After
10 years of restrictions, China’s government is opening the access of foreign
investments into the corn deep processing industry again. The government is
aiming to enhance the economy with this step and also hopes to improve the
effective way to reduce the huge corn storage.
Source: Pixabay
China’s
corn deep processing industry actually has the longest processing chain in all
food crops processing. After all, up to 2,000 downstream products can be
created from processing corn. The corn deep processing industry has segments in
the food business, medical, daily supplies, fuel, and more.
According
to market intelligence firm CCM, the Catalogue for the Guidance of
Foreign-Invested Industries was amended in 2017 and finally will into effect on
July 28. The amended version has cancelled all restrictions of foreign
investments into the corn deep processing and fuel ethanol industry, which
means domestic and foreign investors can equally invest in the industry and
mergers and acquisitions between enterprises are easier.
The
restriction for foreign investment was established in 2007 as a response to the
limited corn supply which was needed for the food and feed industry rather than
used in the corn deep processing industry. The result of the restriction was
that less than 26% of corn was able to be used in deep processing. Despite the restriction
of foreign investments, also new projects for deep processing were supervised
more closely and needed approval.
According
to CCM, the cancelling of the corn storage policy with the resulting drop of corn prices as well as the aiming of China’s government to stimulate
economic growth are the main factors for the change in this policy. However,
since China’s corn deep processing industry is on a quite mature level, the
opening to foreign investments might not change the current situation significantly.
The
biggest change will occur in the domestic competition, as foreign enterprises
are generally enjoying better funded companies, stronger research and
development abilities as well as higher talent in human resources. As a result,
the industry in China will likely concentrate more and the technology will be
improved faster.
Not
only the restrictions for foreign investments in corn deep processing has been
lifted, but also processing of edible oil and fats from soybean, rapeseed,
peanut, cottonseed, camellia seed, sunflower seed, and plam. Furthermore,
processing of rice, flour and crude sugar were also subjects of the improved
access to foreign investment.
The
corn supply for China’s corn deep processing industry was tight in the last
years. In order to feed the increasing population in China and guarantee corn
supply for food and feed, some corn deep processing products were restricted by
the government. Inefficient corn starch production lines even have been
required to be eliminated. For example, the 2011 edition of the Guideline
Catalogue for Industrial Restructuring stipulated that the construction of corn
starch production lines with capacity under 300,000t/a shall be
restricted.
What’s
more, Corn deep processing enterprises will certainly benefit from the corn
subsidy policy, especially starch sugar manufacturers: starch sugar,
particularly corn soft sugar, will be an increasingly popular substitute for
sugar, as the current sugar price is quite high, according to CCM.
The
peak season for the beverage industry comes, and consequently the consumption
of starch sugar, in particular HFCS, will become high. For example, 95% of
drinks produced by the Coca-Cola Company are added with HFCS, and its HFCS
consumption is expected to be higher in Q3 2017.
Currently,
the corn price remains low and the production costs of starch sugar are lower
than those in 2015 and 2016. Even if the consumption of starch sugar goes up,
its price will not increases greatly but remain stable.
About
CCM
CCM
is the leading market intelligence provider for China’s agriculture, chemicals,
food & ingredients and life science markets.
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