China’s Changing Food System: Its Urban Dimensions and Its Discontents

The following talk was given by Robert Gottlieb on 3/30/17 for The Wellington K.K. Chan Distinguished Visitor in Residence Program in Chinese Studies at Occidental College

China’s turn to marketization, globalization, and urban development during the past three decades has brought about major changes in its food system. This includes how and where food is produced, where it is distributed and sold, and what and where food is consumed. These changes are especially pronounced when it comes to urban food issues, which, in turn, has led to satisfaction as well as discontent on the part of urban food consumers.

To explore these changes, let me first set a context for this talk. My interest in China’s food system changes has several different sources. In 2010, UEPI, in conjunction with several other research and community-based organizations, sponsored an international conference (Moving Forward Together) on the environmental, community, and labor impacts from global trade and the flow of goods into and out of the Ports of Los Angeles and Long Beach and at ports and distribution hubs in other parts of the US. UEPI helped arrange for a speaker from the Hong Kong research and policy think tank, Civic Exchange, and UEPI staff member Mark Vallianatos made a workshop presentation on the globalization of food. UEPI had a strong research and action program around food system issues, and my book, Food Justice, co-authored with former UEPI staff member Anupama Joshi, included a discussion of the increasingly globalized nature of the food system, with a brief discussion of food system changes taking place in China.

Soon after the Moving Forward Conference, I had a meeting with Helena Kolenda from the Luce Foundation about a new funding initiative, the Luce Initiative on Asian Environmental Studies, or LIASE, that was in the planning stage. Occidental was invited to submit a proposal for the first round of applications for a LIASE grant and we were among the first five selected for this new Luce program. Our proposal would create a student research and faculty teaching component that included the development of a three-way relationship between Oxy, Hong Kong academic and community partners, and partners at Nanjing University in China. Civic Exchange helped establish multiple connections with Hong Kong academics and civic organizations while Professor Yin helped establish our connection with Nanjing University.  For the research component, we identified three areas: air quality, built environment, and food system issues.

We also provided for faculty and other researchers to make presentations about their research. It was after one of those presentations in 2011 by Simon Ng, who was Civic Exchange’s Chief Research Officer, that we began to explore the idea of collaborative research towards an eventual book publication. Our book, Global Cities: Urban Environments in Los Angeles, Hong Kong, and China, co-authored by Simon and myself, took five years to complete and will be available in stores in a few weeks. The book compares and contrasts the urban environments – and the policies and community responses – in six different areas in Los Angeles, Hong Kong, and China. These include chapters on ports and goods movement, air pollution, water supply and water quality, transportation, spaces (both public and private), and food systems.

I’ll focus tonight on China’s urban food environment. One side note: the book was completed and went into production shortly before the election of Donald Trump and before the upcoming election of Hong Kong’s Chief Executive and the 19th National Congress of the Chinese Communist Party. Those events introduce important new variables not just regarding policy and global restructuring but also community action and opportunities (and the limits and even reversals) for change; a subject for another talk that would be fruitful in comparing the China and US food system – and urban environmental approaches.

So how has China’s food system changed since the mid to late 1980s and especially after 2001 when China entered the World Trade Organization? This discussion, while focused on the urban dimensions of the food system, also has obvious deep implications for China’s changing rural food environments, to be discussed during tomorrow’s sessions.

Let me start with changes in food production — how and what and where food is produced. Food production changes include, among others:

Changing land ownership and more concentrated production units.

This includes a shift from communal production to smallholder lots to eventually some larger vertically integrated organizations that link production, processing, and marketing, such as the dragon head enterprises, one of the forms of agribusiness with Chinese characteristics. These larger organizations are subsidized by the central government and especially by local governments through tax and credit benefits, advantageous loans, and the availability of land and electricity.

Changing labor markets and migrations from rural to urban and peri-urban places

As the nature and structure of agricultural production has changed, the number of people working on the farms has declined, with estimates of the decline since the late 1980s ranging from five to ten million people a year who are no longer directly engaged in farming in rural areas. This is especially true of young people seeking new job opportunities. These migrations have created a type of semi-proletarianized peasantry, with peasant family households still trying to cling to their small land holdings while family members, especially the young, join the rural migrant labor force with its indeterminate status, neither urban nor rural. It has further led to a huge back and forth migratory flow between rural and urban and peri-urban areas, creating inmigrant clusters of a new “floating population.” It has also generated a kind of anti-migrant sentiment – along with policy restrictions — that are present in the cities. Those outcomes are familiar to us in the U.S. with our own history of immigrant exploitation, even more today due to Donald Trump’s restrictive immigration executive orders and policies that are further creating a vast tier of second-class non-citizens.

