China Council for the Promotion of International Trade (ccpit) 2009 Preface



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Chapter 11 An Outlook and Forecast on Light Industry


In 2008, various countries were influenced by the financial crisis. The year saw decline of production scale, dull sales and shrinking market demands in the world. With a relatively large export proportion, China's light industry was also impacted by the sudden decline of international demands. The production and sales of export-oriented light industry enterprises were stricken, some of which suffered from production and sales difficulties. In face of these challenges, Chinese government implemented negative economic stimulus plan, formulated Readjustment and Reviving Layout of Light Industry to guide its development in future.

In spite of the current export hurdles, China's light industrial products still have advantages in the international market with a large market share and a good reputation,. If guided by proper policies, the enterprises still have more room for development despite the traditional market demand decline of Europe, the USA and Japan and so on and more difficulties to export to new markets and developing countries. In view of the features of light industry and current domestic market demand situation, extension of new overseas market becomes the key to China's response to the problems faced by the light industry in operation.

At present, all light industry sectors are strongly complementary and greatly involved in various areas of people's life. In 2008, the production value of agricultural and sideline food processing industry and food manufacturing industry accounted for 33.09% of total light industry production value. Only food production accounts for one third of the light industry's total value. The stable basic life need in China and the gradual expansion of other domestic market provide the foundation for stable development of light industry.

In 2009, the country will invest heavily in building railway and other public facilities, which will promote the development of real estate and production-based service industry. In addition, the government increases public housing provision and will consequently stimulate sectors closely related to light industry such as home appliances, furniture and hardware. At the same time, the anticipation for policy adjustment results in delayed exports for some enterprises. But exports will resume as soon as the policy is nailed down.

The above factors indicate that the year of 2009, especially the first half, will be hard time for light industry. Later on, the market will be boosted by relevant policies. The production will gradually revive. The next 2 or 3 years will see a full recovery of light industry production and consumption.

    1. Food and Beverage Industry


In 2008, the major difficulty of China's food industry was high cost. Although the consumption demand shrank this year, the weak periodicity of this industry determined it would grow faster than China's GDP. Therefore, China's food and beverage industry will maintain a growth rate of more than 10% in 2009.

In the first half of 2008, the largest challenge for China's food industry is the pressure from high costs of raw materials and manufacturing. But from the middle of this year on, prices of agricultural products represented by grain and pork went down. So did the energy price. High cost pressure was greatly eased. In 2009, customer demand will be inhibited by China's inevitable economic slow-down, lower income growth, increasing employment pressure, and greater economic uncertainty. The world economic situation allows no optimism. China's food industry will be definitely influenced by macro-economy decline.

In 2009, all sectors in food and beverage industry will benefit in varying degrees from various cost drops caused by economic decline such as grain price, pork price, transport cost and interest rate and so on. Domestic grain output rise for the fifth consecutive year has become a foregone conclusion. So in 2009 the grain price will basically enter an adjustment period after continuing rises. As long as the quantity of slaughtered pigs continues to rise, its price will keep going down. Domestic legume and oil products prices which are closely related to international market price also have undergone substantial decline accordingly. As a whole, the stable or lower price of agricultural products will reduce processing cost and create more profits for food and beverage industry.

Chinese baijiu (white spirit) industry boomed in the first half of 2008 but became very uncertain in the second half. The country's four trillion yuan investment plan means that there will be strong demand for baijiu on administrative and business occasions in the coming few years. But the demand growth is counteracted by the sharp decline of export-based enterprises. Therefore, the high-end baijiu price has little room for growth. Meanwhile, middle-grade baijiu will encounter fierce competition.

With the improvement of people's lives, dairy industry entered its golden era. In the past decade, dairy products sales growth rate has been more than 10%. But this prosperity was interrupted by melamine incident. In the first 8 months this year, the dairy product output reached 12.957 million ton, up by 12.6% year-on-year, lower than the past. The listed dairy enterprises increased main business income by 25% in the first three quarters but their marketing expense also went up substantially. Because of milk-adulteration scandal, annual dairy product sales in 2008 was only around 19 million ton, up by 4.7% over last year, making the worst record in the recent ten more years. Its impact on customers might lead to single-digit growth or zero growth of domestic dairy product sales in the next year.

On the whole, food and beverage industry will keep a certain growth speed in 2009. But some sectors such as dairy industry will suffer serious growth decline influenced by some incidents.




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