and cultural backgrounds, as well as people’s awareness and understanding of things. At the same time, eating reflects “etiquette” everywhere. Just as “The Book of Rites, Lai Wan” said : “People know about proprieties only after eating full”，this spirit of etiquette not only runs throughout the process, but also constitutes a logical starting point for the Chinese food culture. Many scholars called this kind of Chinese peculiar ideas “food is the god of people (Bread is the staff of life)” as the cultural inclination of “suffused with the doctrine of
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eating”.

Languages are carriers and mirrors of the culture, the language reflects culture. This kind of cultural tendency “suffused with the doctrine of eating” has the most abundant reflection in Chinese. Yi Zhongtian, had the most vivid description in “Talk about Chinese”: Call the above people as the mouth, call the job as the rice bowl, considering is called as “chew”, envy is called as “eating vinegar”, happy is called “to drink in”, common is called “a simple meal”, easy is called “a piece of cake”. In a word, in Chinese culture, no matter the material or spiritual, it seems can be eaten anytime. In western countries, such as Great Britain and American, etc., the food is only taken as an essential means of existence and a way of communicate. American psychologist, Maslow, divides people’s demand into five levels from elementary to advanced, in which the food is on the first floor. That is to say, food is regarded as the most low-grade demand of human beings; there are safety demand, emotion demand, respect demand and self-actualization demand above it.

Mr. Lin Yutang once said: “Westerners’ food idea is different from China, the British and the Americans, only take eating as pouring the fuel into a biological machine in order to guarantee its normal operation, so long as they can keep healthy and resist the attack of germ and disease after eating, others are insignificant”. Therefore, “eating” only plays a kind of function of maintaining the life in their mind. Speaking of communication function, a book called Emily Post’s Etiquette in America said: “Dinner is to express thanks to the service provider; to celebrate a successful business; to win the confidence of the customer or new customer; to ask someone to do me a favor; to introduce others; or to discuss some ideas…”. We can find that eating is a simple way to communicate in the western countries, is not as important as in China, which
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called eating as the source of all etiquettes.

Ⅱ. Ostentation and Extravagance vs. Simple and Ease

There is a fundamental difference in the banquet idea between China and western countries. When Chinese treat someone to the meal, they pay attention to the meal, pursuing the ostentation and extravagance, always supplying overabundant food and drink. Generally, a formal dinner at least has seven or eight course, which hasn’t include cold dishes, snacks, desserts and finally staple foods (noodles, rice, etc.). The abundant and precious foods can embody owner’s hospitality and guests’ status, and the meal will generally over supplied, otherwise it is not enough to reveal the host’s hospitability.

This probably comes from the Chinese traditional values: “Running a home in an industrious and thrifty way, entertaining a guest in an abundant way”. “A Full Dinner Courses of Man and Han Nationalities” (Man Han Quan Xi) is a good example. It appeared in Qing Dynasty, and is a kind of feast that holds in order to entertain all officials of Manchus and Hans. The emperor hosts it to release the conflictions between two nationalities. The dishes divided to cold dish, scalding dish, stir-fry, meal, beet, etc.; Tea distinguished green tea , fragrant tea , parched rice tea, etc.; The dessert have two kinds of salty one and sweet one, etc.. The dinner has 108 dishes all together, and can be eat up in three days.

In the west, a grand Western-style banquet is usually just six courses, and only two courses among them are regarded as dishes, the others is only foil. Entertaining at ordinary times, the meal is simpler. In U.S.A., sometimes friends make contributions to the party when they have a dinner party, called Potluck, i.e. each person takes a course of dish and let everybody share. Another kind of party, called Party, the host only offers beverage, wine and
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some simple food, for instance cheese, French fries, sandwich, etc., do not offer the meal.

Obviously, they regard eating as an opportunity of meeting and the communication, an opportunity of reviewing the old friendship and making new friends with others, and also a place of obtaining the information. The food is no doubt essential, but is not the most important thing. So, it should not be ostentatious and wasteful. Exactly affected by this idea, the western banquet doesn’t make eating unnecessary and overelaborate formalities, but like liberalization and diversification banquet forms. The host must try his best to create a kind of relaxed, harmonious and joyful atmosphere to let the guests enjoy a period of free happy time. Ⅲ. Collectivism vs. Individualism In cross-cultural communication, values is a crucial issue. Clyde Kluckhohn regarded values as “a kind of clear and hiding concept which can be desirable and held by an individual or collective. It has a certain national characteristics. This idea affected people to make choices from the various existing mode of operation, methods and goals.”

In China, collectivism is the dominant values. From “even the dog swaggers when its master win favor” to “relatives friendship, township friendship, friendship spanning many generations, friendship between persons of the same graduation class” and so on, they are branded the marks of Chinese community culture without exception. In Britain, the U.S. and other Western countries, people emphasis more on individualism, and recognize the value and dignity of the individual.

Two distinct values are also reflected on the food culture. It was that Chinese usually eating in a way of common share, everybody shares a table and
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eats every dish at the time. The common table in China is a round one and has a turnplate in the middle. It is quite convenient for everyone around the table to pick up each dish. After dinner, another funny thing will happen, everyone struggles to pay the bill of the dinner. This may come from the thought of collectivism that “eating together is so happy”, which emphasizes enjoying together. But with the impact of individualism, the westerners usually order their own dishes from the menu, needn’t consider others’ taste and likes, and often adopt AA system, that is, everyone pays their own bill.

1.3.2 Differences in the banquet etiquette

China and the west both pay attention to the banquet etiquette. But they have absolutely different banquet etiquettes. Ⅰ. The difference of the tableware: Chopsticks vs. Knife and Fork

The most obvious difference in the Chinese and Western banquet is the use of the tableware. Chinese eat the food with the chopsticks, but westerners cut the food with the knife and fork. Different eating ways are results of different cultural.

Since ancient times, Chinese were deeply affected by agriculture and ploughs activities. So-called “face towards the loess and back towards the sky” is exactly the true portrayal of this culture phenomenon. In this cultural, people
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usually regard cereal as the staple food, want to enjoy good and prosperous life and work in a peaceful and stable environment, and emphasize harmonious in the whole life.

This kind of culture reflects in the food, which is embodied by the choice of the tableware and eating way naturally. Chinese are gentle and cultivated while using the chopsticks, the attitude towards food is sooth and gentle on the dining table. Though Chinese like eating the meat as well as the westerners, they eat it in a quite different way. The famous French literature thinker and critic Rolan Barthes, when talking bout chopsticks, he thought chopsticks are not used in cutting, pitching, griping like the knife and fork. While mentioning the chopsticks, said “the food no longer becomes the prey under people’s violence game, but becomes the material conveyed harmoniously”. Ⅱ. Differences of attendance time: Late vs. Punctual Punctual seems to be a universally applicable concept, but the understanding of this concept is not the same in different countries and different culture, and this concept is changeable due to different activities.

One of the founders studying cross-cultural communication, the famous anthropologist in U.S.A., Hall proposes that the human time concept has two kinds of culture patterns, i.e. “Monochromic time” and “Polychromic time”. Monochromic time demands that doing anything should strictly observe schedule, do something when what should be done; but the persons of holding concept of Polychromic have no habit of arranging schedule, don’t do anything on time. The former pays attention to observing appointment time strictly, can’t break the promise; the latter does not pay attention to observing time and making an appointment.

Hall still thinks Monochromic time is the time mode of America, Europe and other western countries; Polychromic time is the mode of the Asian,
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African and Latin American area. In his view, time just likes commodity, and it can buy and sell, save, spend, waste, lose, remedy and calculate. So, while participating in the entertaining, because of different culture patterns, the difference between China and Western to treat time seems outstanding dissimilitude. In China, generally speaking, the mode of Polychromic time makes people incline to be late, sometimes half an hour after fixed time.

As to this, the host also seems to have mental preparation already, often arranges some other programs in this period of waiting, such as playing cards, drinking tea, chatting etc., to let some guests arrived early to spend the waiting time. As to the phenomenon of being late, both sides of host and guest are accustomed to it, do not regard it as a kind of behavior despising the host’s invite or a kind of impolite behavior. Sometimes the host even informs the banquet time earlier on purpose, in order to offer more abundant time for the guests to be late. But in the western countries, the formal banquet demands to reach on time. Ⅲ. Differences of seats arrangement

North and South vs. Left and Right The arrangement of the seat is a kind of important form that utilizes the space position to show each one’s status and interpersonal relationships. People’s spatial idea is acquired through influence from all sorts of factors, in which the factor of culture is particularly important. So

people’s demand to the space, communicating rule related to space as well as values about space are different in different cultures. Hall describes the function of the space as “Spacespeaks”.
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In China, the seat in the banquet is usually regarded facing the south as on, regarded facing the north as under, which formed the traditional idea of “the south is honor”, “the north is humble”. It is inseparable with China’s traditional culture. China ancient society has a long history, the dynasty is multitudinous. But no matter in which dynasty, or in which generation, emperors will sit and facing south without exception. So, there is an old saying that “facing the south is called king”. And the official in feudal times always faces the north when visiting the king. Therefore, “south” has already developed into a kind of most lofty symbol gradually in Chinese’s mind, and have represented power, position and identity. In contrast, the position of “the north” is much lower status naturally. This phenomenon can be explained very well in the idiom of Chinese too. For example, when “the south” and “the north” appear in the idioms at the same time, “the south” is in front of “the north”, for instance “trying to go south by driving the chariot north”, “fighting north and south for many fronts”, etc. So, it’s certain that regarding seat facing the south as honor in the banquet, and the seat facing the north is humble.

In the western society of ancient times, the most honorable guest’s seat is on the left of the host, this is because people got used to holding daggers with right hands, assassinating the people sitting on the left. If the most honorable guest will be arrange on the host’s left hand position, not only he is inconvenient to assassinate, but also the host has advantage status of bringing him under control. With the progress of the society, this old phenomenon that assassinated on the banquet almost disappeared. Today, the westerners have already no longer focused on safe protection while arranging the seats, but stemmed from the psychological protection demand, putting the honoree seat on host’s right, which, the rule of the dining table seat that take right as on and left as under have formed.

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Men’s superiority vs. Lady first China and Western countries have a greater difference on arranging the position of men and women guest too. In ancient China, women can not be seen at all on the formal feast, thus it do not just need to consider arrangement of women’s position, which is identical with thought of “men’s superiority to women” of China’s traditional culture. Mr. Lin Yutang even said in his book called “Chinese”: “Since primitive era, women have not occupied the due status in the Chinese blood”. Later on, with “unifies the whole country” of Confucianism, women are constrained in the feudal Confucian or feudal ethical codes all the time, and in the subordinate status. Today, status of Chinese women has improved notably, and has already got rid of former subordinate status. Women appearing in the feast are also early accepted by Chinese, but women often sit together. When the principles of “respect elders” and “woman first” have the contradictions, the Chinese chooses “the respect elders” instead of “woman first”. In the west, “Lady first” is their traditional culture idea, and the important etiquette norm in the social activity. This is because Christianity is the religion, which is generally believed in by many western counties. This religion worships Maria as the Blessed Virgin Mary, and takes admiring the female as the noble sentiment. In addition, in the 12, 13th century, with the eastward fight of the Crusades, this unique stratum of “knight’s group” had formed. Because “knight’s group” had tremendous influence and prominent status, their own etiquette norm had formed and been spread among the people gradually, in which, respecting ladies is the most characteristic. Later, giving priority service to ladies called as “knight’s poise” became the civilization criterion of the noble and even common people stratum at one time, and was followed until now. So, in the western feast, women occupied the important position since long time ago, and men and women guests must sit crossly, which has reflected the thought of the equality of men and women from another respect.
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1.3.3 Differences of food names

Many names of Chinese dishes always comprise much historical and cultural information. For example, it is said that “Dongpo Meat” is cooked according to the recipe that come down from Su Dongpo who was a great litterateur of Song Dynasty; “Gongbao Chicken Pieces” is cooked according to the cookbook hand tailored by an officer of Qin Dynasty whose name was Gong bao. Some other names of dishes are related to literary quotations and legends. Such as “Ba Wang Bie Ji”, it’s from the literary quotation of Xiang Yu, overlord of West Chu, and his loved imperial concubine Yu Ji; “Fo Tiao Qiang”, the scent of which tempted the monks to jump out of the wall of the temple according to the folk legend. With the ceaseless development of catering services, the content of dishes will change gradually, get rid of the stale and bring forth the fresh, and the names of dishes will have new changes.