Changing production practices, including more inputs

Along with changing land ownership, marketing, and labor markets, food production has increasingly relied on more inputs, similar to what I would call the California industrial agriculture model that took root in the 1940s and 1950s. Those inputs include increased need for capital; increased use of machinery and technology; a shift from family labor to wage labor; greater energy needs and increased reliance on irrigation; greater needs for sources of capital; shifting crop production and attention to export markets; long distance and even globally sourced inputs such as feed and seed; and greater use of chemical fertilizer and pesticides and insecticides. Any one of those changes can bring about important shifts in production; their combination begins to fundamentally reorient the agricultural production system.

Greater environmental impacts from food production

Environmental impacts from food production are multiple. The loss of farmland has been exacerbated due to pollution impacts, some related to production practices but also due to industrial discharges such as cadmium that pollute the soil as well as the groundwater and surface water. Soil decline and loss of water resources are also due to overuse of pesticides and chemical fertilizers. China now has the dubious distinction, from an environmental perspective, of obtaining the status as the world’s largest user and producer of pesticides, creating serious impacts both in their production in chemical plants and in their use on the farm. A 2014 report by the Ministry of Environmental Protection, for example, identified a nearly 20% loss of farmland due to contamination.  Contamination of water resources in certain areas has become so severe – including contamination due to chemical-laden farm runoff – that for some water sources the quality of the water has been identified as unfit for any use, not just for human consumption, but for agricultural use as well.

Changes in what food is produced

Part of the agricultural restructuring involves the shift towards a different product mix, including animal production organized at industrial scale and practices. This also represents a shift away from rural self-sufficiency, a trend representative of a number of food economies in Asia and Africa that have become oriented towards global export markets. While China’s huge domestic market, including its rapidly expanding urban food markets, represents a separate market (though parallel in certain respects) from the export trade, it nevertheless links the multi-varied food supply chains that dominate key commodities, from soy to grain to beef and chicken.

 

Food System Changes: Food Retail

Moving along the food system, the increased role of the urban food economy is heightened by the changes in food retail and distribution. This includes, notably, the rise of supermarkets or hypermarkets, the largest of the food retail entities similar to our Big Box stores that combine traditional supermarket features with some department store features. The restructuring of food retail in China includes both a global and a domestic component and it now represents the largest food retail market in the world from what had been a minor presence until the 1980s. Since the 1990s, a number of global food retailers, notably Walmart, Tesco, and Carrefour, the big three in global retail until recently, have opened hundreds of stores in China, including several hypermarkets. First located in Tier I cities such as Beijing, Shanghai and Guangzhou, the global chains have sought to enter other Tier 1 and some Tier 2 cities as the focus of China’s policies on urban growth and development has continued apace.

Despite their hopes and anticipation of a major new global market opportunity, the chains, even as they have expanded in China, have experienced a number of challenges. Walmart, for example, which opened its first store in China in 1996, waited until China joined the WTO before making a big push to expand new store development. Strategies included a reliance on its cost-focused (squeeze the suppliers) supply chain management approaches along with a high-volume business based on multiple large stores located throughout the country (411 stores in 174 cities in 2017). But by 2017, Walmart also found that it had overreached and began to close some stores, even as it also pursued new store openings in lower-tier cities. Walmart also sought to reverse its problematic food safety reputation after a series of high profile scandals that led it to dedicate $25 million in food safety supply chain research last year, particularly for poultry. It has also begun to market an online shopping platform to attract China’s tech-savvy middle class consumers after it lost customers to several of China’s on line grocery businesses. Despite these efforts, Walmart has concluded that its China experience has been at best a mixed outcome even as it remains central to its global market strategy.

UK-based Tesco, which entered China in 2004, had perhaps the most difficulty of the global retailers. With ambitious plans to expand to as many as 200 stores by 2016 and a reliance on its well-developed hypermarket format, Tesco experienced multiple difficulties in its China operations. For example, similar to the problems it encountered when it sought to enter the US market, including Los Angeles, Tesco in China was not successful in fully adapting to specific Chinese consumer interests and preferences. With sluggish growth results, Tesco, in 2013, accepted an offer from China’s largest retailer, China Resources Enterprises (CRE), to establish a joint venture, with Tesco the minority partner at 20 percent.

The cultural challenge that the global retailers experienced has ultimately favored its domestic competitors such as CRE. CRE is a state-owned enterprise that is part of a huge conglomerate that operates in six other sectors besides food and retail, including cement, real estate, power supply, gas, and medicine. Beyond its state-owned status and the potential policy advantages that come with it, CRE along with other domestic retail companies can better take advantage of the preferences and tastes of China’s increasing numbers of urban middle class shoppers.

