HALF A CENTURY OF PALM OIL EXCELLENCE IN CHINA
As 2024 marks five decades of diplomatic relations between Putrajaya and Beijing, it's noteworthy that Malaysia holds the distinction of being China's inaugural palm oil exporter, a milestone achieved in the mid-1980s.
From seeds of friendship, these two Asian nations have established and sustained fruitful business rapport, expanding beyond crude palm oil exports to encompass strategic collaborations in downstream processing, with sustainability at its core.
The commemoration of Malaysia and China's 50th anniversary follows the historic Joint Communiqué signed by Second Prime Minister Tun Abdul Razak Hussein and His Excellency Chou En Lai on 31st May, 1974.
Why China a key market for Malaysia?
Malaysian Palm Oil Council (MPOC) chief executive officer Belvinder Sron said with a population of 1.4 billion, China is undeniably an important market for Malaysia.
It generates significant demand for oils and fats, amounting to about 42.0 million tonnes annually, with 25% to 30% of this demand being met through imports.
“The growing demand and production deficit present substantial opportunities for Malaysia. The close geographical proximity between the two nations further enhances Malaysia's role in bridging any supply-demand gaps, particularly during periods when geopolitical factors disrupt the supply chain,” she told Bernama.
Belvinder said that despite a recent slowdown in the Chinese economy, China's status as the world's second-largest economy ensures a consistent and growing demand for palm oil.
Additionally, limited arable land and an expanding economy indicate that China is likely to increase its imports of vegetable oils, including palm oil.
The International Monetary Fund projected China's economy to grow by five% this year and 4.5% in 2025.
Sharing some data, Belvinder mentioned that in 2023, Malaysia exported 3.05 million tonnes of palm products to China, primarily consisting of palm oil and oleochemicals.
These two categories, she said, were the major components, accounting for 48% and 20% of the total exports, respectively.
Other products, including palm kernel oil, also contributed to the export portfolio.
The primary palm oil fractions exported from Malaysia to China were refined bleached deodorised (RBD) palm olein and RBD palm stearin, constituting 50% and 38% of palm oil exports in 2023.
RBD palm olein is primarily used in China for frying instant noodles, as cooking oil in food processing and catering and in food manufacturing, while RBD palm stearin serves as a feedstock for producing various oleochemicals.
Meanwhile, Belvinder noted that palm kernel cake has gained popularity in China as an alternative feedstock for animal feed production, reducing reliance on imported soybean meal.
Strengthening ties
Since the 1990s, the MPOC has actively engaged with Chinese stakeholders through government-to-government and business-to-business initiatives, showcasing palm oil's versatility and health benefits.
Seminars, summits and forums have facilitated direct interaction between Malaysian suppliers and Chinese counterparts, fostering new business relationships and enhancing existing ones.
"The MPOC established a representative office in Shanghai in 2002 to better manage these activities and serve as a focal point for the Chinese industry.
"This office plays a crucial role in organising marketing initiatives, gathering market intelligence on import demands and policy changes, and working closely with Chinese importers to meet their demand for sustainable palm oil in both the food and non-food sectors," Belvinder said.
China's sustainable development goals
Belvinder said China is actively progressing towards sustainability, although specific regulations for sustainable palm oil have not yet been introduced.
The country's 14th Five-Year Plan (2021-2025) emphasises a green transformation in economic and social development, highlighting green consumption as a key element in building a green economy.
“While formal policies mandating sustainable palm oil are still under development, some major Chinese food processors have already begun using sustainable palm oil.
“This shift is part of their strategy to contribute to sustainable development and to align with global sustainability goals. As the process continues, more companies are expected to incorporate sustainable palm oil into their operations,” she said.
Belvinder noted the growing importance of Malaysia's Sustainable Palm Oil (MSPO) certification, which upholds environmental and social responsibilities, suggesting it could play a crucial role in meeting China's increasing demand for sustainable products.
Forging a Fruitful Future
As China's market grows more sophisticated and its consumers increasingly health-conscious, MPOC anticipates a shift from conventional palm oil products like RBD palm olein and palm stearin to higher-value alternatives such as carotene-rich red palm oil, specialty fats, and hydrotreated vegetable oil, meeting new demand trends.
Further collaboration in research and product development is expected, potentially through joint ventures in Malaysia or China.
“This partnership will extend beyond food and non-food sectors to include bioenergy, notably in sustainable aviation fuel, where Malaysia aims to become a key supplier. These developments are set to elevate the relationship between the two nations in the palm oil sector in the coming decades.
“For MPOC, we will continue to adopt various approaches to promote palm oil in China, engaging with industry stakeholders, health experts and government agencies to highlight its benefits and versatility.
“We believe these collaborative efforts will enhance understanding and acceptance of palm oil across different sectors of the Chinese market,” she said.
Belvinder emphasised that due to China's limited arable land, the country would continue to face a shortage of locally produced vegetable oils, making it a net importer for the foreseeable future.
"As the most versatile and widely produced vegetable oil globally, the demand for palm oil in China is likely to grow. Thus, China will persist as an important market for the Malaysian palm oil industry," she added.