Compare with it, the western dish name is simpler, is often clear at a glance. Take Kentucky Fried Chicken that is popular all over the world for example, we can know that it’s a shop of fried chicken from the shop name. And the food in shop, such as fried chicken leg, fragrant and hot chicken wing, chips, hamburger, and the Mexican chicken roll and seafood soup etc, is nearly not named with raw material adding cooking method or place name. In some other western dining rooms the cooked food appearing frequently, such as Italy noodles, the Italian pizza, roast the beefsteak, the fruit salad and so on are also so. To Chinese, it has been lack of some cultural “the flavor” in among, but actually has conformed to “the taste” of western, conformed to the quick rhythm work and the life in the western society, omitted the unnecessary thought time, and simplified the process of eating and drinking.

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Above all, there are great differences between eastern and western foods on notion, etiquette, content etc; we can usually find the original resources from the culture. Of course, the difference on food is relative. The trans-culture communication under the globalization tendency strengths the complementarity and compatibility of the multiply food Culture.

Along with unceasing communication between the East and West culture, Chinese food Culture will also appear new characteristic in the collision with other countries’ culture and produce new changes. On the one hand, it will be helpful for Chinese food Culture to draw useful lessons from other countries culture in the intercourse and collision, perfect and develop constantly, and maintain vigorous vitality all along. On the other hand, it will promote widespread and development of Chinese food Culture in the world-wide scopes.

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Appendix 1.1 Eight Cuisines in China

Chinese cuisine has a number of different genres, but the most influential and typical known by the public are the “Eight Cuisines”. These are as follows: Shangdong Cuisine, Sichuan Cuisine, Guangdong Cuisine, Fujian Cuisine, Jiangsu Cuisine, Zhejiang Cuisine, Hunan Cuisine, and Anhui Cuisine. The essential factors that establish the form of a genre are complex and include history, cooking features, geography, climate, resources and life styles. Cuisines from different regions are so distinctive that sometimes despite the fact that two areas are geographical neighbors their styles are completely alien.

Shandong Cuisine Consisting of Jinan cuisine and Jiaodong cuisine, Shandong cuisine, clear, pure and not greasy, is characterized by its emphasis on aroma, freshness, crispness and tenderness. Shallot and garlic are usually used as seasonings so Shangdong dishes tastes pungent usually. Soups are given much emphasis in Shangdong dishes. Thin soup features clear and fresh while creamy soup looks thick and tastes strong. Jinan cuisine is adept at deep-frying, grilling, frying and stir-frying while Jiaodong division is famous for cooking seafood with fresh and light taste. Typical Courses: Bird's Nest Soup; the Yellow River Carp in Sweet and Sour sauce.

Sichuan Cuisine Sichuan Cuisine, known often in the West as Sichuan Cuisine, is one of the most famous Chinese cuisines in the world. Characterized by its spicy and pungent flavor, Sichuan cuisine, prolific of tastes, emphasizes on the use of chili. Pepper and prickly ash also never fail to accompany, producing typical exciting tastes. Besides, garlic, ginger and fermented soybean are also used in the cooking process. Wild vegetables and animals are usually chosen as
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ingredients, while frying, frying without oil, pickling and braising are applied as basic cooking techniques. It cannot be said that one who does not experience Sichuan food ever reaches China. Typical Courses: Hot Pot; Smoked Duck; Kung Pao Chicken; Twice Cooked Pork; Mapo Dofu.

Guangdong Cuisine Tasting clear, light, crisp and fresh, Guangdong cuisine, familiar to Westerners, usually chooses raptors and beasts to produce originative dishes. Its basic cooking techniques include roasting, stir-frying, sauteing, deep-frying, braising, stewing and steaming. Among them steaming and stir-frying are more commonly applied to preserve the natural flavor. Guangdong chefs also pay much attention to the artistic presentation of dishes. Typical Courses: Shark's Fin Soup; Steamed Sea Bass; Roasted Piglet.

Fujian Cuisine Consisting of Fuzhou Cuisine, Quanzhou Cuisine and Xiamen Cuisine, Fujian Cuisine is distinguished for its choice seafood, beautiful color and magic taste of sweet, sour, salty and savory. The most distinct features are their “pickled taste”. Typical Courses: Buddha Jumping Over the Wall; Snow Chicken; Prawn with Dragon's Body and Phoenix's tail.

Jiangsu Cuisine Jiangsu Cuisine, also called Huaiyang Cuisine, is popular in the lower reach of the Yangtze River. Aquatics as the main ingredients, it stresses the freshness of materials. Its carving techniques are delicate, of which the melon carving technique is especially well known. Cooking techniques consist of stewing, braising, roasting, simmering, etc. The flavor of Huaiyang Cuisine is
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light, fresh and sweet and with delicate elegance. Typical Courses: Stewed Crab with Clear Soup, Long-boiled and Dry-shredded Meat, Duck Triplet, Crystal Meat, Squirrel with Mandarin Fish, and Liangxi Crisp Eel.

Zhejiang Cuisine Comprising local cuisines of Hanzhou, Ningbo and Shaoxing, Zhejiang Cuisine, not greasy, wins its reputation for freshness, tenderness, softness, smoothness of its dishes with mellow fragrance. Hangzhou Cuisine is the most famous one among the three. Typical Courses: Sour West Lake Fish, Longjing Shelled Shrimp, Beggar's Chicken.

Hunan Cuisine

Hunan cuisine consists of local Cuisines of Xiangjiang Region, Dongting Lake and Xiangxi coteau. It characterizes itself by thick and pungent flavor. Chili, pepper and shallot are usually necessaries in this division. Typical Courses: Dongan Chick; Peppery and Hot Chick.

Anhui Cuisine Anhui Cuisine chefs focus much more attention on the temperature in cooking and are good at braising and stewing. Often hams will be added to improve taste and sugar candy added to gain freshness. Typical Courses: Stewed Snapper; Huangshan Braised Pigeon.

(Sources: http://www.china-guide.com/)

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Part Two

Chinese Food Industry

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2.1 Definition and Classification of Food

2.1.1 Definition According to the “Food Hygiene Law of the People’s Republic of China (1995)”, “Food” means any finished product or raw materials provided for people to eat or drink, as well as any product that has traditionally served as both food and medicament, with the exception of products used solely for medical purposes. Here, except the food which used for traditional treatment, the new research and development food for treatment purpose are out of the food category. As food for treatment is a category of food that its ingredient and characteristic only for certain aged people who are in special circumstances, special environmental conditions or special nutritional needs of food, it is difficult to define a material whether it is for treatment or for nutrition purpose.

2.1.2 Classification Ⅰ. Simple Classification According with the habits of Chinese people, we usually classify the food into two categories, staple food and subsidiary food. The staple food mainly refers to provisions, it is the most basic food for the human body needs daily calorie. However, with the development of economy and continued improvement of people’s living standard, the Chinese diet structure is constantly changing. Meat, eggs, milk and other foods have become an important consumption of the people. Their production and supply is increased significantly these years. According to the teaching needs of the business and commercial practices, we also divided subsidiary food into meat, fish, eggs and their products, vegetables and fruits, sugar and confectionery, beverages, cakes, tea, canned food, dairy products, tobacco and alcohol, etc.
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Ⅱ. Classification of Food industry

Food industry is processing and manufacturing the products that produced by agriculture, forestry, livestock, fish and other sector, which closely linked with people’s lives. It contains 10 categories: sugar industry, fermentation industry, cooking oil processing industry, canned food processing industry, tobacco industry, beverage industry, condiment industry, slaughter processing industry, frozen food industry, and food processing industry to use wastes. According to the census of the third industrial classification, the food industry is classified into five parts as salt industry, food processing industry, food manufacturing industry, beverage manufacturing industry, and tobacco processing industry.
Table 2.1 food industry classifications in China

Main category Food processing and manufacturing industry

Detailed classifications Foodstuff processing industry, vegetable oil processing industry, cakes & confectionery manufacturing industry, sugar manufacturing industry, slaughtering and meat processing industry, egg processing industry, dairy processing industry, aquatic products processing industry, canned food manufacturing industry, food addiitive manufacturing industry, condiment manufacturing industry, and other food industries Beverage alcohol industry, alcohol manufacturing industry, non-alcoholic beverage manufacturing industry, tea manufacturing industry, and other beverages manufacturing industries Tobacco roasting industry, cigarettes manufacturing industry, and other tobacco manufacturing and processing industries Salt processing industry

Beverage manufacturing industry Tobacco processing industry Salt industry

Sources: Chinese food industry Yearbook, Beijing, 1997: China Light Industry Press.

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2.2 Development of China Food Industry

2.2.1 The history of the development of China's food industry

Chinese food industry has changed tremendously after the People’s Republic of China was founded in 1949. Its development can be divided into four stages:

Ⅰ. The Recovery Period (1949 - 1957) After the foundation of the new government, it confiscated bureaucratic capital and foreign-owned enterprises and transformed them into socialist state-owned. Moreover, the transformation of the private enterprises and handicraft enterprises also carried out. All these transformation made a powerful support to successful development of the Chinese food industry.

In 1952, the national food industrial production value reached RMB 8.28 billion Yuan which accounts for 24.1% of whole national industrial production value. It’s the second largest one in whole industries. In this period, food production is principally to meet the basic needs of the mass market.

In terms of products structure, it is mainly grain & oil products, which includes flour and edible oil. Meat products are mainly fresh and frozen meat, processed meat is rarely. Liquor is mainly alcohol, beer and wine can rarely be found in the market.

China’s first Five-Year Plan starts in 1953, which leads to the systematic construction of the food industry for the first time in China. After that, the growth rate of industrial production rose year on year. In 1957, the national revenue of food industry reached RMB 1.36 billion Yuan (fixed price in 1952),
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increased by 85.5% over 1952 with an average increase of 13.2% per year, accounts for 19.60% of the national industrial output and ranked first in the industrial sectors.

Ⅱ. The Fluctuation Period (1958 - 1978) First, the “Great Leap Forward” campaign started since 1958 leads to a serious decline of agriculture and a seriously scarce of the supply of raw materials relevant to food industry. The problem of enterprises unemployment is serious and productivity significantly declined at the same time. In 1962, the food industry revenue is RMB 12.69 billion Yuan (fixed price in 1957), it decreased by 8.4% compared to 1957.

During the period of 1963 to 1965, after the readjustment, the food industry became more dynamic and the productivity gradually rebounded. In 1965, the total revenue reached RMB 17.55 billion Yuan (fixed price in 1957), grow by 26.80% over 1957. Sugar, crude salt, edible vegetable oil, wine and dairy products, etc. all reached a new maximum output level and the situation of market supply also got better.