However, the retailers, both domestic and global, have also experienced recent setbacks, due to China’s slowing economy. According to Euromonitor International’s annual analysis of China’s Retail Sector last published in December 2016, the urban food retail sector is increasingly polarized between meeting its urban customers desire for better prices and other wealthier urban consumers more focused on quality and convenience. While the hypermarkets have experienced mixed results, new specialized “premium” markets (the US equivalent of stores like Gelson’s and Bristol Farms) have been introduced by some of the big Chinese domestic chains. At the same time, small sized convenience store type formats have been introduced or expanded in number.

Keep in mind, these food retail changes, or what Timothy Lang has identified as a type of “food retail industrialization,” are nearly entirely an urban phenomenon and do not extend into some of the neighborhoods and areas where the migrant populations have settled, such as the “villages in the city,” as some of these places have been called. A widespread street food culture still exists within urban China as part of a larger informal food economy that includes open air markets, street vendors, and individual plots for growing vegetables.  Meanwhile rural areas, which relied through the Mao era on state stores that began to disappear in the 1980s and 1990s, saw those state stores make way for the urban-focused “private” or “free market” retail market system (albeit also with some state-owned enterprises like CRE). Although not part of this presentation, it would be interesting to evaluate how the rural food retail system has mimicked or differed from the food retail changes taking place in the cities, particularly in the mega-cities.

 

WHAT AND WHERE PEOPLE EAT – CHANGES IN CONSUMPTION

One of the biggest food system changes related to the restructuring in the urban food retail and agricultural production sectors has been the change in what people eat. This includes:

** Increased volume of processed foods consumed

According to Euromonitor, the retail sales and per capita purchases of processed food increased four times between 1999 and 2013 in China, for a 22.4% annual growth over that fourteen-year period. The availability of processed food, including highly processed food with a far higher sugar, salt, and fat content, was also made possible with the rapid expansion of the urban food retail sector.

** Changes in diet

The changes in food consumed include the trend toward a diet heavier in meat, poultry, and other protein sources and a reduction in the consumption of the traditional sources of grains and starchy roots. One study estimated that in the space of a few decades, the ratio of consumption of grains, vegetables, and meat items shifted from an 8-1-1 to a 4-3-3 ratio, with rapidly growing consumption of meat, pork, and poultry creating a more protein-heavy diet. The shift toward more meat and poultry improved important dietary needs, but also became part of a food consumption pattern that favored more of the processed foods and snack foods that also had a higher salt, sugar, and fat content. This has led to what some researchers have called “China’s nutrition transition.”

Increased weight gain

This nutrition transition, fueled by increases in fast food and processed foods and combined with other factors such as decreased physical activity, has led to increases in overweight and obesity. A study in The Lancet identified 62 million obese people in China in 2013, which represented nearly 10 percent of the world’s obese population (the United States had the highest numbers, at 86.9 million). Books and articles with such titles as “Fat China” or “Obesity Rate on the Increase” have identified another outcome of China’s modernization strategies.

 

Consumption-related health outcomes

The changes in diet and reduced physical activity in urban areas have further led to a sharp increase in the prevalence of diabetes, similar to those in Los Angeles and Hong Kong. According to national surveys, diabetes prevalence increased from less than 1 percent of China’s population in 1980 to 11.6 percent (or fourteen million adults eighteen or older) in 2010, with more than half the population having possible risk factors for the development of diabetes or cardiovascular disease. As a side note, with China’s marketization in mind, some of the global drug companies have perceived advantages in these numbers, with their promise of “double-digit pharmaceutical sales growth and significant opportunity for multinational pharmaceutical companies,” as one research report for such companies characterized the opportunity. However, to put in perspective, changes in diet in the country as a whole, including more protein sources and greater availability of a variety of foods, have also significantly reduced the incidences of hunger and extreme food insecurity, particularly in rural areas.

More Fast Food, More Eating Out

In China’s cities, there has been a significant increase in away-from-home food spending and eating out. While eating out was almost nonexistent as recently as the early 1980s, it increased to 22.8 percent by 2010. And while those percentages for Chinese cities are smaller than those for Los Angeles, they represent a more dramatic shift in where food is consumed. This trend also coincides with the rise of a fast food culture in China, led by global chains such as Yum Brands (KFC) and McDonald’s, but also including a number of domestic counterparts. Similar to the global retail chains, the global fast food companies, while increasingly dependent on their global markets including China (China represented at one point as much as 50% of KFC’s total sales) have also experienced some uneven performances, including from food safety scares.

