China’s reopening could boost the food and ag sector
From the beginning of the pandemic, until the end of 2022, China adopted a zero- Covid policy which caused border closures, and lockdowns that had dramatic impacts on all sectors of the economy.
In a recent report by the USDA, authorities indicated that economic growth in the country slowed to an estimated 3% in 2022, and the Hotel, Restaurant, and Institutional (HRI) sector was one of the most devastated by these measures.
Luckily, the agricultural sector, due to its importance to the Asian country, was able to survive and even thrive throughout these two years. In fact, according to the report, in 2022 “U.S. exports of agricultural and related products to China reached a record $41 billion.”
The reopening of the country and its economy comes as a huge relief to the local and world economy.
For 2023 and 2024, the International Monetary Fund (IMF) has projected economic growth of 5.2% and 4.5% respectively for China.
Even though this is considerably lower than what China is used to, and below the 5.5% GDP growth target announced by the government in March of 2022, “Chinese imports of agriculture and related products should continue to grow rapidly.”
A table comparing China’s GDP and Ag imports shows that throughout the last five years, imports from the US and other parts of the world towards China have grown more than the country's GDP. This trend is expected to continue.
Strict restrictions and control of transportation workers had caused delays in the flow of goods and multiple logistics issues. This caused transport costs to skyrocket, forcing many local businesses to start buying local products.
The impacts were felt not only in the local supply chain but all around the world.
With these restrictions easing, and port operations going back to normal, industry experts anticipate a complete recovery in 2023.