From 1966 to 1976, the food industry suffered from serious setbacks and loss in the “decade of civil strife”. In 1970, the industry revenue was RMB 19.79 billion Yuan (fixed price in 1957), just increased by 12.80% over 1965, the production of sugar, oil, edible oil products also reduced over the same period in the history. Meanwhile, Chinese total population has grown to 830 million, the growth made per capita food consumption declined and made people’s living conditions worse.

After the end of the “decade of civil strife”, the situation changed a lot. The food industry revenue was RMB 38.86 billion Yuan in 1976 (fixed prices
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in 1970), growth more than 50% over 1970 with an average of 7.1% increase per year.

The development of food industry almost stagnated in the period of “Great Leap Forward” and “Cultural Revolution”.

Ⅲ. The New Development Period (1979 to 1990) After a period of confusion, Chinese food industry began to re-equip with advanced technology and the quality of food improving quickly.

In December 1978, the Third Plenary Session of the Party’s 11th CPC Central Committee shifted the focus of work to the socialist modernization and reform and opening up policy, the food industry entered a new development period.

The Chinese government paid more attention to food industry and it was taken as a whole to be planned and developed for the first time. Chinese food industry had been decentralized by various official departments, with the approval of the State Council, Chinese Food Industry Association established in 1981 to empower the planning and coordination functions. In July 1984, the State Council authorized the Chinese Food Industry Association drafted the “National Food Industry Development Program (1981~2000)”, which defined the approach and development goals and relative economic policy. This is the first time for the food industry overall planning for all the sectors. Since then, the state has promulgated a series of preferential policies, such as measures to accelerate technological innovation and provided strong support in the financial. Not only the national government promotes the propaganda through the mass media on the development of food industry, but also the local governments did a lot to make the industry more dynamic.
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After 12 years’ effort, until 1990, the food industry production value reached RMB 135.999 billion Yuan (fixed price in 1980). 12 years of sustained production growth with an average annual growth rate of 9% showed the fast growth of the food industry. The growth rate of this period is higher than that in any other “Five-Year Planning” periods. Meanwhile, the tax income and exportation growth fast too. Pre tax profit from 1980 to 1990 years is RMB 10.73 billion Yuan and RMB 40.94 billion Yuan, which increased 2.8 times. Exportation growth is from US$2.28 billion to US$5.645 billion, which increased 1.5 times.

Ⅳ. The Continuous Development Period (1991 till now) Since 1991, the food industry entered a Period of Continuous Development, which has many new characteristics. Deng Xiaoping’s southern tour speech and the 14th National Party Congress’s convene marks the China’s Reform and Opening up entered a new stage of vigorous development. The country’s economic power enhanced greatly and food production increased steadily.

Along with improvement of the quality of people’s life, Chinese food market attracted many foreign capitals. A lot of foreign enterprises built factories and began to do businesses in China. Consequently, the competition between domestic enterprises and foreign-funded is very fierce. How to improve product quality and enhance economic efficiency is becoming the focus on Chinese food market.

The main purpose of the food industry development during this period is to meet the people’s modern living needs and to help realizing a higher standard of living condition. Since then, the food industry increased investment.
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The investment of fixed asset was in a high level from 1991 to 1997, it reached RMB 198.09 billion Yuan, and it increased by 2.3 times compared with the period from 1981 to 1990. In particular, the investment of food industry concentrated on daily foods production and beverage manufacturing industry. National food industry production value in 1997 reached RMB 584.208 billion Yuan (fixed price in 1994), increase by 1.43 times over 1990, with an average increase of 13.5% per year. The output of food industry has been ranked first in whole sectors since 1996, it became an important pillar of the national economy industries.

Instant foods, soft beverage, frozen beverage, dairy products, wine, beer, processed meat products, aquatic products, food additives, condiments, and other industries developed quickly in this period. New technologies had been widely applied by enterprises to enhance competitiveness. Over the past 10 years, the food industry increased technical inputs constantly. Meanwhile, the import of new technologies and modern equipments expanded soon.

Chinese food market has entered a brand competition era since the 1990s. Food industry enterprises were prepared to establish their own famous brands.

China’s food industry is competitive, it fasten the adjustment progress of industrial structure. More and more big enterprises appeared in this period. Some sunrise industries, like instant food industry and frozen food industry expanded rapidly. The adjustment accelerated the food industry’s market process and internationalization process. In 1997, the output of

non-state-owned enterprises accounts for 62.87% in the whole food industry, and this process continues to accelerating. The average growth rate of Chinese food industry has always been higher than the other national industrial during the past 20 years.

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2.2.2 The Current Situation of Chinese Food Industry

Ⅰ. Introduction Since 1996 to 2002, the production value of food industry is always the highest in all industrial sectors. And the food industry has remained rapid development in recent years.
Table 2.2 Major Economic Indicators of Chinese Food Industry, 2001~2004 (RMB 100 million Yuan) Year Industry production value Growth rate (%) Sales revenue Growth rate (%) Tax Growth rate (%) Profit Growth rate (%) 2001 9260.70 12.12 8848.85 12.77 1666.18 15.19 441.22 23.93 2002 10759.30 15.83 10169.68 16.35 1925.90 16.57 524.85 18.57 2003 12913.54 19.67 12329.50 20.64 2267.52 18.24 698.04 32.47 2004 16163.86 25.86 15634.19 27.35 2757.42 22.36 915.90 31.85

Source: China Statistical Yearbook.2005

In recent years, national food industry production value, sales revenue, total profits and taxes, the total amount of the economic indicators have shown a good momentum of sustained growth. At present, the growth rate of Chinese food industry is significantly higher than that in foreign countries, including the US, Japan, Europe and 30 members of the OECD whose average growth rate is 3.6% in 2004. Under the macro-environments of China’s national economy, the communication equipments, computers and other electronic equipment manufacturing industries increased by more than 30% in recent years, with the result that since 1996, the food industry became 2nd place and 3rd place in China’s national economy, instead of the first place in 2003 and 2004.

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Table 2.3 Major Economic Indicators of Food Industries, 2004 (RMB Billion Yuan)
Indicators Enterprise numbers Total Salt Farm and subsidiary foods processing Food manufacturing Beverage manufacturing Tobacco processing 20923 174 12244 4950 3332 223 Sale revenue 1563.419 12.594 781.097 268.896 243.361 257.371 Growth rate (%) 27.35 56.36 35.04 25.23 18.75 16.25 275.742 2.213 36.087 24.145 44.742 168.556 Tax Growth rate (%) 22.36 45.43 34.64 16.52 16.48 22.24 91.590 0.777 23.395 13.299 17.031 37.128 Profit Growth rate (%) 31.85 108.29 37.98 16.43 24.23 37.30

Source: China Statistical Yearbook, 2005.

Ⅱ. Sub-industries In 2003, National Statistics Bureau readjusted the classification of food industry to more clearer and detailed. If taken as a major industry, besides of salt industry, the food industry can be divided into four categories: farm and subsidiary foods processing, food manufacturing, beverage manufacturing and tobacco processing industry, then subdivided into 24 categories, and 64 small categories.

In 2004, the sales revenue of sub-industry over RMB 100 billion Yuan are following six: tobacco manufacturing (249.96 billion), edible oil processing (178.915 billion), slaughtering and meat processing (162.058 billion), wine production (138.033 billion), fodder processing (115.809 billion), aquatic processing (105.376 billion).In terms of sales revenue, those more than RMB 500000 billion Yuan are: soft-beverage (878180 billion), cereal milling industry (865620 billion) and liquid milk and dairy manufacturing (625190 billion). From the growth rate of sales revenue in these sub-industries, those more than 30% are: vegetables, fruits and nut processing (44.05%), slaughtering and meat processing (39.33%), cereal milling (38.14%), aquatic products processing (33.66%), alcohol manufacturing (35.13%), fodder processing (33.66%) and vegetable oil processing (31.29%) industries, at the same time, the growth rates
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of other sub-industries have achieved more than 10% .

Ⅲ. Food Enterprises By the end of 2004, there are 20923 food enterprises in China, including: 12244 food processing enterprises, 4095 enterprises of food manufacturing, 3332 enterprises of beverage manufacturing, and 223 enterprises of tobacco processing. A lot of large and medium-sized enterprises emerged in the market. The industrial concentration has increased. Among China’s top 500 enterprises in 2005, food industrial enterprises account for 34, including 16 tobacco processing enterprises, 3 wine-making enterprises, 6 beverage and dairy enterprises, 1 meat processing enterprises, 5 food processing enterprises and 3 others.

Table 2.4 Food Industry Enterprises in China’s TOP 500, 2005 Revenue (10 thousand Yuan )
11744287 3361811 1932700 1761871 1602002 1382093 1343592 1199076 1140727 1131114 1103934 977474 959749 873499 862069 851189 762002 740531 725399

Series
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Rank
15 68 137 149 161 181 186 202 212 214 219 261 262 289 291 294 325 330 335

Name China national Grain & Oil Group Co. Ltd HONGTA Tobacco Group Co. Ltd Shanghai Tobacco (Group)corp. Heilongjiang BeiDaHuang agricultural inc. Luohe Shineway Industry Group Co. Ltd WULIANGYE Co. Ltd (Yibin) China Grains and Oils Group Corporation Hunan Changsha Cigarette Factory Hangzhou Wahaha Group Co. Ltd Kunming Cigarette factory Changde Cigarette Factory Honghe Cigarette Factory Hangzhou Cigarette Factory Inner Mongolia Yili Industrial Co. Ltd Tsingtao Beer Co. Ltd. VV Group Co. Ltd Dalian Huanong Group Co. Ltd Qujing Cigarette Factory (Yunnan) Etsong Tabacco Group - 36 -

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20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

337 359 360 363 369 385 387 404 405 453 471 489 496 497 499

Mengniu Dairy Company Shanghai Bright Dairy & Food Co. Ltd Yanjin Beer Group (Beijing) Nanjing Cigarette Factory Jilin Grain Group Co. Ltd Huanong food Group Co. Ltd Ningbo Cigarette Factory Sanlu group Co. Ltd Guiyang Cigarette Factory 93 Group Co. Ltd Shanhe Hopeful Grain & Oil Group Co. Ltd General Tabacco Group Co. Ltd Chengdu Cigarette Factory Guangxi Cigarette Factory Henna Xinzheng Tobacco Group Co. Ltd

721383 678568 677542 674085 665428 630574 628247 602147 600947 513847 498874 469236 461522 458888 457946

Source: www.hc101.com

Ⅳ. Main products output In 2004, those outputs more than 10 million tons are: wheat flour (2921.15), beer (2757.68), canned water (1130.60), vegetable oil (1085.35), and rice (1036.12). If we see the growth rate of the output we can find that, frozen drinks increased by 35.23%, dairy products (milk, condensed milk, cheese) increase by 34.74%, liquid milk growth by 33.86%, fruit juice and fruit juice drinks growth by 28.09%. In addition, the growth rate of wheat flour, soft drink, rice and edible plant oils was also quite high.

Ⅴ. Economic benefit From 2001 to 2004, the total tax and profit of food industry was accelerated greatly. In segment industry, whose profitability growth rate higher than the national average level are: sugar (715.031%), alcohol manufacturing (104.70%), feed processing (82.24%), refined tea processing (75.65%), vegetables, fruit and nut processing (62.21%), cereal bowls (61.40%), aquatic products processing (45.21%), tobacco manufacturing (37.91%) and wine manufacturing (33.68%) . Profits in Vegetable oil processing and Tin-making
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industry appeared negative growth.