 

China’s Food System: its Beneficiaries and its Discontents

Food Safety

Food safety in fact has emerged as one of the most significant of the problems associated with China’s urban food system changes. The term “food safety” first emerged prominently during the 1990s as concerns shifted from historical problems with “poisoned foods” due to unsanitary conditions, with spoiled foods, and with unsafe storage, to contemporary concerns about hazardous food additives, toxic food preservatives, fake foods, chemical inputs, and cost-cutting abuses along the supply chain up to and including markets and restaurants. Such products as adulterated baby formula and powdered milk, fake soy sauce, cooking oil adulterated with sewage oil, and adulterated or mislabeled meats have led to nationwide scandals and heightened food safety scares. Whether related to the trade in live poultry or contaminated ingredients in products, such as melamine in baby formula which led to serious illnesses and even deaths, each scandal has only magnified such fears and begun to shift certain government policies, food product selections, and individual choices of what to eat. For example, after the baby formula scandal in China led to a huge increase in Hong Kong of purchases of baby milk formula by mainland visitors and by black market traders, the Hong Kong government imposed a limit of two cans of formula that could be carried across the border. It also led to new food safety related policies introduced in 2015 by China’s central government that targeted such items as infant formula milk powder, health food labels, online shopping, and small food manufacturers and processing mills, although the success of such policies is dependent on local and regional implementation that, at best, has an uneven track record.

Organic Food

Along with food safety, the scandals about the toxicity of the food production and food supply systems has led to a complex series of standards governing the use of an “organic” label. There are actually three types of organic or green food labels: “hazard-free” (which is the weakest), “green food” (which is more of a transitional label or not quite organic), and “organic” (the strictest and also the most expensive). Yet even the organic standard has run into problems due to the skepticism about how such labels are granted. One interesting comment I came across was from Tony Guo, who runs an organic-oriented food retail chain in Shanghai, who argued that he considers as many as 30% of all organic labels to be falsified or misleading.

Alternative Food System Strategies

It is clear that China’s urban food system changes have generated multiple concerns, including the erosion of traditional agricultural practices that over the centuries had represented a connection to the soil and the use of sustainable growing strategies. Food safety scandals and concerns about the toxicity and chemical hazards of the food supply chain are the most prominent areas of concern among urban consumers and that discontent has led to various government policy initiatives in the past few years, although the concerns still remain.

At the same time, there is growing interest in a range of what we would consider in the US “alternative food system” approaches, ranging from the development of Community Supported Agriculture (or CSA) farms, urban agriculture initiatives, and rooftop gardens, among others. The CSA farm model, in particular, was initially developed in China around 2010-2011 as a way to increase support for a sustainable agriculture approach and to create a bond between consumers who considered themselves “ethical eaters” and farmers. CSAs were also designed to increase awareness about the need to facilitate and support a new generation of farmers, particularly in areas within or near urban centers.

However, some of these initiatives tended to reinforce a consumer orientation focused on the search for “safe” or “organic” food rather than focus on helping build more sustainable food growing and new urban-related farm development. This consumer orientation also took on more of a class dimension when some organic farms, called “special supply farms,” were specifically earmarked for high ranking government officials and/or wealthy consumers.

 

China’s Food System Today

In sum, China’s food system today continues to be in flux, as the core goals of urbanization, marketization, developmentalism, and, increasingly, globalization, remain dominant. This is happening in a country that still has a huge rural-based smallholder farm population, and a long historical tradition of communal and cooperative modes and connection to the soil. China’s food system is increasingly urban-focused; it reinforces some of the regional and class divides in the country; and it has sought, sometimes unevenly and hesitantly, to position itself within a global food system. This food system, however, is not monolithic; a diversity of food growing practices and regional cuisines and diets still exist and discontent continues to percolate about some of the outcomes of a food system that reinforces disparities, environmental damage, and profit-driven tampering with how food is produced and sold. In our book, we asked: can a new ecological-based farming strategy and an ethical farmer-producer-distributor-eater relationship evolve as part of a larger sustainable development approach impacting both production and consumption? Can such goals as “inheriting a healthy dietary tradition of consuming mainly vegetable food and less animal food” and “protecting food with local characteristics,” stipulated by the Chinese government’s guidelines on food and nutrition development issued in February 2014, be truly implemented in the face of the increasingly dominant food system trends?  Those are questions that resonate when addressing the US food system as well and for those of us who seek to not only study it but to change it as well.

-Robert Gottlieb


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