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News : Irish Economy Last Updated: May 19, 2015 - 7:42 AM


China-Ireland: Economic relationship on a slow burn
By Michael Hennigan, Finfacts founder and editor
May 18, 2015 - 7:17 AM

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 Li Keqiang (l), Chinese premier, is welcomed byEnda Kenny, taoiseach, at Ashford Castle, County Mayo, Ireland, May 17, 2015. Photo: Xinhua

China-Ireland: The current stopover in Ireland of Li Keqiang, the Chinese premier, is the latest in official visits by the leaders of the two countries in recent years. Nevertheless, the economic relationship is on a slow burn while there are opportunities for raising food exports. Meanwhile, Ireland's record in attracting Chinese outward investment has been poor.

The Chinese premier arrived at Shannon Airport on Sunday and will leave Monday for Latin America where he is due to visit Brazil, Columbia, Peru and Chile.

Li Keqiang met Enda Kenny, taoiseach, at Ashford Castle, Co Mayo, and they visited a beef and dairy farm near Headford on the Galway-Mayo border.

China and Ireland agreed that holders of diplomatic passports of both countries will be exempt from visa requirements for visits of up to 90 days to the other country while official passport holders who travel in the company of a minister on official visits of this short term duration will also be visa-exempt.

In addition, Simon Coveney, agriculture minister and his counterpart, Han Changfu, signed a joint statement on deepening agricultural cooperation.

Trade

In 2014 merchandise exports of €2.1bn amounted to 2.4% of total goods exports while in 2013 services exports of €2.4bn amounted to 2.6% of total services exports. Exports to China as a ratio of total exports was at 2.5% while imports were valued at almost €4.0bn.

Intel, the US chip giant, is likely Ireland's biggest exporter to China while commercial aviation leasing accounted for almost 40% of services exports in 2013.

In 2012, Enterprise Ireland, the State enterprise agency, said that foreign firms in Ireland were responsible for 94% of Irish exports to China.

Bord Bia, the food agency, reports that food and drinks exports to China were valued at €547m in 2014 — up almost 50% on 2013. This was 5.3% of total food and drinks exports in 2014.

Last February the Chinese government re-opened its market to Irish beef for the first time in 15 years. This news follows Irish beef re-entering the US market for the first time in 15 years, making Ireland the first EU country to be allowed back into the US market since the BSE brain disease scare.

China has a ban on all beef imports except from seven countries — Australia, Uruguay, New Zealand, Canada, Argentina and Costa Rica, and now, Ireland.

Reuters reported last month that China is considering a ban on advertisements for infant milk formula in a bid to tackle low levels of breast feeding, the official Xinhua news agency said, raising a potential headache for firms targeting the country's near $18bn market.

The draft would ban adverts in mass media or public places for dairy products, drinks and other foods that "claim to partly or completely substitute mother's milk", Xinhua said.

Reuters said that less than a third of babies are exclusively breastfed in China and the number is falling despite global health bodies recommending the practice for babies under six months.

At the same time, China's infant formula market is set to grow to more than $30bn by 2017, according to consultancy Euromonitor, making the country a magnet for dairy firms such as Danone SA, Mead Johnson Nutrition Co and New Zealand dairy exporter Fonterra Co-Operative Group Ltd.

Selling in China has lots of challenges and the world's main agri-food exporters are active in the market. There are no easy bonanzas and the Netherlands, the world's second-biggest agri-food exporter after the US and in 2010 over 3,500 companies in the Netherlands exported goods to China {Statistics Netherlands (CBS), 2012}. CBS calculated that a third of exports to China consisted of re-exports, against 46% of total Dutch exports. This means one euro of exports to China contributes more to the Dutch economy than the average euro of exports.

Foreign investment

Europe has been a popular destination in recent years for Chinese outward investment but so far Ireland has been off the radar.

We reported last February that Chinese investment into Europe was at record levels and at 50% higher than the US level. With 153 separate investments worth $18bn last year, Europe emerged as one of the top destinations for Chinese foreign investment globally. The UK is the top destination and $55bn has been invested in Europe in five years but IDA Ireland, the Irish inward investment agency, has yet to have an impact.

The other top destinations are Italy, the Netherlands, Portugal and Germany.

Last year we reported that in a survey by the Economist Intelligence Unit, Ireland didn't feature in the top 67 destinations for Chinese outward FDI (foreign direct investment).

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