United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Abstract

Use of corn to make starch, sweeteners, ethyl alcohol, and other industrial products has 

accounted for most of the growth in China’s corn use over the past decade. Despite the 

surge in industrial use, China still has a surplus of corn. The country’s exports of cornbased industrial products have grown as exports of unprocessed corn receded. Industrial processing was encouraged by government policy early in the decade. Industrial 

processors in China benefited from policies that kept domestic corn prices from rising 

in 2007/08, but many experienced losses in 2008/09 when demand slowed and the 

government supported corn prices.

Keywords: China, corn, starch, alcohol, ethanol, industry, consumption, exports, price 

support

Acknowledgments

University of California-Davis student intern Yingying Gu assisted in gathering and 

analyzing data for this report. Helpful comments were received from John Dyck, 

Linwood Hoffman, and Mary Ann Normile of USDA’s Economic Research Service; 

Richard O’Meara and Hui Jiang of USDA’s Foreign Agricultural Service; Jerry Norton 

of USDA’s World Agricultural Outlook Board; Jacinto Fabiosa of Iowa State University; and Bill Tierney of Doane Advisory Services. 

1H. Frederick Gale and Francis Tuan are with USDA, Economic Research Service. Xiaohui Wang 

and Zhi Cao are with China National Grain and Oils Information Center.

H. Frederick Gale (fgale@ers.usda.gov), 

Francis Tuan (ftuan@ers.usda.gov), 

Xiaohui Wang, and Zhi Cao1

China Is Using More Corn for 

Industrial Products 

FDS-09K-01

December 2009

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction. . . . . . . . . . . . . . 2

Industrial Uses Dominate 

Growth in Corn Use. . . . . . . . 3

Policy Support Encouraged 

Growth. . . . . . . . . . . . . . . . . . . 6

Capacity Growth Outpaced 

Domestic Demand. . . . . . . . . . 9

Growth in Exports of 

Industrial Products. . . . . . . . 13

High Corn Prices Squeeze 

Manufacturers. . . . . . . . . . . 16

Slower Growth and Consolidation May Be Ahead. . . . . . . . 18

References. . . . . . . . . . . . . . . 19

Appendix. . . . . . . . . . . . . . . . 21
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China is the world’s second-leading consumer and producer of corn, 

accounting for 19 percent of world consumption in market year 2007/08 (fig. 

1). In past years, China was a leading exporter of corn, but its exports fell from 

a peak of 16 million metric tons (mmt) in calendar year 2003 to under 1 mmt in 

2008. To date, the country is not a significant corn importer, but many market 

analysts expect this may change as a result of China’s rising consumption. 

The rapid growth of industrial processing of corn makes it difficult to assess 

China’s corn market. About one-fourth of China’s corn now enters industrial 

processing, which yields hundreds of food, feed, alcohol, and chemical products. Estimates of corn use from analysts in China indicate that the share of 

corn used in industrial processing may be higher than currently estimated by 

USDA and is already at or above the share in developed countries. Estimates 

are complicated by the large number of products and co-products and the 

lack of statistical information on these industries.

This report describes the recent growth in industrial use of corn in China. 

It also reviews unpublished estimates of corn use from Chinese analysts, 

describes government support for industrial processing, and summarizes 

trends in corn product exports and prices. 

At first glance, growth in both industrial use and feed use of corn would 

be expected to raise demand to a level that will soon turn China into a corn 

importer. More careful analysis, however, shows that China still had a 

substantial surplus of corn in the 2008/09 market year (October-September), 

despite the rise in industrial use. The rapid rise in processing capacity was 

encouraged by government policies and outpaced the robust growth in 

domestic demand for corn-based chemicals, food, and feed additives. Faced 

with excess capacity, many producers sold their products on the international 

market, and helped trigger a worldwide boom in imports of industrial corn 

products. At the same time, China’s exports of unprocessed corn declined. 

Growth in industrial processing of corn slowed as the industry’s excess 

capacity became apparent.

Introduction

Figure 1

China and the United States accounted for over half of world 

corn use in 2007/08

Note: 2007/08 market year (China: October-September; United States: September-August).

Source: USDA, Economic Research Service using USDA, Foreign Agricultural Service, 

Production, Supply, and Distribution estimates. Accessed in February 2009. 

China

(19%)

United States

(34%)

European Union (8%)

Brazil (6%)

Mexico (4%)

Rest of world

(29%)
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Based on estimates by Chinese market analysts, industrial uses have 

