What’s happening in China? That’s a question I often hear in conferences or when talking to clients seeking to understand new AgriFoodTech trends. Indeed, few geographies create as much curiosity as China, with a mix of anticipation of great innovation and anxiety of missing something significant.

1 – Funding: a large ecosystem, but not at the frontier of AgriFoodTech trends

If we use the standard “measures of innovation” such as the amount of funds being raised by startups, China is an interesting hub, third behind the US and India. As shown on the graph, after the highs reached between 2016 and 2021 linked to food delivery startups, funding has decreased to extremely low levels and is now mostly going towards innovative brands.

It is hard to spot more than a handful of deals in areas such as alternative proteins, agricultural resilience, or healthy ageing. Indeed, more broadly, if we use DigitalFoodLab’s AgriFoodTech trends, there are not many Chinese startups active in the most “hype” or disruptive technologies.

2 – China innovating behind the curtains

However, innovation is not limited to startups, far from it. Recently, a fascinating piece published by Green Queen looked at the top 20 cultivated meat patent applications globally. Leading are the most well-funded Western startups such as Upside Foods, Aleph Farms (Israel) and Mosa Meat (Netherlands). But, the surprise is below: 8 of the top 20 applicants are Chinese universities and a local startup.

This rise in interest from Chinese organisations is supported by an increasing public support (such as this new $11M cultivated meat centre). While things are slowing down in the West with much less funding for alternative proteins (even if government support is somewhat increasing), China is moving forward with its own model, which relies much more on already established organisations.

Beyond cellular agriculture, this can be seen in other alternative protein technologies such as precision fermentation. In many ways, what we are observing now could look like an accelerated version of what happened to the solar panel industry a few decades ago: the initial technology and efforts had been financed in the US and Europe, but due to a lack of political will, the scale up didn’t happen there but and Chinese companies which are now selling us cheap and efficient panels that we can’t compete with. The geopolitical consequences of a world where high-value, alternative proteins, healthy ageing, and agricultural inputs are all produced in China are immense and should be considered more seriously.

3 – The second Chinese delivery war: is it something that will happen elsewhere?

To illustrate the fact that innovation in food is coming from players beyond startups, consider food delivery. As for other markets, food delivery exploded in China a decade ago, with around tens of startups, and then after a war of attrition and concentration, a couple of leaders emerged (Meituan and Alibaba). Also, as in the rest of the world, after a long period of non-profitable growth, these leaders started to deliver healthy benefits to their shareholders.

However, what’s different in China is that a new delivery war has started recently. The new players are not startups, but deep-pocketed companies like ByteDance (the owner of TikTok). While this increased competition is good for consumers (who say no to €1 latte deliveries?), it is quite damaging:

• For the companies themselves: Alibaba posted quite awful results due to the increasing competition and additional marketing and delivery costs;
• Drivers who are paid less and are getting ever more pressure to multiply deliveries at great speed;
• Restaurants which are getting squeezed by this intensified competition;
• Food quality (the €1 lattes and food items don’t tend to be of the highest quality).

As for the ” first delivery war”, this one will probably land on a new equilibrium. As it is China, at any moment, the government can put a stop to this raging competition. However, for the rest of the world, the outcome will be quite significant: it is hard to imagine a different scenario than the previous situation with two to three leaders on a single market. If they are different from the “former leaders”, this may give ideas to tech companies in other countries to do the same and enter their own delivery war.
To answer the question with which I started, “no”, China is not a hot startup market, notably in terms of funding, but “yes”, it is very much a leading place for AgriFoodTech. In many ways, it is a leader and could even become a hegemony in the most disruptive technologies.