Ⅵ. Investment of fixed asset In 2004, the project that is more than 5 million investments on food industry increased by 27.77% and actual completed 121.306 billion of investment in fixed assets. New increased fixed asset is 66.898 billion, increased 21.00% than last year.

Among these investments, a salt industry shared 11.85 billion Yuan, 52.173 billion Yuan to agricultural and products processing industry; food processing, 35.055 billion Yuan; beverage manufacturing, 24.488 billion Yuan; tobacco industry, 8.405 billion Yuan.

Ⅶ. Export Currently, the growth rate of global commodity export is low and sometimes even downward, but the proportion of China’s merchandise exports account for global exports rising increasingly. In 1989, 1995 and 2002, the growth rates are 1.7%, 3.0% and 5.1% respectively.

At same time, Chinese food exports accounted for the proportion of the global food exports are 2.3%, 2.5% and 3.3% respectively.

The export revenue of foods in 2004 is US$ 40.456 billion with an increase of 7.76% comparing to 2003; imports are US$ 20.13 billion with an increase of 35.36%; surplus of international trade is US$ 196 million. In 2004, the main products for export are aquatic products, edible vegetables, canned food (mainly vegetables and canned fruit), meat and meat preparations.

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Ⅷ. Regional food industry in China It can be seen from Table 2.5 that the East China has absolute advantage than other regions in food industry, but the profit growth of west and middle areas showed a great potential.
Table 2.5 Major areas of the food industry in China (RMB 100 million Yuan) Sale revenue (billion RMB) 1563.419 927.585 344.684 290.750

Area

Growth rate (%) 27.35 28.74 27.43 23.03

Tax (billion RMB) 275.742 2.213 36.087 24.145

Growth rate (%) 22.36 131.025 62.132 82.585

Profit (billion RMB) 91.590 51.134 15.960 24.496

Growth rate (%) 31.85 26.13 34.11 43.89

National East Middle West

Source: China Statistical Yearbook, 2005.

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2.3 Import and Export of Chinese Food Market

2.3.1 Brief Introduction

2.3.1.1 Development progress The agricultural products and sideline products are the main part of export foods in early time while traditional food exports gradually reduced in several decades after that. Since the beginning of the 1990s, with the expansion of the reform and opening up, the development of overall economy and agricultural industry strengthened. Therefore, the export of food increases rapidly. Food for export and import in China are mainly grain, edible vegetable oil and sugar.

The development of food import in China can be divided into four stages:

The First Stage (1950s): Export was the protagonist while the import is very little. According to statistic data, China exported 22.8 million tons of food in 1950-1959, including soybean, rice, many kinds of grains and beans and so on, but mainly of soybean and rice.

The Second Stage (1960-1976): China started import foodstuff in large quantities. There are also some exports, but it is fewer than import. The export quantum reached 41.43 million tons, of which 8.98 million tons of soybean, 21.12 million tons rice, 11.24 million tons of other grains and beans, while the import quantum reached 84.9 million tons.

The Third Stage (1977-1989): Import of food accounts for the most part, food export is seldom. During this period, China has imported 159 million tons and exported 48 million tons.

The Fourth Stage (1990-1999): The export and import of China showed
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large fluctuation. In the late of 1990s, due to larger supply than demand in domestic food market, China has become a net exporter for many years.

We can see that after 1960s Chinese agriculture industry developed slowly, at the same time the population grown fast, the pressure of foodstuff were more urgently at this period. From 1987 to 1989, annual import quantum had increased to 15-16 million tons. The situation changed in 1990s, especially the late 1990s, along with the deepening of reform and restructuring of agricultural production, food supply in China has been fundamentally changed from the past long-term of less supply than demand to a balance of supply and demand. After entering the 21st century, Chinese food export and import have developed very well, every items of food export and import quantum continued to develop stably contrasted to former decade.

Ⅰ. The quantities of sugar export and import remain a balance before 1950s, net import reached 0.8 million tons. After 60 years of the 20th century, sugar imports went up dramatically, especially in the 1980s. According to statistic data, in the period of 1983-1989, China’s net imports of sugar reached 11.48 million tons. But China turned to be net exporter after 1990s.

Ⅱ. Import of edible vegetable oil increases fast. China was a net exporter of vegetable oil before 1985; annual export quantum per year reached more than RMB 100 million Yuan. After 1986, China became a net importer of vegetable oil; net import quantum reached 1.18 billion US Dollars in 1999.

Ⅲ. In addition, with the opening of China coastal areas, import of high-grade meat, aquatic products, fruit and dairy also increased dramatically. (See Table 2.6)
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Table 2.6 Volume of Business of Main Agriculture Product in 1988-2003 Ten Thousand Tons Species Year 1988 1994 1999 2001 2003 462 1026 700 858 2121.5 Grain Export Import 1491 769 79 107 160.3 148 83 20 26 / Soya Export Import 15 5 432 1394 2074 Edible Oil Export 3 27 10 13 6 Import 21 163 208 168 541.8 25 95 37 20 10.3 Sugar Export Import 371 155 42 120 77.5

Source: “Agriculture Development Report of China”, Chinese Agriculture Publishing Company, 2002-2004.

2.3.1.2 Situation in 2004 Ⅰ. Export in 2004 Export of food products increased except grain In 2004, China’s exports of cereals and cereal powder reached 4.73 million tons, worth 830 million US dollars, decreased by 78.496 and 68.9% respectively over last year, accounting for 4.1% of total Chinese exports of foodstuff. Food stuff except grain and grain powder increases by 20.2%, rose by 4.7 % over 2003.

General trade was the main type Foodstuffs expert of general trade reached 14.95 billion US dollars in 2004, got an increase of 2.2%, accounting for 73.6% of total value of food exports; in addition, the export of processing trade is 4.61 billion US dollars, increased by 33.3%, accounting for 22.7%.

Trade to Japan, Hong Kong, Europe and US and other major consume countries increased Japan is China’s largest food export market. China exported 6.75 billion
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US dollars’ food to Japan in 2004, got an increase of 19.8% and accounting for 1/3 of total value of food export in China. There are other main export markets such as Hong Kong, European Union and America. China exported to Hong Kong for 2.46 billion US dollars, increased by 19.1%; the number to European Union reached 2.08 billion US dollars, an increase of 12.8%; 1.98 billion to America, an increase of 11.1%. The numbers of the three markets added up to 1/3 of the total value that year.

The export of private companies grew fast and the export of foreign-invested corporations were still the main part The value of foodstuff which exported by private enterprises reached 4.29 billion US dollars in 2004, an increase of 77.6% over last year. Foreign-invested enterprises exported 9.05 billion US dollars’ food, accounting for 44.6% of the total export value that year with an increase of 23%. The food export scale of foreign-invested enterprises accounts the largest part of total Chinese food export.

The returned part with quality problem of export foods declined impressively The returned foods with quality problem declined in 2004, the total value of the returned food is 76.23 million US dollars and 15.2% lower than that in 2003. The situation that the returned foods keep increasing since 2000 has totally changed.

Ⅱ.Import in 2004 The main imported foodstuff is Soya and edible vegetable oil China imported 20.23 million tons of Soyas in 2004, with total value of 6.98 billion US dollars, declined by 2.5%; while the import value of Soya grew by 28.8%, the value accounted for more than 1/3 of the total imported foodstuff
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in China. The quantities of imported edible vegetable oil are 6.76 million tons, valued 3.67 billion US dollars, increased 24.9% and 42.1% respectively over last year. It accounts for 18.3% of total value of imported foods in 2004. Among the imported oil, Soya oil and palm oil are the principal breeds. In 2004 China imported Soya oil for 2.52 million tons, with value of 1.55 billion US dollars, that is, an increase of 34% and 52.6% for each. To palm oil, China imported 2.39 million tons, valued 1.17 billion US dollars, and increased 2.6% and 12.6% respectively.

The main import way is general-trade not processing trade The foodstuff imported by general-trade reached 16.17 billion US dollars in 2004, a growth of 45.2%, accounting for 80.4% in the total import value. Furthermore, the food imported in the way of processing trade reached 2.42 billion dollars, increased by 18.3%.

America, Brazil and Argentina are the main import sources China imported 4.97 billion US dollars of foodstuff from America in 2004, a growth of 41.7% over 2003; 2.73 billion US dollars from Brazil, a growth of 36.3%; 2.67 billion US dollars and 18.9% from Argentina. The imported value of the three countries is 10.37 billion US dollars, which accounts 51.6% of the total imported food value in China.

2.3.1.3 Export of Chinese Food Ⅰ. The export of daily necessity foods grows relatively slow, the percentage in total food export also declines This dedicates that the demand and supply of infinity foodstuff have gone to balance recent years, such as: commissariat and sugar. While we have a large population, land resource is relatively insufficient, which limits the growth of such food export.
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Ⅱ. High-value foodstuff exports increase more rapidly High-value food mainly refers to meat product, aquatic product, vegetable, fruit and beverages and so on. According to statistics, China’s high-value food products’ export reached 3.49 billion US dollars in 1989, increased to 7.562 billion US dollars in 1999, a growth of 117%, the average growth rate per year reached 8.04%, considerably faster than the growth of total food exports in China in the same year. Such kinds of food product accounted for 49.5% of total export in 1989, increased to 66.34% in 1999. Moreover, the import scale of such food products is far smaller than the size of export; imports amounted to 1.9 billion US dollars in 1999, 5.662 billion US dollars less than export.

2.3.2 Basic Impact Factors of Chinese Food Import and Export There are many factors impact the Chinese food export and import. Combined with former and current situation, we find that the main factors are as follows:

Ⅰ. Impact Factors of Import sector Import grows dramatically drove by national demand For recent years, national demand to Soya, grain and edible vegetable oil grows continuously. Although China had Soya foison of 18 million tons in 2004, China could not supply whole Chinese for the lack of processing ability. The insufficiency of storage is outstanding, and the price of national foodstuff grows too fast, a great amount of foodstuff need to be imported. Meanwhile, international enterprises start to use trans-gene materials and mass production, thus, the prices of edible vegetable oil in international market are much lower than national market. All of the factors accelerate the mass import of edible vegetable oil of China, the total import of foodstuff reached 6.76 million tons in 2004. Compared with 2001, it is 3.1 times of the former import gross in the
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past 3 years.

Price changes of main products in the international market The Chinese enterprises had signed abundant contracts of Soya futures in early 2004, resulting in the increasing of average price of Soya imports, and the following drop of Soya price in international market brought huge disadvantages to enterprises in China. Importing at a high price certainly pushes the ascendance of price. China imported a total of 20.23 million tons of Soya, which is worth 6.98 billion US dollars, imports fell by 2.5%, the value of imports grew by 28.8%, taken over 1/3 of the foodstuff imports.

Ⅱ. Impact Factors of Export sector The Impact of Policy Adjustment Since 1999, food production reduced in the consecutive four years, the gap between supply and demand basically relied on the stocks to balance till 2004. But the prices of foods which take commissariat as motivation ascended by 9.9%. In order to hold down this momentum, the state has stepped up the control force to food exports, controlled the scale of grain exports and reduced the quotas of cereal exports. For that time, the corn export quota was only 4 million tons, 1/4 of the actual export amount in last year. Actually, the corn exported 2.32 million tons, went down by 85.8%, which worth 0.33 billion US dollars and a net decrease of 1.44 billion US dollars. Affected by that, China’s exports of cereals and cereal powder dropped sharply in 2004, dragged down the pace of the food exports.

