China’s new food security law poised to crack down on food waste and boost grain processing

05 Jun 2024 --- China recently passed a new food security law, the first of its kind, to achieve “absolute self-sufficiency” in the supply of grain and related products. The law provides a legal framework for strengthening the country’s food security and covers the grain supply process, from production to processing. Under the regulation, grain processors must comply with relevant industry standards relating to the quality and security of the produce.

It also includes provisions protecting arable land from conversion to other uses, germplasm resources (seeds and tissues containing genetic data) and preventing food waste. According to the country’s Ministry of Justice, China currently feeds over 1.4 billion people with only 9% of the world’s fertile land.

Official data states that China’s grain output rose by 1.3%  to a record high of 695.41 million tons in 2023.

Experts say that food security has long been a priority for China’s president Xi Jinping, and while the government had regulations, rules and norms in place for decades, the link to a broader law was missing.

Industry impact of the law
Various players in the food industry, including farmers, food processors and international suppliers of agricultural and food products, will feel the impact of the law.

There are two notable changes to expect, Even Pay, director of Trivium China, a policy research think-tank headquartered in Beijing, tells Food Ingredients First:

“First, by linking existing requirements to the notion of ‘food security,’ the law is likely to raise the perceived priority of these policies among local officials. Second, the law explicitly mandates penalties for local officials that do a poor job of implementing food security requirements, which will further incentivize folks to implement existing requirements well.”

The food security law poses several challenges and opportunities to China's grain sector.Invoking chapter eight of the law, Pen further explains how this could play out: “Reducing food waste, as laid out in the new law, requires effective post-harvest processing and storage of domestic staple crops to reduce waste. The chapter also requires effort to reduce waste at food processing facilities.”

China’s 2021 Food Waste Law targeted the restaurant and catering industry and covered similar requirements. However, “their inclusion in a law linked to food security and backed by clearer supervisory measures will increase the likelihood of their adoption.”

Consequences for grain processing businesses
The law poses several opportunities and challenges to China’s grain production, storage and processing businesses. Ma Wenfeng, a senior analyst at the Beijing Orient Agribusiness Consultancy, tells Food Ingredients First that since the new law sets higher benchmarks for storage and processing than previous regulations, it should increase the industry’s entry barriers. 

“This shift will likely lead to greater market concentration and a higher degree of market monopolization, potentially increasing profit margins in these operational phases.”

However, he warns of the downside of an unchecked monopoly. “It is essential for large distribution groups to embrace greater social responsibility to achieve concurrent development and progress of both corporations and society at large.”

Wenfeng also points out that the grain department handles processing and storage in China, while the agriculture department oversees grain production. 

Therefore, by integrating food security into the production stage, as stipulated, the strategy becomes more “logical and aligned” with industry chain management regulations.

How the new law differs
Highlighting the differences between the newly passed and previous stipulations, Wenfeng notes: “Historically, food security-related laws focused primarily on the processing and distribution phases. The new law introduces a broader concept of food security, advocating for a diversified approach to ensuring a stable food supply.”

“It emphasizes the strategy of ‘storing grain on land and in technology,’ highlighting the enhancement of production and supply capacities. The responsibility of local government leaders in managing food security is also underscored.”

R&D investment
Ensuring that operators in production and distributors can secure a basic profit is vital for the health of the grain industry.According to the law, the country aims to increase investment in science innovation and IT applications and support basic and advanced R&D in the grain sector.

But while grain figures might seem fine on paper, experts say there is much scope for improvement in the production and distribution segments of the country’s main grain supply chain, especially in reducing waste and increasing production.

“Among the various links in the food security chain, production is the foundation, and distribution guarantees continuity. Ensuring that each segment’s operators can secure a basic profit is vital for the health of the grain industry,” notes Wefeng. 

“The state currently suppresses agricultural profits excessively at the planting stage, and government subsidies do not effectively reach the farmers, rendering grain production unprofitable. This poses a significant security risk and represents a major inefficiency in China’s ability to secure its food supply.”

In addition, rising distribution costs have led to a deterioration of the country’s commercial distribution environment, posing a “threat” to food safety.

Even as the government shows the urgency to fend off food-related risks, “it doesn’t change the realities on the ground for local officials who were already under significant pressure to deliver on food security (and have been for years),” concludes Pen.

By Anvisha Manral