accounted for nearly all growth in corn use in China since 2000 (fig. 2). In 

1985, less than 2 mmt of corn was used for industrial processing; however, 

the amount grew throughout the 1990s, reaching 10.5 mmt in 2001. With 

strong government support and robust demand, industrial use of corn then 

doubled to 20 mmt in 2004, and doubled again to 40 mmt in 2006. The 

growth in industrial use of corn slowed in 2007 and reversed in 2008 as the 

slowing economy reduced demand. Industrial processors cut back production 

in 2008 when the Chinese government set a minimum corn purchase price 

that erased profits for many types of corn processing.1

Industrial milling separates corn kernels into their components: germ, bran, 

and endosperm. Starch, protein, fiber, oil, and moisture are extracted and 

further refined into dozens of feed ingredients, sweeteners, alcohols, food 

additives, and other products. Starch is sold to industrial users as modified or 

specialty starch; processed into sugars and sweeteners like maltose, glucose, 

liquid and solid sugars, and high-fructose corn syrup (HFCS); or distilled 

into ethyl alcohol for beverages, fuel, or pharmaceutical uses. Organic acids 

and their salts are obtained by fermenting corn syrup or enzyme-treated 

starch. Acids and salts include citric acid, widely used in pharmaceuticals 

and foods; glutamic acids and their salts, including monosodium glutamate, 

that are important food-flavoring agents; and lysine, an essential amino acid 

used in animal feed. Corn-based starches, sugars, acids, alcohols and other 

products are used in making paper, pharmaceuticals, textiles, paints, cleaning 

solutions, and other items. Corn oil extracted from the endosperm is used 

as cooking oil. Residuals from processing—hulls, fiber, germ meal, gluten, 

distillers’ dried grains and steep water—are used as feed ingredients.

Industrial Uses Dominate Growth 

in Corn Use

1Estimates by China National Grain 

and Oils Information Center and other 

analysts in China show surprisingly little growth in feed use of corn in recent 

years. Livestock production (and feed 

demand) is growing at a slower pace 

than in the 1990s, and efficiency of 

feed conversion is improving. However, 

it is difficult to make conclusive statements about feed consumption because 

statistics on the livestock and feed sectors are sparse and analysts question the 

accuracy of official figures. 

Figure 2

Industrial processing was the fastest growing component of China’s corn use during the past decade

Note: Chart shows estimated domestic use of corn. Market year is October-September.

Source: USDA, Economic Research Service using 1985-94 data from China Academy of Agricultural Sciences and 1995-2008 data 

from China National Grain and Oils Information Center reports.

1985/86 87/88 89/90 91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08

0

20

40

60

80

100

Food, seed, other

Feed

Industrial

Million metric tons
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Figure 3

Growth in China’s industrial use of corn encompassed a variety of products

Note: Chart shows estimated use of China’s corn for industrial products. Market year is October-September. A 2009 speech by Yue 

(another official from the same company) estimated that industrial use fell to 38 mmt in 2008/09, but did not provide a breakdown by product.

Source: USDA, Economic Research Service using Yu, Zuojiang, “Analysis on China’s Corn Deep Processing Industry,” International 

Corn Industry Conference, Dalian, China, September 2008.

Million metric tons

1998/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08

0

5

10

15

20

25

30

35

40

45

Starch sugars

Beverage and

industrial alcohol

Fuel ethanol

Monosodium glutamate

Lysine

Citric acid

Other industrial uses

Production of all these corn products has grown rapidly. A 2008 conference presentation by an official from one of China’s largest agribusiness 

companies reported fourfold growth in industrial use of corn in China over 

1998-2007 (fig. 3) (Yu). The largest single categories of use were starch 

sugars (glucose, lactose, dextrin, maltose, HFCS, and oligosaccharides) and 

alcohol for beverage and industrial uses. Use of monosodium glutamate was 

estimated at over 4 mmt of corn in 2007. Production of lysine began in 2000 

and accounted for about 2 mmt of corn by 2007. Use of corn for citric acid 

grew nearly fourfold in a decade. Ethanol production used 11.6 mmt of corn 

in 2007—most of it for beverage, industrial, and pharmaceutical uses. Fuel 

ethanol production from corn began on a commercial scale in 2004 at three 

designated plants, which now consume about 3 mmt of corn annually.2

Estimates of the amount of corn used in industrial production vary and are 

complicated by the wide variety of products and a lack of data.3 In late 2008, 

ERS surveyed the corn market reports of five grain market analysis organizations in China and found their estimates of corn industrial use for the market 

year 2006/07 varied from 30 mmt to 40 mmt. Estimates of industrial use as a 

share of domestic consumption ranged from 22 to 27 percent, up from about 

10 percent in 2003/04.

China’s share of corn used for industrial processing is already high by international standards. USDA’s production, supply, and distribution database 

includes estimates of two components of demand for each country: feed and 

residual use, and combined food, seed, and industrial (FSI) use. In China, the 

United States, and other industrialized countries, industrial uses account for 

most of the FSI category.4 The USDA estimate of China’s FSI was 28 percent 

of its domestic corn use in 2006/07, comparable to the share in Japan and 

Canada and higher than the shares in South Korea, the European Union, and 

Brazil (fig. 4). The FSI share is much lower elsewhere in East Asia—in the 

range of 3-6 percent in Thailand, Taiwan, and Malaysia. Estimates of China’s 

FSI from Chinese analysts were even higher. The 37-percent share estimated 

2A fourth ethanol plant uses wheat as 

its main raw material, and a fifth plant 

that opened in 2008 uses cassava. A 

number of nongrain biofuel projects are 

in pilot stages.

3Estimates are further complicated 

by the fact that many starch and alcohol products can also be made from 

other starchy grains. In China, starches 

are made from corn, cassava, Irish 

potatoes, sweet potatoes, and wheat. 

China’s National Development and 

Reform Commission estimated that 

corn-based products accounted for 92 

percent of starch production. 

4India and African and Latin American countries have a high food, seed, 

and industrial share that reflects a high 

share of corn used as a staple food. 

