How more Asean-China agricultural trade could reshape regional, global markets

Two-way agricultural trade can help address food security concerns, strengthen productivity and pose a fresh challenge to the traditional dominance of US and Australian exports

Genevieve Donnellon-May

Published: 4:30pm, 18 Apr 2024

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Former Cambodian leader Hun Sen’s recent call for stronger Sino-Asean trade brings to light an often-overlooked but key aspect in the bilateral relationship: two-way agricultural trade.

Encouraging stronger agricultural trade between the Association of Southeast Asian Nations and China could address the growing food security concerns at both regional and global levels, while providing mutual benefits. Aside from strengthening agricultural productivity and supply, it could also help maintain a stable regional food market.

Two-way agricultural trade is booming. Between 2000 and 2022, the volume of Chinese agricultural exports to Asean countries skyrocketed from US$1.52 billion to US$61 billion, making China the economic bloc’s largest source of imports.

Southeast Asian nations are among the leading exporters of agricultural products such as palm oil, cereals, sugar and rice. In 2022, the region’s agricultural exports to China totalled nearly US$37 billion, accounting for 15.7 per cent of China’s total agricultural imports for that year.

Local agricultural production plays a key role in Southeast Asia, accounting for more than 20 per cent of GDP in countries such as Laos and more than 40 per cent of employment in Myanmar and elsewhere. Estimates suggest that bilateral trade volume, including agricultural trade, could reach US$100 billion by 2030.

There are several ways this could reshape Asian agricultural trade and cooperation. First, there is significant potential for agricultural technology (agtech) and biotechnology transfers. While the productivity of key agricultural crops such as rice in Southeast Asia has not kept pace with other regions in recent years, China has made considerable advancements.

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Joint research and development projects and other collaborative efforts such as regional research centres could strengthen markets for Chinese agtech while also supporting Southeast Asian agricultural productivity and regional stockpiles.

Second, stronger market access should be considered. Greater cooperation between Southeast Asia and China, including under the existing bilateral free trade agreement, could facilitate stronger two-way trade while paving the way for further cooperation in related areas of concern such as poverty reduction.

This could also help Asean countries export agricultural products to China and other countries through existing connectivity and logistics hubs. Doing so may help Southeast Asian agricultural exports reach new or harder-to-reach markets and vice versa.

Third, opportunities for foreign direct investment are significant. Currently, China’s agricultural investment in Asean countries accounts for 40 per cent of its total overseas agricultural investment. With Beijing seeking a stronger role in global and regional food governance, its “Food Silk Road” could promote stronger agricultural cooperation by creating food corridors or storage facilities to reduce post-harvest losses.

However, challenges lie ahead. While both sides might seek to boost local production and exports, more frequent extreme weather raises the risk of multiple crop failures across Asia. This could force countries to increase reliance on global markets while reducing export capacity, potentially making them less willing to help increase regional and national food reserves via trade.

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Food nationalism is another consideration. Having already resulted in protectionist measures in countries across the region, Asean states or China could seek to halt or reduce agricultural exports, hindering regional cooperation.

Further linking food nationalism to the weaponisation of imports and exports is China’s economic power. As Singaporean diplomat Tommy Koh has pointed out, Asean states remain concerned about China using its economic heft to coerce others to side with it.

Competing territorial claims and maritime disputes in the South China Sea only add to Asean countries’ concerns about China. Beijing’s actions, including harassing other countries’ fishing vessels and coastguard ships, add to the distrust.

This comes after past incidents such as China undertaking diplomatic and economic sanctions on the Philippines in 2012, including restrictions on some food imports, over their South China Sea territorial dispute. A similar situation emerged two years later when China began restricting banana exports from the Philippines at the same time as Manila pressed ahead with its case at an international tribunal, which ruled against Beijing’s claims in the South China Sea.

Greater inter-regional trade also has implications for Western agricultural exporters. Changes in China’s agricultural trade policies and production could influence global and regional food trade flows. A shift towards inter-regional trade could push Beijing towards challenging imports from Western nations with its own agricultural exports. Southeast Asian importers could seek to import greater quantities of cheaper agricultural products from China to help avoid concerns over supply chain disruptions.

For agricultural powerhouses such as the United States and Australia, growing competition with Chinese exports could prompt them to seek alternative markets or face stronger competition for market share. Addressing these concerns could require Western exporters to reassess their agricultural and foreign policies to maintain competitiveness.

Stronger inter-regional agricultural trade is an efficient way of helping to address growing food security concerns amid an increasingly fractured geopolitical environment, climate shocks and trade disruptions.

Although stronger two-way food trade could lead to a reduction in dependence on Western exporters in both China and Southeast Asia in the medium to longer term, demand for Western food imports is likely to remain for now.

Disputes between China and Southeast Asian states are largely being carefully managed at present. This needs to continue so they do not add to the challenges for governments and policymakers in the future.

Genevieve Donnellon-May is a researcher at Oxford Global Society, the Asia-Pacific analyst for The Red Line podcast and a 2023 Pacific Forum Young Leader