“Green barriers” and foreign anti-dumping measures impede Chinese food exports in recent years In recent years, food security problems in domestic have occurred frequently and been exposed by media, such as: fake liquor, poisonous
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sauerkraut and vermicelli, bean products of poor quality, preserved fruit and stale commissariat. That phenomenon caused great psychological

comprehension and barriers, and also affected the confidence of foreign consumers, with increasing of technical barriers against Chinese foodstuff exports.

In recent years, many countries have imposed stronger examine to Chinese exports of meat products for the reason of exceeding-limitation of drug residue and existence of avian flu virus, such as Japan and Korea. And they have even taken tactic of closing custom. China exported 650 million US dollars of poultry products, dropped by 23.6% in 2004. The Commerce Department of United State ruled that Chinese shrimp exports was dumping, and was heavily taxed. For the reason above, Chinese shrimp products exported to the US dropped significantly by 47%, a net decrease of 200 million US dollars.

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2.4 The Future of Chinese Food Industry

2.4.1 Spacious Development Space The Chinese food industry has experienced large competition, and achieved great development since the reform and opening. More important, the development remains sustainable and rapid as the 21st century.

According to the statistical material, Chinese food industry increases 10.5% in 2001 compared with 2000, 16.6% in 2002 and 19.8% in 2003. The development accelerates in 2004, and the accumulated modern industrial product is 1616.386 billion RBM Yuan, 25.2% more than the last year, while a total output valued is 552.982 billion RBM Yuan, accounting for 10.09% of national industrial added value. With the continuing development of the food economy, the food market remains rapider growth in 2005. The product sale reaches 420.536 billion RBM Yuan in the first quarter of 2005, 25.72% more than the same stage of 2004, while the product sale rate is 96.94%, 0.27 percentages point more than the last year.

Chinese food industry will increase stable and sustained because of the following external and internal factors:

Ⅰ. The turnover of food industry is 2700 billion US dollars ahead of other industry, but China only takes up less than 5%, so it has great potential.

Ⅱ. Social Economy Factors

The large population in China makes a good international market. We have an old saying that “food is the most important to human”. The
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statistical materials show that food consumption stands in the first in the consumption structure of urban residents, reaching 44.5%. Thus, there is large consumption in food.

Engel coefficient goes down with the heightening of living level, someone forecasts that the coefficient of urban and city residents will decline from 37%,47% in 2002 to 30%,35% in 2015~2020. But the absolute value goes up. The food consumption begins to pursuit quality from pursuit quantity. Especially, the demand for industrial finished and semi-manufactured goods will increase largely, which will supply more spacious market for food industry.

With Changing of living style and accelerating living rhythm, residents especially the housewives spend less time in cooking and spend more money in going out for repast, which will push the development of restaurant economy and industrial food market.

Rural consumption plays an important role in food processing and shows great potentiality. Seeing from the developed country and coastal region of Chine, the trend that farmers sell agriculture products and purchase processing products is inevitable. If we exploit this potential market fully, we can not only reduce the gap between urban and rural areas, but also can adjust the layout of the food industry.

Ⅲ. Policy Factors

National macro-control policies are skewed to the positive direction of expanding consumer demand such as carrying out taxation, financial and industrial policy which encourages consume, improves the consumption
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environment and the rural public infrastructure in order to further invigorating flow of the rural market, exploit rural market, create new consumption hot spots, expand of service consumption and make good efforts to maintain the prices of grain and other major agricultural products basically stable. The points are put on the capital goods prices and curb excessive rises, achieving stable food production, continuously increasing of farmer’s income and speeding up the pace of reducing agricultural taxes. All of these will promote the development of food industry.

2.4.2 Prospect of Chinese food industry development As stated above, the food consumption has now shifted from pursuit of quality to confrontation, convenience, quality, health, nutrition and security objectives, and the demand of finished products in qualify and quality is rapidly rise. Food production enterprises must hold the trend of food industry and conform to the needs of the consumer market to make forward-looking strategy and operational plan. Integrated the international trend and the specificity of China’s food industry, there are several pictures in our food production and consumption trend as follows:

Ⅰ. We should take good use of our conditions in order to heighten the difference, concentration and scale effects of regional resources, production patterns All country takes it as a magic weapon to make full use of their resources in international competition. China is vast in area and the different regions have their own unique resources, production and consumption habits. For a long time, the industrial layout divided by administrative zoning makes similar structures in different regions and low-level redundant constructions which limit the regional advantage to play. Chinese food industry should learn to grasp own advantages, demonstrate the differences and focus potency on the
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development of scale effect.

Ⅱ. Convenience and diversity of food will be the character in a period of development of the food industry It is predicted that population will reach 1.4 billion and the urban population will exceed 0.5 billion in China by 2010, which makes a great market and asks the food industry to develop rapidly. According to the survey data, the self-sufficiency of food consumption to urban residents goes down and shows five new features:

Diversity. To meet the nutrition needs, the staple food and non-staple food trend to be various.

Tasting. They need to be tasting good and special.

Convenience. The convenient food and take-away food are popular.

Multifunction. The food should be not only rich of nutrition, but also good to health, preventing and treating diseases.

High conversion rate. It is the main pursuit of the rich flora, fauna and aquatic resources, and direct production of high conversion rates, low-salt and low-sugar food that can be rapidly absorbed.

At present, the early processing of agricultural product materials is the main part of Chinese food industry, while sophisticated processing is less and food product is low-level. It lacks of convenient food according with nutrition equilibrium standards for breakfast, lunch and supper and lacks of food to meet special nutrition needs of special consumers. With the changing of people’s
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living style and values, diversity and convenience will be the main trend for food industry in future.

Ⅲ . Improvement of food nutrition will be a important part to development of food industry A WHO (World Health Organization) survey shows that the proportion under-health population in the world reaches 75%. The public care most about health and such problems as height-control and strengthening immunity in healthy field. Transformation food nutrition to raising the level of health will be an important part of food industry in the future. KFC and McDonald’s have supplied a series of local product and attached more importance to “nutrition equilibrium” ads. All of these indicate that nutrition of food not only the issue which must be taken by Chinese food industry, but also the emphasis belonged to international food industry.

Food producing should pay large attention to exploit balance nutrition food, rich nutrition food and health food. The food should avoid deficient nutrition and imbalance nutrition to make harm for health. The micronutrient deficiency is very universal in our country, various deficiencies have made bad impact to different people such as children, adult, elder.

The Chinese administration is going to strengthen food nutrition, such as bread, biscuit, constant noodles, fine dried noodles, deepfreeze staple food and so on, by using heightened nutrition flour and rice,. What’s more, the strengthening to bean products, milk, sauce, edible vegetable oil etc will be carried out gradually.

Ⅳ. Safety of food will play the important role in food industry Recently, there appears some food safety issue which attracts the large
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attention of the Party Central Committee and State Department, and they have carried out a series of plans to ensure food security and quality. We can see the safety level improves rapidly, safety system erects rudiment, the framework of safety examine, agricultural product and certificated task goes well, and food safety law system goes to perfect gradually. But there are also some issues which exist in some segment such as food product and supply needs our attention. Insufficient also exists in various security detection systems, authentication systems, safety management system and laws. Food safety will become the important issue to be resolved in food industry.

Ⅴ. New Technology As we known, the overall level of the food industry is low, industry scale is small, the level of food product technology is relatively backward, and economic growth is not high in technology content in our country. The added value we can attain from 1 dollar export commodities is only 0.15 dollar, while it reaches 0.85 dollar in US and Western country.

With the changing of consumer’s living style and habit, the market accelerate adjustment of the product structure and the pace of industry upgrading, and the innovation of product and package also goes as fast as time going on. All of these emphasize the high need to advanced technologies.

Ⅵ. Realization of the “recycling economics” Along with the increasing contradiction between social progress, economic development and limited resources, the society takes increasingly account to sustainable development, environment protection and resource conservation. As a new integrated mode of economics development and environment protection, recycling economics received widespread concern. Chinese food industry will invest more human resource, material and fund to
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combat pollution in the production processes and improve the utilization and recycling use of resources in order to improve economic efficiency and ecological efficiency in the food industry.

2.4.3 Developing Trends of Main Segmentation Markets Ⅰ. Edible Oil Market Serialized Product China is spacious and suitable for varieties of oil-bearing crops growth; furthermore, the material used as oil-bearing crops also become more and more with advanced technology. Our types of oil are abundant and oil-bearing crops scope increasing; thus, we have more abundant edible oil products such as peanut oil, rapeseed oil, sunflower oil, soy, cotton oil and millet oil exploited in recent years and so on. From the view of output, there are mainly rapeseed oil, soy oil and peanut oil.

As nutrition composition in different edible oil is different and consumption habits in different areas are different too, such as people love salad oil in Beijing, peanut oil in Guangdong, rapeseed oil in Chengdu, while people taste various salads, soy and so on in Shanghai. Edible oil brands have to develop series product as important support if they want to be national.

Price Going Down After a glorious period, edible oil market in our country becomes mature, growth tends to be moderate.

In recent years, the consumption of edible oil per person in China increased 1 kg which maintains rapid growth, but domestic oil resources and international oil market supply are both adequate, and maintain a high level of imports, which make the supply growth rate is conspicuously higher than the
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demand in the market. That leads to continued stagnation in oil price in our country. (Table 2.7)
Table 2.7 Supplies of National Oil in 2002~2004 Year New supply( million kg) Consumption per person( kg/year) Total population(billion) Total consumption( million kg) 2002/2003 0.01677 12.5 1.3 0.01625 2003/2004 0.01758 13.0 1.3 0.01690

Taking a part of WTO will exaggerate the influence that international market gives to national market. According to the treaty achieved with WTO, we will raise the export tariff quota of certain kind of oil by years, such as bean oil, rapeseed oil and so on. Except that, the tariff will decline by years, so large lowprice oil from international market will give serious impact to national edible oil market. Thus, the trend that price goes down is inevitable.

The concentrate of market will be enhanced In recent years, the market of edible oil in China is more and more concentrated, a number of large oil producers have occurred, such as Golden Dragon Fish, Fulin Doors.

With the growth of small package oil market, identity of brand consumption is more and more conspicuous, and we seem to encounter the war of price. From early August 2001, the price of packing edible oil in large shopping centers throughout the country turned down. The average price cut of nearly hundred brands such as Fulin Doors, Golden Dragon Fish, Sea Lion etc reached 5%, some brand reached even 8%. This means that the survival space for middle and small corporations in edible oil industry turns to be smaller.

Package goes smaller.

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Small packaged edible oil has taken 50%- 60% of local edible market sale in Hong Kong, Singapore and Japan. At present, bulk edible oil also is the main part in national edible oil market, and takes up more than 90%. While the small packing edible oil in our country starts late and sales only 1.2 million tons every year, it has a rapid development: its brands develop very fast and reach 400~500 in the whole country; its sale especially in the big cities grows fast also. In our edible oil market, the proportion of small packing edible oil is only 10%, but 60% in big cities. This means that purchasing small packing edible oil is not luxury consumption to many urban residents.

Ⅱ. Meat Product It’s expected that the our country’s meat production will grow steadily in “10th Five-Year Plan”, but the growth will significantly less than that of “9th Five-Year Plan.” In contrast, the development potential of meat is great. In recent years, meat consumption structure in China has changed greatly, the meat products have changed too, specifically in the following aspects:

The rise of health meat products This functional meat food has the specific function for health which cans regulatory body functions, enhance immunity and delay senility. It is an important topic in the new century and has the broad prospects in research for healthy meat products and green meat products.