These countries are excluded from this 

comparison. China’s food use of corn 

is larger than that of the United States, 

while U.S. seed use is higher than that 

of China because the U.S. planted area 

is much bigger.
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by China National Grain and Oils Information Center (CNGOIC) is close to 

the world-leading U.S. FSI share of 38 percent. 

The growing use of corn for industrial processing at first glance appears 

to reduce the amount of corn available for feed; however, a significant 

portion of corn used for industrial products emerges as feed additives and 

feed co-products. Lysine, for example, is an essential amino acid that helps 

animals build protein and gain weight faster. (In past years, China imported 

lysine, but it is now a lysine exporter.) Feed co-products of industrial corn 

processing include gluten feed derived from the bran and fibrous portions 

of the corn (a medium-protein feed) and gluten meal that remains after 

extracting starch (a high-protein feed). Distillers’ dried grains, another feed 

ingredient high in protein and fiber, is a co-product of alcohol distillation. 

Feed mills in China mix these products with grains, oilseed meals, and other 

ingredients to manufacture commercial feeds. 

These products generate significant revenue for processors and constitute 

a significant share of the country’s feed supply. China’s 40 mmt of industrially processed corn may yield 8-13 mmt of feed co-products. Industrial 

processing of corn has probably increased the efficiency of corn use in China 

by separating corn kernels into their components so that feed mills can mix 

feeds more precisely. This creates a market for each component of the corn 

kernel and minimizes waste, in comparison with traditional methods of 

feeding whole or crushed corn kernels to animals. 

Figure 4

The share of China’s corn used for food, seed, and industrial uses is

among the world’s highest

Note: Chart shows FSI (food, seed, and industrial) use as a share of domestic consumption of

corn. Animal feed accounts for the remaining share of use. Data are for 2006/07 market year.

Source: USDA, Economic Research Service using USDA, Foreign Agricultural Service, 

Production, Supply, and Distribution database, China National Grain and Oils Information 

Center (NGOIC), and Chicorn (yumi.com.cn).

China estimates:

Percent

NGOIC

Chicorn

USDA

United States

Japan

Canada

South Korea

European Union

Brazil

Malaysia

Taiwan

Thailand

0 5 10 15 20 25 30 35 40
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The rapid growth in corn processing in China over the past decade reflects 

a combination of robust demand and strong government support. In fact, 

processing companies’ headquarters often display large photos of Communist 

Party leaders visiting their facilities, and company brochures usually emphasize their support from the government. 

A confluence of factors led to a high level of government involvement in the 

2000s. Strong policy support was offered in the late 1990s when China had 

a glut of corn and prices were depressed. This dovetailed with other priorities, such as promoting economic development in the northeastern provinces, 

encouraging the development of high-tech industries, and expanding cornbased ethanol to meet goals for renewable fuels and energy independence. 

The central government identified corn processing as a key industry for 

government support in 2000, and the sector was singled out for support in 

China’s 5-year plans for 2000-05 and 2006-10. The government’s strategic 

plan for the corn industry for 2008-15 called for increased processing of corn 

by nurturing large-scale leading enterprises, “industrialized” supply chains, 

and the development of “production bases” of farmers. The plan stressed 

support for citric acid and other value-added products that could benefit 

farmers. The fuel ethanol industry was initiated in the early 2000s with 

government support. Fuel ethanol producers depend on government subsidies 

to earn profits, and a small number of plants with close government connections have been awarded quotas to sell ethanol at fixed prices to state-owned 

petroleum companies that monopolize gasoline blending.5

National strategies for corn processing are set by central authorities and 

implemented by various departments of provincial and municipal governments in conjunction with a designated processing company that may be 

partly owned by the local government. Companies receive support in various 

ways: through income tax waivers, reduced value-added tax rates, loans 

granted by state-owned banks, interest rate subsidies, access to real estate 

(often village-owned farmland that must receive government approval to 

be converted to industrial use) for industrial parks, and reduced tariffs on 

imported machinery. Local governments act as intermediaries who organize 

production bases of farmers to supply corn. A national program gives subsidies to farmers for the purchase of quality seeds for corn and other grains. 

Many subsidized corn varieties have high starch content or other characteristics that facilitate processing. 

Shandong Province has been the leader in China’s corn-processing industry. 

The industry is mainly driven by private investment, but policy support 

plays a role. For example, Shandong’s Zouping County initiated a cornprocessing export project in 2004 with support from the provincial branch 

of the import/export authority and the county government. At the end of the 

3-year implementation, the project was intended to involve 80 percent of the 

county’s grain producers as model farmers. Farmers are to be given extension 

services and market corn under contract to the Xi Wang (West King) Group, 

a company with capacity to process 1.8 mmt of corn annually to make starch, 

sweeteners, corn oil, and feed, mostly for the international market.6

5The subsidy for ethanol is set to 

ensure that companies can make a 

small profit. Companies also receive tax 

breaks. The subsidy was raised in 2009 

to compensate producers for a decline 

in the fuel price that year (Beckman 

and Jiang; China Business Journal). 

6“Zouping National-Level Corn 

Export Processing Base Standardized 

Demonstration Project Under Consideration,” http://www.zouping.gov.cn/

Html/zwxx/08260132.html.

