China-Laos rice trade has considerable potential

13 November 2017 Lao PDR

During his ongoing trip to Laos, Chinese President Xi Jinping called on both sides to build "a community of shared future with strategic significance" in a signed article published in the Laos media on Monday. Laos is also eager to enhance its economic links with China and cater for increasing consumer demand in the world's second-largest economy. Rice is a major part of the story, with China being one of the main destinations for Laos' rice exports.

Laos posted a small trade surplus with China in 2016. This favorable balance of trade with China has been a hard-won result and is also an issue of great importance for the country. If Laos can accumulate more foreign exchange reserves, it could become a major engine for driving economic growth, if used properly. Besides the country's traditional exports such as wood products, rice has become a new growth point in Laos' exports to China.

China agreed to allow imports of rice from Laos for the first time in 2015, a move that gave Laotian farmers access to the world's biggest rice market. In recent years, Thai fragrant rice has become one of the most popular consumer choices in the Chinese market, and there is a lot of public interest in rice imported from Laos, a country that shares a border with Thailand and has a similar natural environment. Rice imported from Laos to China is expected to rise from 7,200 tons in 2016 to roughly 10,000 tons in 2017.

However, this export potential is still far from being fully realized. Rice has long been the most important food crop cultivated in Laos. While the country boasts a long history of rice planting, a considerable portion of its rice is of relatively low quality. One reason for this is weak infrastructure. The Xinhua News Agency reported earlier this year that approximately 226,000 hectares of rice fields in the country are totally dependent on rainfall because they do not have irrigation systems. However, China requires imported rice be of high quality and free from any diseases. The demand in Chinese markets is increasing, so it is regrettable that Laos is unable at the moment to produce enough rice that can meet Chinese import standards.

In a bid to expand cooperation with Laos over rice, China could draw on its experience in agricultural cooperation with other Southeast Asian countries such as Cambodia. Following a series of measures to boost cooperation in rice planting, inspection and quarantine, as well as food security, Cambodia exported 94,720 tons of milled rice to the Chinese market in the first half of 2017, up 101 percent over the same period last year. China could make full use of its advantages in capital and technology to invest in Laos in a bid to improve the quality of rice in the country and push up productivity in related industries. In this regard, the two countries share large potential for cooperation in rice processing, warehousing and logistics.

Given Chinese consumers' enthusiasm for rice imported from Laos, its supply sometimes falls short of demand in the Chinese market. Although the China's Xuanye (Lao) Co Ltd was reportedly approved by the Chinese authorities as the sole exporter of rice to China from Laos, people can easily find different brands of "Laos' rice" at China's leading online retailer Taobao. It is high time for China to crack down on the smuggling of illicit rice and counterfeit goods in order to prevent defective products from damaging the reputation of Laos' rice.

Laos is not the only country that China is looking to in the hope of importing more high-quality rice. Many Southeast Asian countries, including Thailand, Vietnam and Cambodia, have established rice trade contacts with China. In a bid to deepen cooperation, coordinated mechanisms and arrangements are needed now. In this regard, an industrial park in South China's Guangxi Zhuang Autonomous Region to focus on trade, warehousing and processing of agricultural products exported to or imported from Southeast Asian countries would be helpful for boosting the rice trade between China and Southeast Asian countries. Although there are still a lot of problems that need fixing, rice trading has the potential to promote economic integration for China and Southeast Asian countries.