Chilled meat will guide the meat consumption Chilled meat is nutritional, fresh, sanitary and safe, which is the mainstream and inevitable trend in meat consumption in 20 century. A few of large meat processing enterprises already have been aware of it and built up chain stores to sell chilled meat, such as Shuanghui, Jinluo and so on, which achieved greatly.
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Western-style meat products have a strong development In the recent 10 years, Western-style meat products are accepted increasingly by countrymen. In this market, the market share of high-temperature meat products is far more than low-temperature products. But in the long run, the market of high-temperature will shrink gradually, and a low-temperature product with better quality is going to make larger impact to entire meat market. Furthermore, they will change the structure and people’s consumption habits radically. Low-temperature meat products will be the main trend to development of our meat products in the future.

New technology of meat preservation is attracted much The preservation of meat determines nutrition of meat and it is a important segment in meat producing. Researching for preservation technology of raw meat and low-temperature meat products is a problem to be solved urgently.

Ⅲ. Instant Food Instant Noodles Market The instant noodles market in China is divided into two: high quality brands which run widespread in the whole country have superior advantage in competition; local products which have lower price take small share mainly in rural market.

It is forecasted that the sale of instant noodles market in our country will reach 2 million ton, with a growth rate of 8% by the end of the century. Most of consumers will not only look instant noodles as food, but also pursue the taste. Corporation need to grasp this change in market to meet different demand and develop and produce a series of high-grade varieties.

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Instant noodle is a kind of industrialized food with high technology. There is great gap between our industry and foreign ones whether in engineering, mechanical equipment or raw materials. The industry in our country need comprehensively study the various factor of production and consume and master the demand point.

The Trend of Frozen Food Frozen food is a kind of food which develops most rapidly in the world nowadays. A internal statistics shows that sales of frozen food has been the first in sales of daily food products in national chain markets for three years since 1999. The turnover of frozen food industries in our country reached 4.566 billion Yuan in 2004, the total assets reached 5.497 billion and total profit realized 0.159 billion Yuan. The fun-profit ratio was 3.55%, a little higher than last year and the asset-liability ratio was 61.87%. There are 120 enterprises of certain scale, of which 80% has realized profit.

With the popularity of microwave oven, the frozen foods suitable for microwave will make new market. Frozen noodles, frozen rice, frozen dough and quick-freeze bake food are important varieties for frozen foods in the future. In addition, frozen vegetable is the most mature of all frozen food products. For its large potentiality, the export market of frozen vegetable continues to be optimistic.

Ⅳ. Fallow Food Market According to a survey conducted by American fallowed food association, “Except for three meals of one day, 30% of the energy in human body comes from snack.” People need convenient food.

At present, many kinds of parties and fallow occasions have occurred in
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our country, which supply a very good chance for fallow food. Currently, the types of Chinese fallow food are considerable. (Table 2.8)
Table 2.8 Type of Leisure Food in China Type Swelled grain Fried nutlet Fried potato Fried grain Non-fried nutlet Sweetmeat Meat and Fish Preserved Fruit & Vegetable Product Rice flower, Corn flower, Rice cake, etc Peanut, Almond, Horse bean, Peach kernel, etc Sweet potato chicks, sagittifolia hunks, etc Fried Chinese date, Labster chips, etc Melon seeds, Fish flake, Sugar peanut, Pine nut, etc Chinese-style candy, Confection, Preserved fruit, etc Peeled prawns, Fish flake, etc Apple, Banana, Grape, Mango, etc

For fallow food, the sense experience is the most important to consumer. Chinese fallow food will be presented as follows:

Food producer will not only pay attention to sense experience, but also the diversification and mood. After Pfizer has bought Adams and Cadbury Adams, they take mass customization tactic and use it to gum. That situation makes us understand the sense experience better.

Technically, enhance flavor of the product specialized will be the important trend, too. Single species and lack of flavor are the main character to former Chinese fallow food. This kind of food in the future will pay more attention to consumer’s sentiment demand and actual experience. Furthermore, the fallow food package needs to be improved. Package technology will be upgraded, more fashionable, humanization and special.

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Part Three

Chinese Food Market

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3.1 Current Situation of Chinese Food Market

3.1.1 Brief Introduction China is a nation of great population and the grain is Chinese inhabitant’s staple food. These years, Chinese food market has the following characteristics (see Table 3.1): (1) The demand of Chinese grain market is stable, but along with the population growing, Chinese grain consumption grows slowly. (2) The demand proportion of non-staple food products has a dropping tendency, but its average demand per person increased along with the people’s increasing income. (3) The demand of tobacco, liquor and tea market is rising quickly, its average demand per person continuously maintains the trend of escalation, and the market scale expands continually. (4) Besides the above-mentioned three main food markets, the demand of other food market expands rapidly, especially the demand for eating outside.

The relations between Chinese urban inhabitant’s food demand and their income are: (1) The relevance between the total demand for grain and the growth of inhabitant’s nominal income is not strong， the total demand has a but strong correlative relationship with the changing of grain price. (2) The total demand for non-staple food product, tobacco, liquor and tea has increased with the steadily growing of individual’s income, and presents the correlative dependence with the price changing. (3) Total demand for other foods and the changing of inhabitant’s nominal income is almost irrelevant, but the demand is extremely sensitive to their price changes. (See Table 3.2)

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Table 3.1 Food consumption structure of Chinese urban residents (calculate at current price)

Unit: % Grain Year consumption proportion 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 22.86 21.98 20.55 19.47 17.13 15.47 14.15 13.34 12.41 12.18 12.49 11.82 12.28 14.20 14.75 14.26 12.26 Non-staple food consumption proportion 54.20 54.65 55.45 55.81 57.69 57.89 58.54 61.05 61.56 60.73 55.47 49.62 49.87 55.07 44.76 48.57 54.98 Cigarette, wine tea consumption proportion 8.95 8.99 8.93 9.36 10.17 10.63 10.27 10.29 10.38 10.97 11.56 11.34 10.79 10.91 7.77 8.87 9.43 Other food consumption proportion 14.00 14.38 15.06 15.36 15.01 16.01 16.58 15.31 15.65 16.12 20.49 27.23 27.06 19.82 32.72 28.31 23.34

Source: China Statistical Yearbook.

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Table 3.2 Food demand and price indexes, Nominal income of urban residents

cigarette, Grain Year total demand non-staple wine food total tea total demand demand hundred Unit million
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 142.14 152.53 158.75 178.44 185.18 203.38 231.98 261.06 301.21 355.24 394.65 448.10 606.62 1006.05 1361.19 1480.75 1231.35

Other Grain food price total index demand hundred million
87.07 99.77 116.36 140.78 162.31 210.53 271.88 299.53 379.97 319.92 647.42 1032.56 1336.51 1404.50 3019.45 2940.47 2344.22

cigarette, non-staple wine food price tea price index index 1980 =100
100.20 99.40 101.49 101.49 104.83 109.13 115.90 132.24 154.59 470.29 174.46 242.85 318.38 473.43 636.29 684.01 629.97

Other retail food price price index index 1980 =100
105.90 106.01 113.00 117.86 139.67 150.42 168.62 203.86 245.65 247.62 260.99 273.78 306.63 417.37 539.63 588.43 594.41

Gross living cost

hundred million
337.04 379.20 428.29 511.56 623.78 761.16 959.73 1194.45 1494.59 355.24 1752.69 1881.59 2463.35 3902.27 4129.54 5044.82 5522.72

hundred million
55.65 62.40 69.01 85.83 109.93 139.73 175.82 201.36 252.03 1771.66 365.26 430.01 532.92 772.88 716.72 921.30 947.59

1980 =100
114.10 113.87 119.11 126.26 155.30 168.19 193.24 253.34 285.26 144.54 292.66 313.14 362.62 496.28 610.74 656.37 661.68

1980 =100
100.80 120.36 118.31 117.72 118.78 120.80 126.23 146.93 163.54 164.19 166.98 177.84 191.17 212.78 229.37 241.07 243.97

1980 =100
114.10 113.87 119.11 126.26 155.30 168.19 193.24 253.34 285.26 284.41 292.66 313.14 362.62 496.28 610.74 405.59 408.83

hundred million
923.91 1046.11 1268.93 1459.18 1719.74 2182.67 2525.67 3208.20 3724.02 4188.31 4716.76 5911.35 7459.08 10904.80 13303.73 15735.85 19085.96

Source: China Statistical Yearbook.

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3.1.2 Big differences of food expending between urban and rural areas

Ⅰ. Daily expending and food budget of urban and rural areas At present, the consumption level of countryside inhabitant is quite low, the income gap and the economic developing gap between urban area and rural area becoming bigger and bigger, which has reflected on food expending level in urban and rural areas. The food expending proportion in both urban and rural areas is dropping these years. The diversity of Engel coefficient between urban and rural areas has expanding tendency (see Table 3.3).

Table 3.3 Residents income per person and Engel coefficient change

Income (RMB Yuan) Year Urban 1978 1980 1985 1990 1992 1993 1995 1996 1997 1998 343.4 477.6 739.1 1510.2 2026.6 2577.0 4283.0 4838.9 5160.3 5425.1 Rural 133.6 191.3 297.6 686.3 784.0 921.6 1577.7 1926.1 2090.1 2161.9

Engel coefficient Urban 58.7 55.2 52.2 54.2 52.8 50.13 49.9 48.6 46.4 44.2 Rural 67.7 61.8 57.8 58.8 57.6 58.1 58.6 56.3 55.1 53.4

Source: China Statistical Yearbook.

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Ⅱ. Food consumption situations in urban and rural areas From the beginning of 1980s, the urban inhabitant’s direct consumption for grain per person has displayed the obvious drop tendency, dropping from 140.1 kilograms (1980-1985) to 91.75 kilograms (1995-1998), annual consumption per person reduced about 3.23 kilograms averagely. Different from this, the countryside inhabitant’s grain consumption has been rising continuously since 1978, even in 1985 when the grain price is raised dramatically. This situation continued until 1993. Then after, it displayed the obvious drop tendency, more than 10 years later than in the cities (See Table 3.4).
Table 3.4 Food consumption per capita in different areas (1978--1998)
Unit: Kilogram Year Food/Area Rural Grain Urban Rural Meat Urban Rural Egg Urban Rural Aquatic Urban Rural Vegetable Urban Rural Sugar Urban Rural Alcohol Urban 1.22 1.89 4.37 6.14 6.56 6.53 6.53 7.11 7.13 6.98 0.73 -1.46 -1.5 7.8 1.5 9.25 1.43 9.85 1.43 9.71 1.28 9.93 1.37 9.72 1.35 9.55 1.40 9.68 141.5 -127.2 -131.1 2.52 134 2.14 129 1.85 107.4 1077 104.6 1.68 106.3 1.71 107.2 1.63 108.97 1.76 0.8 -1.1 152.3 1.6 144.4 2.1 138.7 2.3 124.9 2.5 120.6 3.4 118.6 3.7 118.5 3.4 115.2 3.31 113.76 0.8 -1.2 -2.05 7.1 2.41 2.7 2.85 8.2 2.88 8 3.22 9.2 3.35 9.3 4.08 9.3 4.11 9.84 6.1 -8.5 -12 6.84 12.6 7.25 13.3 9.45 13.3 8.86 13.1 9.74 13.8 9.64 15.1 11.13 15.53 10.76 247 -257 -257 20.9 262 25.1 251 26.5 266 24.5 258.9 24.7 256.2 26.8 250.7 25.5 249.28 23.87 1978 -1980 145.4 1985 134.8 1990 130.7 1992 111.5 1993 97.8 1995 97 1996 94.7 1997 88.6 1998 86.72

Source: China Statistical Yearbook.