Policy Support Encouraged Growth
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Jilin Province and other northeastern provinces—the principal cornproducing region in China—have lagged behind Shandong, but the region’s 

processing capacity has surged due to aggressive government support. The 

region has been targeted for support to address the lack of local demand for 

corn and to soften the impacts of the widespread failure of state-owned factories that were concentrated in the region until the late 1990s.7 In 2008, the 

Jilin provincial government issued a food processing plan that emphasized 

corn-based food additives, sweeteners, acids, chemical alcohol, pharmaceuticals, and foods like frozen corn and corn porridge mix. The Jilin government 

has supported the Dacheng Group, said to be the largest corn processor in 

Asia. Two distilling plants in Jilin and Heilongjiang Provinces produce cornbased fuel ethanol.8

By 2007, the central government sought to curb the blistering pace of growth 

that favorable policies had helped bring about. Given mounting concerns 

about rising food prices, food security, pollution, and inefficient use of energy 

and water (Zhao), the National Development and Reform Commission 

(NDRC) issued a document in September 2007 that sought to freeze industrial use at 26 percent or less (according to NDRC’s estimates) of China’s 

corn use. The commission required the approval for new corn-processing 

projects by the State Council (China’s highest decisionmaking body), the 

closure of inefficient processing plants, and the creation of a more concentrated industry through mergers and acquisitions (NDRC; China Ministry 

of Environmental Protection). Authorities also halted growth in grain-based 

ethanol production, mandating that future growth in biofuel production come 

from nongrain raw materials. Authorities called for controls on production of 

corn-based citric acid, lysine, and other products in oversupply. A December 

2007 document revising China’s foreign investment policy placed strict 

limits on foreign investment in corn-processing industries. During MaySeptember 2008, the government ordered many corn processors in provinces 

surrounding Beijing to shut down or cut back production to reduce pollution 

during the Olympic Games. 

In 2008/09, the government revived support for corn processing when China 

found itself with a glut of corn. China had a record corn harvest that year and 

demand for feed and industrial corn products slowed. China’s Premier called 

for greater capacity utilization and improved policy support for industrial 

corn processing as one of eight policy measures to support farmers during 

the global economic slowdown. The government also needed to dispose 

of a large stockpile of corn reserves it accumulated when it committed to 

purchase more than half of the corn crop in the northeastern provinces at 

minimum purchase prices to shield farmers from falling commodity prices.9

The government purchased 35 mmt of the record corn harvest of 165 mmt in 

2008 for state reserves. Processors and feed mills were unwilling to purchase 

corn at the support price. At times during 2008/09, China’s corn market was 

at a standstill due to high domestic corn prices, slower demand for industrial 

corn products due to the global economic slowdown, and weak feed demand 

(resulting from a cyclical decline in pork production and weak dairy and egg 

demand in the aftermath of the 2008 melamine adulteration crisis).10

7Ma describes a shift in Jilin Province’s agricultural exports from bulk 

corn to processed corn products, meats, 

and other value-added products. Support for Jilin agricultural exports was 

available from a fund for international 

trade promotion and a fund for the 

renewal of “old industrial areas.” 

8Other fuel ethanol plants use wheat, 

rice, and cassava. According to news 

reports, pilot projects using sweet 

sorghum were said to have been abandoned during 2008. 

9Corn stocks had also been bolstered 

by tight restrictions on grain exports 

during 2008.

10In September 2008, it was revealed 

that thousands of children in China 

experienced kidney problems linked to 

the chemical melamine illegally added 

to watered-down milk. Melamine was 

also found in poultry feed.
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With high raw material (i.e., corn) prices and slow demand, processors in 

the northeast and other regions idled much of their processing capacity. The 

government arranged to transfer corn from the northeast to southern provinces to ease the glut of corn in the northeast and offered a subsidy to northeastern processors for every metric ton of corn they processed. In June 2009, 

a rebate on value-added taxes (VAT) for export of processed corn products 

that had been canceled in 2008 was restored at a rate of 5 percent.11 11The value-added tax rebate for corn 

was kept at zero in June 2009. Rebates 

for some other agricultural products 

were set as high as 13 percent.
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China’s processing capacity for corn-based products appears to have 

outpaced domestic demand. Central government reports call for prevention of 

“blind” (mang mu) investment—the creation of excess capacity when companies encouraged by local authorities simultaneously build similar large plants 

in multiple locations without regard to the ability of the market to absorb the 

new supply. Much of the new capacity is in large, modern facilities, added to 

an existing base of older, smaller processors that often use outmoded equipment. The highly competitive market results in price cutting and losses. With 

a saturated domestic market, companies have expanded overseas sales to 

utilize their production capacity.

A December 2008 corn-processing industry report by Chicorn (www.yumi.

com.cn) estimated that China was utilizing about 57 percent of its corn 

processing capacity in 2008. Another analyst reported that China’s starch 

industry was operating at 62 percent of capacity and the ethanol industry was 

at 50 percent of capacity in 2007 (Yu). 

According to the Chicorn report, China had over 500 corn processing enterprises, but most were small in scale, used outdated equipment, and had high 

production costs. The Chicorn report noted that the capacity to produce some 

products far exceeded domestic demand. Among these products were citric 

acid12 and sorbitol (each with capacity over 1 mmt), lysine (capacity over 

700,000 mt), and monosodium glutamate (capacity over 2 mmt). 

