The Chinese National Bureau of Statistics announced last week that for the first time, the urban population of China is now greater than the rural population. This change in Chinese demographics is very significant for Australian farmers, even though the link between Chinese demographics and Australian agriculture may not be immediately apparent.

The announcement by the Chinese National Bureau of Statistics stated "In 2011, the proportion of urban population reached 51.27 percent, climbed 1.32 percentage points over previous year, the urban population stood at 690.79 million persons, went up by 21 million persons, rural population stood at 656.56 million persons, decreased 14.56 million persons. Urban population was 34.23 million persons more than rural population. " 

While the switch between rural dominance and urban dominance made news internationally, the underlying trend in migration from a rural to an urban population has been going on for some time. It is significant for Australian agriculture for a number of reasons. Firstly, as a general rule when people move from rural to urban areas, their income and their food consumption both tend to increase, and their diet changes. Put simply, the "three meals of rice a day" diet of the rural peasant is gradually replaced by an urban diet with a higher proportion of animal protein, with protein consumption (meat, dairy, fish, eggs, poultry) increasing proportionally until it begins to approach that of 'westernised' diets where approximately one third of daily calorific intake is protein. 

This creates increased demand for animal protein, (as noted in an Australian Farm Institute research report) which can be readily observed in the stratospheric increases in Chinese pork, poultry, fish and meat consumption (China is now the second biggest export market for Australian lamb) but also has a multiplier effect on demand for feed grain, as producing one kilogram of animal protein requires anywhere between two (poultry) and seven (beef) kilograms of grain. Again, the effect of this can be observed in Chinese feedgrain imports, which have grown from virtually nil to fifty million tonnes annually (twice Australian's annual wheat harvest) over the last decade, and shows no signs of slowing it's rate of growth.

Chinese feedgrain and meat demand will both have big direct  and indirect benefits for the profitability of Australian agriculture. Even if this increased Chinese demand is not met from Australian production, (the main growth in Chinese feed imports has been soybeans from Brazil)  having this growing demand impacting on world markets will lift world prices and create an indirect benefit for agricultural exporters such as Australia.

The migration of people from rural to urban China will have another impact, in that it is likely to speed up the consolidation of Chinese farms into bigger production units as the available rural labor supply shrinks, and farm consolidation occurs through necessity. This would be aided by more security over land titles, which is being encouraged by economists and is slowly starting to happen. This farm consolidation has the potential to lift Chinese farm productivity and help meet added food demand, but will also be limited if the migration from rural to urban is predominantly younger persons, and the rural population begins to age more quickly.

While all this is happening, the Chinese policymakers are desperate to try and make sure rural income growth keeps pace with urban income growth, because they know that a disgruntled rural population, and an overly rapid rural-urban migration rate will create problems in both rural and urban areas, and lead to unrest.

While this is a complex problem for Chinese policymakers, the overall impact on Australian agriculture will be positive, and the rural-urban migration in China is unlikely to be reversed.