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Table 3.4 shows that the urban inhabitant’s average non-staple food consumption level (including beef, mutton, poultry, egg, aquatic product, sugar) is much higher than those of rural inhabitant’s. In 1985, the urban inhabitant’s non-staple food product consumption quantity was 37.36 kilograms, but the rural inhabitant’s non-staple food product consumption quantity was 15.65 kilograms, 50%less than that of urban inhabitant’s consumption quantity. This kind of situation was continuing to 1998. Consider the non-staple food product expending, the average meat consumption per person both in urban and rural areas are growing stably. Accumulated total increase rates of pork consumption and beef and mutton consumption from 1988 to 1998 are 34.95% and 103.74% respectively, which was lower than 48.92% and 137.93% from 1980 to 1988 period. The increased speed has reduced in 1988 and 1998 period.

To the urban inhabitant, the pork consumption proportion fluctuant dropped from 1985’s 79.9% to 1998’s 69.53%. The meat consumption had a tendency of diversification; the livestock consumption proportion in urban area was always higher than that in the rural area, which in 1998 was 19.84%. Moreover, the pork and the bird’s meat seem to be the substitute to each other, which indicated when the pork consumption proportion became higher the bird’s meat consumption proportion will became lower, and vice versa. Although the rural inhabitant’s birds and beasts’ meat consumption proportion continuously increase, the pork consumption proportion is still the main part of food consumption, whose ratio reached above 80%. In 1998 the pork consumption accounted for 80.5% in the whole livestock consumption. However, the meat consumption structure was still not reasonable. At the same time, the fish and the egg consumption has also experienced fast but stable growth process.

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We can have the following conclusions: （1）Except grain and egg, the difference between urban and rural inhabitant’s consumption on most food is reducing. (2) The urban and rural inhabitant’s non-staple food consumption has a synchronized growth trend, but at the same time the difference between urban and rural inhabitant’s non-staple food consumption hasn’t changed a lot. (3) As for the consumption of pork, beef, mutton, portray, fish and shrimp, there has more frequent undulations in urban area than in rural area. This shows that the urban inhabitant is more sensitive to the price change of these food products and food self-sufficient proportion is much higher in rural area. (4) As for the consumption of different meats, the rural inhabitant relies more on the pork, but the urban inhabitant’s meat consumption is more diverse, the proportion of birds and fish consumption occupies gradually raise these years.

Ⅲ. Different food expending structures between urban and rural areas Food expending structure is related with the development of food market, the food processing industry, the food product price, the consumer’s income and so on. We can divide the food into five subgroups: staple food (mainly grain), non-staple food (including pork, beef, mutton, portray, egg, aquatic product, vegetables, sugar), luxury good (including liquor), outside eating (including eating in the restaurants, food and drink shops, eating houses, and snack bars) and the other foods. From the food investigation in 1998, we can find out the following results: (1) The staple food expending proportion of urban inhabitant is far different from those of rural inhabitant. The rural inhabitant’s staple food expending proportion reached 36 %, but the proportion in urban area is only 12%. (2) To the non-staple food product, the expending proportions of the rural inhabitant and the urban inhabitant are quite close. This is possibly because the grain demand income elasticity is quite low, the reform policy and the economical development brought up the growth rate of
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agricultural production and the growth rate of the rural inhabitant’s income was higher than the growth rate of low-grade foods consumption, thus increased the consumption of beef, mutton, egg, fish in rural areas. It should be pointed out that, even the expending proportion in urban and rural areas are the same, their consumption quantity actually has a remarkable difference. From Table 3.4 we can find, the rural inhabitant’s non-staple food consumption quantity is 50 % less than that of the urban inhabitant’s. (3) The difference of eating outside between rural inhabitant and urban inhabitant is not big. This shows the changing of people’s consuming conception because of the fast rhythm of life.

Ⅳ. Nutrition situation and differences between urban and rural areas With the increasing of the income level, people’s food consumption pattern will change consequently. The nutrition has playing a more and more important role in food consuming with the time goes by. Here we classified the food into two subgroups: vegetable food and animal food. Vegetable food includes grain (grain, potato and legumes), vegetable oil, sugar, vegetables and wines, while animal food includes meats (pork, beef, mutton, birds and beasts meat), egg and aquatic product (see Table 3.5).

Calorie and protein are two main criteria to measure people’s nutritional level. Since mid-1980s, China has entering into the adjustment stage of meal consumption structure, the nutrition level and the state of health have improved quickly. The ingesting calorie and protein level per person have almost achieved the recommendation nutrition standard (RDA).

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Table 3.5

Urban and rural residents’ consumption structure and nutrition state (1985-1998)
Vegetable Foods Animal Foods Alcohol
4.37 6.98 7.8 9.68 8 12.9 14.4 17.8 -

Item

Area

Year Grain

Vegetable Oil
4 6.13 5.8 7.55 36 55.2 55.2 68 4 61.3 5.8 7.55

Sugar
1.46 1.4 2.52 1.76 5.5 5.3 9.5 6.6 0.007 0.006 0.01 0.008 1.3 -

Vegetable
131.1 108.97 144.4 113.76 2.4 19.6 2.6 2.05 1.5 1.2 0.3 0.2 0.2 0.18

Meat
12.9 15.53 21.9 23.87 5.9 7.12 100.4 109.4 1.2 1.4 2 2.2 5.99 7.21 10.2 11.1

Egg
2.05 4.11 6.84 10.76 3 6 10 15.8 0.3 0.5 0.8 1.3 0.2 0.4 0.7 1.1

Aquatic
1.6 3.31 7.1 9.84 1.3 2.6 5.6 7.7 0.2 0.4 0.9 1.2 0.04 0.08 0.17 0.24

Food consumption structure (kilogram)

1985

257 249.28 134.8 86.72 922 894 484 311 23.6 22.9 12.4 8 6.1 5.9 3.2 2.1

Rural
1998 1985

Urban
1998 1985

Rural Energy (kilojoules) Urban
1998 1985 1998 1985

Rural Proteid (kilogram) Urban
1998 1985 1998 1985

Rural Fat (kilogram) Urban
1998 1998 1985

Source: China Statistical Yearbook.

Shows in Table 3.5, we can find that although the grain foods are still main thermal origin, its role had gradually drops these years. In 1985, mainland Chinese rural inhabitant’s 93% heat was come from grain foods, the urban inhabitant’s 71% heat was come from grain foods. In 1998, it dropped to 83% and 56% respectively. In 1950, this proportion in Taiwan was 78%, and 64% in 1970’s.

Obviously, mainland urban and rural inhabitants increased the quantity of heat from other foods along with the increasing income and the change of the grain consuming type. But, both in 1980’s and 1990’s, rural inhabitant’s quantity of heat provided by non-grain foods is far lower than that of the urban

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inhabitant. Nowadays, the urban inhabitant get more heat from meat and other foods, but the rural inhabitant is more relied on grain foods. The meal nutrition structure in rural area needs improve urgently.

In the protein internal origin construction, the urban inhabitant’s vegetable protein dropped, the animal protein remarkable increased, the protein origin structure became more diversification. But the rural inhabitant’s protein origin structure is more unitary, the vegetable protein proportion is higher than that of the urban inhabitant’s. At the same time, the rural inhabitant is more relied on pork, which accounts for 80% of the meat consuming; their consuming of egg, fish and the grass feeding animal meat is quite few. This restricts the enhancement of rural inhabitant’s nutrition level.

3.1.3 Characteristics of Chinese food consuming market

Ⅰ . People’s food expending maintain a fast growth, and its proportion in whole family’s expending keeps dropping The Engel coefficient of Chinese family continues decline, in 2003 it has already fell into 39%. In 2003, among the national gross retail sales of wholesale and retail enterprises above norm, the food commodity increased 14.1%, the costume commodity increased 11.1%, and the using commodity increased 17.7%. Although the expending growth of food commodity is fast, its proportion in whole family’s expending keeps dropping.

Ⅱ . Expending on non-staple foods growth remarkably and the expending proportion of the staple food drops In 2003, the inhabitant’s food consuming quality improved continually, the basic staple food consumption saturated and has a dropping tendency, the nutrition-rich non-staple food consumption increased fast. Statistic data shows
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that Chinese urban inhabitant’s annual grain consumption per capita has dropped to 88 kilograms, the consumption of meat, fowl, fresh egg, aquatic product and vegetable oil continues to increase. The nutrition structure of meals further improved.

Ⅲ . Food commodity’s supply-demand relation still presents the buyer’s market character According to the data of the Ministry of Commerce of China and the China National Business Information Center, among the 82 kinds of food products in the second half year of 2003, 47 kinds’ (57.3%) supply and demand reached basic balance, increased 19.1% than the first half year of 2003; 35 kinds’ (42.7%) supply exceeded demand, reduced 19.1% compared with the first half year of 2003. The situation of demand exceeds supply in food market keep changing. To the food manufacturing enterprises, the market competition was still stinging; to the consumer, the food shopping is more convenient. We can also find that the market has strong request to adjustment of food category structure and renewal of food products.

Ⅳ. Supermarkets become the main place of buying foods; the foreign retail giant occupies the domestic food retail market on a large scale In 2003, food sales in chain stores, supermarkets and stockroom-style supermarkets were extremely good. By contraries, the sales in traditional food markets were unsatisfied. Why Chinese people like to buy foods in supermarkets recent years? Maybe we can find out some possible reasons. First, people have a lot of choices in supermarket and they can choose the food by them self. Secondly, the food price is usually lower than traditional food markets. Thirdly, the consumption environment is much better in supermarket and most of them offer good services to the customer.

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In 2003, foreign-capital retailers, such as Wal-mart and Carrefour, expanded fast in Chinese cities. They opened a lot of new stores in China recently and food selling is also their main business. This gave a huge impact of domestic supermarkets’ business and made the competition more intense.

Ⅴ. Food safety problem becomes the focal point of entire society, the consumption of green food become a new fashion In recent years, the whole society paid much attention on the food safety problem. The Chinese government also focuses on this problem and draws some new policies to deal with it. Beijing and other cities have formulated food market entry system one after another, and introduced more comprehensive food security control systems recent years. People now pay more attention on the health and nutrition aspects. The consumption of green food becomes a new fashion in China. If some food products have the logo of “Green Food”, they can be easily sold out in China. People even like to pay higher price for the green food.

3.1.4 The main social and economic factors that influenced food consumptions in China

Since 1990s, Chinese food consumption structure has changed enormously. The food consumption is influenced by many factors, such as population, resources, economy development level, people’s income level, people’s diet tradition and so on. In recent China, the most important factors that influenced the food consumption are inhabitant’s income level and food supply ability. Urbanization, the changing of population, the development of market economy, commercialization, the growth of income as well as internal changing of food industrial structure are the main factors affect the food consumption structure.

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Ⅰ . The urbanization progress and the changing of population’s influence on food consumption Since 1980, Chinese economy entered a new growth stage when the economy structure changed dramatically and the market economy developed fast. The labor force structure between city and countryside and the total population scale have also changed a lot, the urbanization progress accelerated, many labor forces go to work in cities. Since 1990, the rural labor force transferred more than 4 million persons to the cities every year, most of them go to the medium and small cities.