ERS assessed the regional distribution of corn-processing industry capacity 

by analyzing data on 160 corn-processing enterprises obtained from the 

Chicorn report.13 Nearly all processing capacity is in northern provinces 

where most corn is produced (fig. 5). Eastern China’s Shandong Province—

a major corn-producing province and a major hub of agribusiness—had the 

largest processing capacity (13.2 mmt) in 2008, and neighboring Hebei Province was also a leading producer (7 mmt). In earlier decades, there was little 

processing capacity in northeastern China (Liaoning, Jilin, Heilongjiang, and 

Inner Mongolia), a region that grows nearly 40 percent of China’s corn but 

is isolated from markets in thriving coastal cities. In recent years, however, 

processors have concentrated on the northeast because of easy access to corn 

and government inducements to develop the region. The northeastern region 

now has about 20 mmt of corn-processing capacity, about half of it in Jilin 

Province. 

The corn-processing industry includes a small number of large companies and dozens of small mills and distilleries (see box, “Profiles of 

Corn-Processing Companies”). The Chicorn report listed 160 plants, their 

capacities, and estimated actual production in 2008 (individual plants of 

several large companies are listed separately). Eleven plants had capacity 

of over 1 mmt per year, and they accounted for about a third of the capacity 

of plants on the list (fig. 6). About 70 medium-sized plants (capacity 

200,000-900,000 mt) accounted for about half of total capacity. Small plants 

accounted for the remainder. 

12Eighty percent of China’s citric 

acid is made from corn.

13The listing excluded small-scale 

corn processors.

Capacity Growth Outpaced Domestic 

Demand
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Figure 5

China’s corn processing capacity is concentrated in northern provinces

Note: Chart shows estimated corn processing output capacity in 2008.

Source: USDA, Economic Research Service analysis of data from Chicorn (www.yumi.com.cn).

Tibet

Xinjiang

Qinghai

Inner Mongolia

Sichuan

Gansu

Jilin

Hubei

Heilongjiang

Hebei

Hunan

Shaanxi Henan

Anhui

Shanxi

Jiangxi

Liaoning

Shandong

Fujian Guizhou

Zhejiang

Yunnan

Jiangsu

Chongqing

Ningxia

Beijing

Tianjin

Shanghai

Taiwan

Corn industrial processing capacity

No data

Less than 3 MMT

3 - 7 MMT

10 - 14 MMT

Figure 6

The largest plants account for nearly a third of China’s 

corn-processing capacity

Note: Chart shows estimated annual corn processing capacity in 2008.

Source: USDA, Economic Research Service analysis of data reported by Chicorn, 

December 2008.

1 million metric tons 

or more (32%)

200,000-900,000 

metric tons (51%)

Under 200,000 

metric tons (18%)
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The list revealed that capacity utilization is lower among small plants. On 

average, the largest plants produced at about two-thirds of capacity in 2008, 

whereas the smallest plants used just a third of their capacity (fig. 7). About 

30 of 80 small plants were reported to be idle. The list noted that all the 

small starch plants in Zhao County of Hebei Province (with capacity totaling 

1.5 mmt) were “probably idle,” apparently due to an environmental cleanup 

campaign in that county.14 14A county government document 

listed 43 companies targeted for the 

rectification program aimed at reducing 

pollution by closing plants with weak 

environmental controls.

Figure 7

The largest corn processors have the highest rate 

of capacity utilization

Note: Chart shows ratio of reported production to processing capacity by size of plant in 2008.

Source: USDA, Economic Research Service analysis of data reported by Chicorn, 

December 2008.

1 million metric

tons or more

200,000-900,000

metric tons

Under 200,000

metric tons

0

10

20

30

40

50

60

70

Percent

Annual capacity of processor
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Profiles of Corn-Processing Companies

China’s corn-processing industry includes companies of varying scales, ownership, and location. Brief profiles 

of several representative companies engaged in industrial processing provide perspective on the diverse players 

in the industry, their roles in world markets, and the effects of government policies on their operations. Profiles 

are based on information provided by company web sites and news reports.

The Changchun Dacheng Industrial Group Co. (Jilin Province) claims to be the largest corn processor in Asia 

and the world’s largest producer of lysine. It is listed on the Hong Kong stock exchange. Its main products 

include corn starch, sweeteners, lysine, chemicals, high-protein feed, and machinery. It has six large cornprocessing plants and the capacity to process 3.2 mmt of corn annually, including 600,000 mt for various kinds 

of amino acids. It exports to North America, Australia, Brazil, other Asian countries, and Europe. The company 

was founded in 1996 and began producing starch in 1998. It initiated lysine production in 2000 “to replace 

imports.”

The Zhucheng Xingmao Corn Developing Co., Ltd. (Shandong Province) was established in 1993. It has over 

10,000 employees and seven starch mills. The company produces starches, sweeteners, corn gluten meal, 

monosodium glutamate, poultry feed, and corn oil. Its processing capacity is 3 mmt of corn. Its annual output is 

2 mmt of corn starch, 300,000 mt of modified starch, 150,000 mt of corn protein meal, and 150,000 mt of corn 

oil. It exports products to 40 countries. Zhucheng is involved in a number of central and provincial government 

food technology projects and is part of a Ministry of Agriculture plan to promote a regional adjustment of farm 

production. 

