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the energy sector, in 2019, almost 85 percent Given its outsized role in global trade, a minor
of China’s oil consumption and over 40 percent shift in China’s trading patterns could elicit huge
of gas consumption was derived from imports. effects. Therefore, foreign investors engaging
Although China is less dependent on the US in in this market should stay abreast of the latest
this sector, compared with technology, recent developments and assess exposure to possible
geopolitical tensions have raised concerns about consequences.
potential disruption to energy shipments. The
key to avoiding this hidden danger is encouraging So far, we believe that China will see this time as a
renewables and diversifying international relations critical chance to deepen market-oriented reforms.
in the energy sector, which could increasingly be This would address concerns on the allocation of
pursued under the umbrella of the Belt and Road production factors (land, labor, capital, and data)
Initiative (BRI). in the market, further gearing local producers
to meet growing domestic demand and expand
In the food sector, it is forecasted by the Chinese industrial output for both the domestic market and
Academy of Social Science that there could exports. For key sectors tied to national security,
be a production shortfall of 25 million tons in such as technology, energy, and agriculture
wheat, corn, and rice by 2025 in China. The sectors, China’s policymakers are expected to
possible shortages in food supply would affect encourage more rapid foreign investment in high-
food prices and risk social stability. Due to rural end manufacturing and R&D besides supporting
labor shortages, lower agricultural productivity, the diversification of global supply chains.
and slow progress in rural land reform, China Considering factors, such as China’s huge domestic
still relies heavily on imported foods, especially market, comprehensive supply chain network,
soybeans, imported seeds, and foreign planting and strong business ecosystem on one hand, and
and processing technology. Here, US farmers will the rising labor cost and aging population on the
enjoy some short-term opportunities, derived other, many foreign investors are adopting “in
additionally from the agricultural product China, for China” and “China plus one” strategies
purchasing agreement set out under the phase one to tap into China’s market demand growth
trade deal. But, over the longer term, China will be while also lowering costs, diversifying risks, and
keen to tap into a diversified group of suppliers, accessing new markets.
which should yield opportunities for farmers in
Europe, Latin America, and those who are part of Although for some investors, managing exposure
the BRI. to pressures in home markets will be the
overwhelming challenge in the short term, there
How will DCS impact China’s foreign is still great opportunity in China and Asia whose
investment environment? economies account for some of the strongest
China’s DCS is currently vaguely defined, but it is growth engines in the world.
expected to be fleshed out in more detail soon, in
the upcoming 14th Five-Year Plan (2021-2025).
SOUTH CHINA BUSINESS JOURNAL 6
of China’s oil consumption and over 40 percent shift in China’s trading patterns could elicit huge
of gas consumption was derived from imports. effects. Therefore, foreign investors engaging
Although China is less dependent on the US in in this market should stay abreast of the latest
this sector, compared with technology, recent developments and assess exposure to possible
geopolitical tensions have raised concerns about consequences.
potential disruption to energy shipments. The
key to avoiding this hidden danger is encouraging So far, we believe that China will see this time as a
renewables and diversifying international relations critical chance to deepen market-oriented reforms.
in the energy sector, which could increasingly be This would address concerns on the allocation of
pursued under the umbrella of the Belt and Road production factors (land, labor, capital, and data)
Initiative (BRI). in the market, further gearing local producers
to meet growing domestic demand and expand
In the food sector, it is forecasted by the Chinese industrial output for both the domestic market and
Academy of Social Science that there could exports. For key sectors tied to national security,
be a production shortfall of 25 million tons in such as technology, energy, and agriculture
wheat, corn, and rice by 2025 in China. The sectors, China’s policymakers are expected to
possible shortages in food supply would affect encourage more rapid foreign investment in high-
food prices and risk social stability. Due to rural end manufacturing and R&D besides supporting
labor shortages, lower agricultural productivity, the diversification of global supply chains.
and slow progress in rural land reform, China Considering factors, such as China’s huge domestic
still relies heavily on imported foods, especially market, comprehensive supply chain network,
soybeans, imported seeds, and foreign planting and strong business ecosystem on one hand, and
and processing technology. Here, US farmers will the rising labor cost and aging population on the
enjoy some short-term opportunities, derived other, many foreign investors are adopting “in
additionally from the agricultural product China, for China” and “China plus one” strategies
purchasing agreement set out under the phase one to tap into China’s market demand growth
trade deal. But, over the longer term, China will be while also lowering costs, diversifying risks, and
keen to tap into a diversified group of suppliers, accessing new markets.
which should yield opportunities for farmers in
Europe, Latin America, and those who are part of Although for some investors, managing exposure
the BRI. to pressures in home markets will be the
overwhelming challenge in the short term, there
How will DCS impact China’s foreign is still great opportunity in China and Asia whose
investment environment? economies account for some of the strongest
China’s DCS is currently vaguely defined, but it is growth engines in the world.
expected to be fleshed out in more detail soon, in
the upcoming 14th Five-Year Plan (2021-2025).
SOUTH CHINA BUSINESS JOURNAL 6