With the development of urban market, urban inhabitants have more rich choices of food than those who living in the rural areas. The urban people are easier to accept the foreign diet culture, more and more western style restaurants established in China. At the same time, Chinese people can find more and more foreign foods in supermarkets. Both people living in urban and rural areas are more willing to buy half-processed food rather than unprocessed food. Canned food, dried food, freezing food and convenience food are quite popular now.

Chinese inhabitants transform their eating concept from “eat full” to “eat well” and to “eat right”. Nutrition knowledge is easy to be accepted in cities, and the diet concepts changed quickly too. China’s urban population rose from 17.92 % in 1978 to 41.76 % in 2004 with annual growth rate of 0.92%. According to the Report of 21st century’s Chinese Foodstuff, under the same income level and price level, if an inhabitant shifts from the countryside to the small or medium cities, the annual grain consumption will reduce 23 to 25 kilograms, but the annual livestock product consumption will increase 4.2 kilograms (small and medium cities) to 7.2 kilograms (big cities), the aquatic product and other foods consumptions also increase correspondingly. Therefore,
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the urbanization progress not only influences food consumption level, but also affects food consumption structure.

Ⅱ. The income growth’s influence on food consumption After the people solved the problem of basic food and clothing, Chinese people’s income unceasingly grows; the demand of agricultural and subsidiary food products unceasingly expands. In the initial period of income growth stage, the direct consumption on coarse fare (including potato and other root crops) rapid dropped and the consumption of refined fare (including high quality flour and rice) rose. When the income growth to a certain stage, the demand of refined fare will be saturated and then have a dropping tendency, the demand of meat, milk and other animal food products will rise. From 1978 to 2020, the people’s average income enters to an unceasingly growth stage, the consumption pattern changed soon. Up to now, most parts of China have completed the conversion process from coarse fare stage to refined fare stage; the rural inhabitant pays great attention to the food quality and food consumption structure.

The countryside inhabitant’s grain consumption did not change much from 1980 to 1995, but the food consumption structure has obviously changed. The refined fare consumption per capita increased from 162.9 kilograms to 210.3 kilograms, the coarse fare consumption per capita reduced from 94.2 kilograms to 48.6 kilograms. At the same time, the oil consumption increased 94.6%, the meat and bird consumption increased 56%, the egg consumption increased 1.7 times, the fish and shrimp consumption increased 1.8 times. In addition, the finished food product and half-finished food product entered into the rural family rapidly. In 1995, the finished food product consumption per capita increased 26.3 %.

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In the developed areas, the higher-income consumer’s food consumption is focused on the good quality and health. The consumption of animal food product, wine and fruit increased fast. The family’s food expending proportion decreased. As for the food consumption tendency, Chinese inhabitant’s consumption will transfer from the quantity growth expansion to the quality growth expansion. The change in cities will be fast than in countryside. The high-income consumers will change more remarkable than the low-income ones. In brief, with the growth of people’s income level and the change of food quantity and quality, Chinese food consumption quantity will increase remarkably.

Ⅲ. The marketlization and commercialization’s influence on food consumption In the past, the majority of rural people’s food is produced by themselves. Along with the development of China’s rural economy and the enhancement of the commercialized degree, the rural inhabitant is more relied on product consumption. The currency consumption proportion of rural people increased from 41% in 1978 to 70% in 1997. According to the Report of 21st century’s Chinese Foodstuff, if the development degree of domestic market improved 10%, the consumption of grain and vegetable will drop 1.0% and 2.1% respectively, and the consumption of meat products, fruit and other foods will increase 3%, 2.1% and 1.9% respectively. It shows the impact of the development of food market and commercialization on Chinese inhabitant’s food consumption structure. As the developments level of eastern-China, middle-China and western-China these is obviously different, the regional food consumption level in these three parts is quite different too. The rural inhabitant’s food expending is RMB 595.87 Yuan, RMB 361.35 Yuan and RMB 270.59 Yuan respectively; the
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commercialization degree is 57.2%, 43.09%, 36.94% respectively. Therefore, we can find out that the commercialization degree of food has positive correlation with economy development level and marketization degree.

In addition, Chinese food consumption is also influenced by other factors, such as policy, price, local culture and regional development equilibrium and income distribution, and so on.

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Appendix 3.1 Chinese inhabitant’s nutrition meal and nutrition condition report (1998- 2002)

1. Changes on Meal

1.1 More and more oil, meat eaten is ten times more than 40 years before The meat is no longer fresh food; at the same time it is no longer a difficult matter too to have the meat. The statistics data provided by viceresearcher He Yuna of Nutrition and Food Security Department, Chinese Center for Disease Control and Prevention, revealed that the rate of Chinese urbanite daily energy taken from the meat is changing from 15.2% of 1992 to 19.2% of 2002. In the report of Nutrition Changes, American scholar Popkin pointed out that from 1961 to 2000, animal food such as pork, beef, mutton which people in the whole world ate increased by twice, but it has increased by 10 times in China.

1.2 The eaten fruits and vegetables became fewer At present, the type and quantity of fruits and vegetables in the market are all unceasingly increasing, but the fruit and vegetable actually eaten by Chinese people are unceasingly reducing. He Yuna introduced that, the daily fruit consumption of urbanite dropped from 80.1 grams of 1992 to 69.3 grams of 2002, the vegetable consumption dropped from 319.3 grams of 1992 to 251.9 grams of 2002.

1.3 More and more sugar, Chinese meal is coming sweeter Now Chinese people have more choices of sweets, such as cake, fruit juice, ice cream and so on. Take water for example, people drunk boiled water, tea and orangeade in the past, but now, people gradually have regarded fizzwater and other soft drinks as the daily water. American scholar Popkin pointed out
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in the report of Nutrition Changes, the sweets manufacturers often add saccharin into the products, and people’s foods are becoming sweeter slowly.

1.4 Taste becomes lighter and lighter, “light food” is more prefer by Chinese people The Chinese inhabitant’s taste is desalinized in some degree, the average salt ingestion amount per day dropped from 14 grams in 1994 to 12 grams in 1992 in whole China. It dropped from 13 grams to 11 grams in urban areas and dropped from 14 grams to 12 grams in rural areas. Vice-researcher He Mei from Chinese Center for Disease Control and Prevention said, people ate less salt than before is because that the food is no longer flavored only by the salt. Moreover, more and more people realize that too much salt can cause hypertension.

1.5 Chinese meal enters into “chronic disease period” Popkin thought that there are three development stages of meal and nutritional, which are “reduce hungry stage”, “chronic disease stage” and “behavior changing stage”. China now is transferring from the first stage to the second stage. A lot of developing countries are entering into the second stage too, its characteristics are increasing ingestion of fat and energy, and reducing of physical activities, therefore it will increase the emergence of meal-relevant chronic diseases.

2. Present problems

2.1 People eat more and more fat The general secretary of China Nutrition Organization Zhai Fengying said that the prominent question exists in Chinese meal structure is that animal foods and fat people swallowed increased rapidly, the cereal foods people ate dropped. This kind of meal structure is not balanced and reasonable. Eating
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much animal fat can cause adiposity and threatening the people’s health. In the recent 10 years, Chinese adult’s disease rate of hypertension raised by adiposity increased 31%.

He Yuna said that the pork is still the main meat in China, but the pork’s fat content is very high, it is higher than that of chicken, fish, beef and so on. He Yuna suggested that people should reduce the proportion of pork and increase the proportion of bird meats and fishes in the meal.

2.2 The fruit and vegetables eaten per day is far below the standard Everybody should eat at least 400 grams to 500 grams of vegetables and 100 grams to 200 grams fruits per day according to the suggestion of the Meal Nutrition Pyramid. But the consumption of fruit and vegetables in China is far less than this standard. We know that vegetables and fruit can help to prevent the diseases such as adiposity, diabetes and tumor. Zhai Fengying suggests Chinese people to eat more vegetables and fruits every day.

2.3 Although the taste becomes “light ", the eaten salt is still exceeds the standard Although the Chinese people’s taste is becoming desalinized, the average salt ingestion amount per day is still higher than the suggestion standard by WHO (not exceed 6 grams each day). Sodium and chlorine that the salt includes are all essential in the meal, but taking more sodium is a dangerous factor leading to hypertension. Zhai Fengying point out: “Always remember to put less salt while cooking”.

2.4 Modern life makes people lazier From 1992 to 2002, some researches on Chinese inhabitant’s physical activity demonstrated that people’s daily physical activities became less and less along with the popular using of electrical appliances and automobiles. The
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longer the static life time, the more the corresponding diseases, such as overweight or adiposity, hypertension, diabetes and so on. Chinese people should have more physical activities every day.

Source: Chinese Center for Disease Control and Prevention, 2003

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3.2 Chinese Functional Food Market

China’s functional food industry started in the late 1980s. It grew from fewer than 100 health food enterprises with a combined production value of RMB1.6 billion to more than 3000 enterprises with an annual production value of RMB50 billion, as of the end of 2003. Functional food industry, as a global sunrise industry, has being developed rapidly. In the past two decades, the volume of functional food market has being increased 36 times in the United States, 32 times in Japan, and European Union has an increasing rate of 17% per year. In China, the growth rate of expenditure of functional food both in urban and rural is 15-30% recently, much higher than the average growth rate of developed countries. In 2003, the sales of functional food in China broke though RMB 50 billion and it’s estimated that the volume will reach 100 billion RMB in 2010.

3.2.1 Definition of Functional Food China functional food markets have been growing rapidly in the recent years. Chinese people have been using food as medicine for centuries. A huge myriad of products are now available in the health food or nutrition stores. The Ministry of Health in China defines the “Health (Functional) Food” as “any food possessing the general nature of food, being able to regulate functions of human body and suitable for specific consumer groups, but without any intention for therapeutic purpose.” In China, the Health Food and the Functional Food have almost the same meaning.

The history of functional food development can be divided into three stages: (1) The first generation of functional food is the most primitive, only deduce the nutrition according to ingredients. These functions have not been examined by any experiments. (2) The second generation function food must be examined by animals and human beings, proving that it has some
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physiological functions. (3) The third generation functional food not only does have some functions, but also needs to be known the structure and the content. The third generation represents the tendency in the future.

There are 6009 kinds of functional food were approved by The Ministry of Health and State Food and Drug Administration of China by June 30, 2004. However, only 1917 of them are eligible to sell in the market, with the volume of 30-50 billion RMB Yuan.

3.2.2 Brief Introduction of China Functional Food Market Ⅰ. The development of functional food market The development of China functional food industry can be divided into four stages:
Table 3.6 Development of functional food industry

Scale Period Stage (No. of Factories) 1980s 1980s～1995 1995～1997 1998～2000 2001 till now Introduction Stagnation Prosperity Depress Revive 100 300 3000 1000 1000

Revenue Characteristics (Billion, RBM) 1.6 3 10 Herbal medicine, microbial 50 product and nutritive fortifier 20 Mainly in nourishing food Nutritional & herbal medicine

It is revealed that among China functional food production enterprises, SMEs accounted for the majority (see table 3.7). On the other hand, it is reported that 20 world famous transnational functional foods corporations set up branches in China by the means of acquisition, merger, leasing, etc., trying to scramble for China domestic markets. In the past five years their sales

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increased in China at the rate of 12%. In 1997, American Alaska oil and American Ginseng have created 20 million revenue in Shanghai, Hangzhou, Shenzhen, Guangzhou and Haikou. Recently, in China, the categories of functional food from Europe and United States are nearly 500, according to US market research company NPD, a famous forecast agent. In the next few years, the US functional food in Chinese market remains popular. Therefore, China will face up to serious challenges.

12.50%

1.45%

38%

>100 million 50-100 million