The Chengfu Food Group (Heilongjiang Province) is a private company with 1,300 employees that produces 

monosodium glutamate, sweeteners, lysine, feed, packing materials, and organic fertilizer. Its annual capacity 

is 400,000 mt of corn. Its output in 2006 of various products totaled 91,720 mt. Chengfu has six “green” corn 

production areas (certified as free of pollution and without toxic pesticides) that comprise about 165,000 acres. 

It is designated as a national agricultural leading enterprise, which entitles the company to government financial 

support and other benefits in exchange for purchasing crops from small farmers. Chengfu exports to Russia and 

east Asian countries.

Limin Starch Company is a collective enterprise with multiple starch production facilities in Zhao County of 

Hebei Province. The No. 1 plant was constructed in 1982 and has annual capacity of 50,000 mt of corn starch 

output and 100-200 employees. It has ISO 9001 quality management system certification and is designated as 

an agricultural leading enterprise of Shijiazhuang City. A document issued by the county government in 2007 

announcing a pollution-control program aimed at starch processors identified Limin as lacking environmental 

controls. The document listed 28 plants that would be closed and 19 that would have to meet requirements by 

a deadline. Limin plants were included on both lists. The December 2008 Chicorn report stated that all small 

processors in Zhao County (total capacity of 1.5 mmt) were probably idle.
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The conventional view among analysts is that rising industrial use represents 

increasing demand for corn in China that will turn the country into a corn 

importer. But a closer look shows that China’s corn supply has outpaced 

domestic demand. China’s exports of unprocessed corn decreased in recent 

years, but its exports of industrial corn products rose. Thus, China still has a 

surplus of corn—its exports have shifted from unprocessed corn to processed 

value-added products. CNGOIC estimates that China’s corn supply exceeded 

its use by 5.8 mmt in 2007/08 and 22 mmt in 2008/09.15

ERS investigated recent trends in industrial product exports by analyzing 

China customs statistics for a set of 19 corn-based starch, oil, sugar, feed, 

and chemical products (appendix table). These products are largely made 

from corn in China, although some may be made from other raw materials 

as well.16 The list of products is not exhaustive—other products that use 

corn as raw material are not included. For example, corn-based ethanol is 

not included since ethanol can be made from different raw materials and the 

statistics do not distinguish corn-based ethanol. The quantity exported is the 

weight of final products. The volume of corn used as raw material exceeds 

the volume of the final products in most categories. 

China’s exports of corn-based products boomed as producers saturated the 

domestic market. With keen competition and downward pressure on prices 

in the domestic market, many producers expanded overseas sales. Exports 

of industrial corn products rose from 1.4 mmt in 2004/05 to a peak of 3.4 

mmt in 2007/08 (fig. 8). The rising exports of corn-based industrial products coincided with a decrease in exports of unprocessed corn from 7.6 

mmt in 2004/05 to 550,000 mt in 2007/08.17 Exports of unprocessed corn 

sank further to 172,000 mt in 2008/09. The decline reflects policies taken 

by Chinese officials during calendar year 2008 to prevent food prices from 

rising, including withdrawal of grain export quotas, cancellation of VAT 

rebates for exports of grains and their products, and a temporary export tax 

on grain exports. Exports for the 2008/09 market year totaled 2.9 mmt, below 

the previous year’s peak but higher than export totals for 2006/07 and earlier 

years.

Exports of industrial corn products grew exponentially through the second 

quarter of 2007 (fig. 9). Exports increased for a range of products, including 

citric acid, lysine, corn starch, dextrins, sugars, syrups, distillers’ grains, residues of starch and corn milling, and monosodium glutamate. China imported 

nearly all of its lysine until the 2000s, but it is now a net exporter. Jilin’s 

Dacheng Group now claims to be the world’s largest lysine producer. China 

dominates world markets for some products. In 2007, China accounted for 

over 80 percent of global citric acid exports and over 60 percent of global 

fructose exports. 

China’s exports of industrial corn products dipped during the second half of 

2007 and then rebounded to a high level during the first two quarters of 2008. 

During 2007-08, international grain prices surged, but China’s restriction on 

corn exports helped keep China’s corn price below international prices. This 

gave Chinese producers of industrial products lower raw material costs than 

15Based on the corn balance sheet 

in China National Grain and Oils 

Information Center’s feed grain market 

supply and demand situation report for 

November 2009.

16ERS confirmed that product 

categories were primarily corn-based 

by checking the geographic origin 

of exports. For example, exports of 

sugar products (harmonized system 

code 170290) originated mostly from 

northern corn-producing provinces, not 

southern provinces where cane sugar is 

produced.

17ERS did not include ethanol in 

its estimate of corn industrial product 

exports since customs statistics do not 

distinguish corn-based alcohol. Yu 

reported a higher total of 3.8 mmt of 

corn exported in the form of processed 

products in 2007. China had a surge 

of ethanol exports during 2006 but 

cancellation of the VAT rebate reduced 

ethanol exports from Jilin and other 

provinces in 2007 (Ma; Yu).

