During an interview with Oregon Public Radio the other day, I was asked where I saw the most opportunity for foreign businesses in China. My answer was education, healthcare, food, cleantech/greentech, and software. It is the same five industries I have been saying for years and the one that always seems to draw the most surprise is food.
Just as a bit of an aside, I divide the world between food cultures and drinking cultures, based strictly on whether the lawyers/clients in a country plan dinner based on its location between where we were working and where we will be going out drinking or whether dinner is based strictly on food quality. By this criterion, China is a food culture.
As China grows wealthier, its demand for safe and high quality food is going to continue increasing and foreign companies all along the food chain are well positioned to benefit. Most importantly, food is low risk at least to the extent that we can be certain there will always be at least some demand. And though I do not for a minute purport to have much expertise in Agrarian economics, it does not take a genius to realize that as China becomes more and more urbanized, it is correspondingly going to become less and less agrarian.
Nomura, Asia’s largest global investment bank, just came out with a report, entitled, The Coming Surge in Food Prices. The report is predicting “another multi-year food price rise, partly because of burgeoning demand from the world’s rapidly developing – and most populated – economies, where diets are changing towards a higher calorie intake.”
The report then goes on to classify the eighty largest economies on their vulnerability to “a sustained surge in food prices.” Nomura bases this vulnerability on, among other things, “whether or not the country is rich or poor, or a large net food mporter or exporter” and” in an attempt to gauge the overall impact on an economy, constructed the Nomura Food Vulnerability Index (NFVI), made up of the following three components:
- Nominal GDP per capita in USD at market exchange rates.
- The share of food in total household consumption.
- Net food exports as a percentage of GDP.
The list is on page 27 of the report and it is fascinating. It ranks Bangladesh, Morroco, and Algeria, as the number one, two and three, most vulnerable countries in the world to a surge in food prices, and New Zealand, Uruguay, and Argentina, as the three least vulnerable. Between these extremes, here are some more ratings, from most to least vulnerable:
- Hong Kong, 9th most vulnerable
- Phillipines, 13th most vulnerable
- India, 21st most vulnerable
- China, 22nd most vulnerable
- Vietnam, 24th most vulnerable
- Indonesia, 32nd most vulnerable
- South Korea, 40th most vulnerable
- Singapore, 49th most vulnerable
- Japan, 53rd most vulnerable
- Thailand, 55th most vulnerable
- Malaysia, 64th most vulnerable
- United States, 67th most vulnerable
- Canada, 68th most vulnerable
- Australia, 69th most vulnerable
My sense is that this list is pretty accurate. What do you think?