Growth in Exports of Industrial Products
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China Is Using More Corn for Industrial Products / FDS-09K-01

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competitors in other countries. However, China’s advantage reversed later in 

2008 when international prices dropped, and Chinese officials supported corn 

prices above the international level. China’s industrial corn product exports 

dipped sharply in the fourth quarter of 2008 before recovering in 2009. In 

June 2009, officials restored the VAT rebate for exported corn starch at a 

rate of 5 percent. By the second quarter of 2009, exports of industrial corn 

products recovered to near the peak levels reached in the first two quarters 

of 2008. Exports for the 2008/09 market year totaled 2.9 mmt, below the 

previous year’s peak but higher than export totals for 2006/07 and earlier 

years.

Figure 8

China’s exports of industrial products grew as unprocessed 

corn exports diminished

Note: Market year is October-September. Industrial products include corn starch, corn oil, 

milling and distilling residues, glucose, fructose, other sweeteners, lysine, glutamic acid, 

citric acid, dextrins, and sorbitol.

Source: USDA, Economic Research Service analysis of China customs statistics. 

Million metric tons

2004/05 05/06 06/07 07/08 08/09

0

1

2

3

4

5

6

7

8 Corn-based industrial products

Unprocessed corn

Figure 9

China’s exports of corn industrial products have risen

Note: Chart shows quarterly exports. Starch and dextrins: corn starch and dextrins. Chemicals and food additives: citric acid, lysine, glutamic 

acid, and sorbitol. Milling residues: residues of corn milling, starch manufacture, distilling, and brewing. Sweeteners: glucose and fructose.

Source: USDA, Economic Research Service analysis of China customs statistics.

Million metric tons

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Sweeteners

Chemicals and food additives

Starch and dextrin

Milling residues

2000 01 02 03 04 05 06 07 08 09
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China Is Using More Corn for Industrial Products / FDS-09K-01

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China’s industrial corn product exports come mainly from a few geographic 

areas where large processors are concentrated. ERS analysis of corn industrial product exports using China customs statistics by city and province 

shows that 47 percent of the country’s exports for January-September 2009 

came from Shandong and 19 percent came from Jilin (fig. 10). These two 

provinces accounted for a combined 68 percent of industrial corn product 

exports, much higher than their 24-percent share of corn production. Sixty 

percent of Jilin Province’s exports came from Changchun City, where the 

Changchun Dacheng Group (see box, “Profiles of Corn-Processing Companies,” on page 12) is headquartered.18 Forty percent of Shandong’s exports 

came from Weifang and 16 percent from Zhucheng City.

Other large sources of industrial corn product exports in China include 

Rizhao, Huimin, Linyi, and Qingdao Cities in Shandong Province, and 

Siping, Baicheng, and Jilin Cities in Jilin Province. Hebei accounted for 12 

percent, but most of those exports came from a single city: Qinhuangdao. 

Anhui accounted for 5 percent (mostly from Bangbu City) and Jiangsu 5 

percent. Apart from Jilin, other major corn-growing provinces in the northeast (Liaoning, Heilongjiang, Inner Mongolia) accounted for a combined 

total of just 4 percent of industrial corn product exports (they accounted for 

more than one-fourth of corn production in 2008). 

18In China’s administrative system, a 

city or prefecture encompasses a multicounty region that includes rural areas 

surrounding the city. Many counties 

have been reclassified as cities since the 

1990s. 

Figure 10

Shandong and Jilin Provinces account for most of China’s exports

of corn industrial products

Note: Chart shows share of quantity exported for January-September 2009, based on 

place of origin recorded on customs documents. 

Source: USDA, Economic Research Service calculations based on China customs statistics 

accessed through Global Trade Information Services, Inc.

Shandong (47%)

Jilin (19%)

Hebei (12%)

Anhui (5%)

Jiangsu (5%)

Other (12%)
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Corn prices are a determinant of the competitiveness of corn-based industrial 

products.19 China’s exports of industrial corn products have risen despite a 

relatively high and rising domestic corn price (fig. 11). On average, China’s 

domestic corn price is 20-40 percent higher than the price at U.S. gulf ports. 

Since 2005, China’s corn prices have been on an upward trend, reflecting 

gradually tightening corn supplies. The cumulative 4-year increase in corn 

price at Dalian in northeastern China from April 2005 to April 2009 was 

about 65 percent. The average unit value of exported corn starch rose in 

tandem with the corn price. 

In 2008/09, China’s corn processors were buffeted by volatile fluctuation in 

world corn prices and a reversal of Chinese corn price policy. When international prices of corn and other commodities spiked in 2008 (Trostle), Chinese 

policymakers enacted temporary policies (as described earlier) to prevent 

domestic grain prices from soaring. The U.S. gulf price of corn rose above 

the China corn price, and the unusual shift in prices gave Chinese industrial 

processors a cost advantage in raw materials. This was a principal factor 

behind the soaring exports of industrial corn products during the first half of 

2008 (see fig. 9). 

In the fourth quarter of 2008, international commodity prices plunged and 

the worldwide economic crisis slowed demand for corn. Chinese authorities 

scrambled to support grain prices, announcing four rounds of corn purchases 

for government reserves at minimum prices. Authorities purchased 35 mmt of 

the 2008/09 corn crop in northeastern provinces—more than half of the crop 

in that region—to support prices.20

The competitive position of industrial users of corn in China reversed sharply 

as prices of starches, alcohol, and related products fell while raw material 

19According to Yue, corn represents 

90 percent of the variable cost of starch 

production, 80 percent of alcohol variable costs, and 50 percent of citric acid 

variable costs in China.

20The government announced plans 

to purchase 40 mmt, but news reports 

indicate that 35 mmt was actually purchased.

High Corn Prices Squeeze Manufacturers

Figure 11

Price of China’s exported corn starch rose with domestic corn price

Note: Exported corn starch price is the ratio of export value to quantity for corn starch (HS code 110812). China domestic price is wholesale 

price at Dalian converted to dollars at the official exchange rate.

Source: USDA, Economic Research Service using China National Grain and Oils Information Center, USDA, and China customs statistics.

$/metric ton

Jan−00 Jan−01 Jan−02 Jan−03 Jan−04 Jan−05 Jan−06 Jan−07 Jan−08 Jan−09

0

50

100

150

200

250

300

350

400

China exported corn starch price

China domestic corn price

U.S. gulf price of corn
17 

China Is Using More Corn for Industrial Products / FDS-09K-01

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costs (corn prices) were supported at high levels. In 2009, CNGOIC forecast a decrease in industrial use from 40.8 mmt in 2007/08 to 38.3 mmt in 

2008/09, followed by a recovery to 41 mmt in 2009/10. Many corn processors in China idled their plants in late 2008 and 2009. Yue reported that 

alcohol manufacturers’ capacity utilization fell to 36 percent in August 2009, 

down from a peak of 62 percent. Capacity utilization was also down sharply 

for starch, citric acid, and lysine production. 

As the 2009 harvest approached, the tradeoffs from supporting corn prices 

became clear. It was widely anticipated that the government would again 

support corn prices at a high level to protect farmers’ income and encourage 

them to continue planting corn. However, the high corn price translated to 

negative profit margins for corn processors. According to news reports, many 

processing facilities were idle for much of 2009 and many were bankrupt 

or trying to sell their factories (Wang). Small privately owned companies—

with less access to bank loans and ineligible for processing subsidies (only 

processors with at least 100,000 mt annual capacity were eligible)—were in 

an especially precarious position. High corn prices also crimped the profits of 

feed mills (who were not given subsidies) and livestock producers.

A regional imbalance in corn supply and demand also emerged. In much of 

the country, corn supplies tightened and prices rose, as private and onfarm 

inventories became mostly depleted as the crop year came to an end. 

According to industry news reports, at least 22 mmt of government corn 

reserves remained unsold in northeastern warehouses (Qi). In August and 

September 2009, China’s government auctioned about 12 mmt of corn from 

reserves, but much of the corn offered went unsold since many buyers were 

unwilling to purchase corn at the minimum prices set for the auctions. With 

large reserves still in government warehouses, many observers wondered 

whether there would be enough space to store the new corn crop after harvest 

in fall 2009 (Qi). 
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The rapid growth in processing capacity since 2000 is not likely to continue. 

Central government policymakers are now encouraging industry consolidation and elimination of excess capacity. Enthusiasm for support for grain 

processing has waned due to growing concern about domestic food security. 

Increased focus on pollution, water supplies, and energy use may lead to 

closure of some plants, cancellation of new projects, and higher operating 

costs in other plants. Closing plants with weak effluent controls or inefficient 

water and energy use may simultaneously address the excess capacity issue 

since these companies tend to be small, old facilities with low efficiency. 

The industry is likely to consolidate into fewer, larger companies through 

mergers, acquisitions, and closures of small outmoded plants. The concentration of the industry reflects economic forces as well as government 

priorities of creating strong “industry champions” with branded products 

and eliminating weaker small companies with lax environmental controls 

and inefficient use of energy and water. Some industry members thought 

the consolidation would be hastened by the bankruptcy of small processors 

during 2009, as described earlier (see Wang). At the same time, a handful of 

large companies are emerging as influential players in the domestic industry 

and in international markets. 

China’s future as a processor of corn products depends largely on the scarcity 

or abundance of corn in the country. The Chinese government encouraged the 

development of the corn-processing industry largely to reduce excess corn 

supplies and raise farm prices. A trend of rising corn prices in China since 

2005 suggests that these goals have been met. If Chinese corn prices continue 

rising in future years, the growth of the industry will slow and exports of 

industrial corn products may decline.

Slower Growth and Consolidation 

May Be Ahead
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Beckman, Chanda, and Junyang Jiang. China Biofuels Annual. U.S. 

Department of Agriculture, Foreign Agricultural Service. GAIN CH9059. 

July 17, 2009. 

China Academy of Agricultural Sciences. China’s Corn Industry. 

Unpublished report. January 1999.

China Business Journal. “Tigao Butie Nanjie Ranliao Yichun Yingli Kun Ju 

(Raising Subsidies a Difficult Solution for Ethanol Profit Predicament).” 

March 7, 2009. http://news.cb.com.cn/html/36/n-4636.html

China Ministry of Environmental Protection. “Clean Production Standards: 

Corn Starch Industry.” Draft presentation. September 2007. http://sjc.zhb.

gov.cn/info/gw/bgth/200711/W020071112264458021992.pdf

China National Development and Reform Commission (NDRC). Guanyu 

Cujin Yumi Shenjiagongye Jiankang Fazhande Zhidao Yijian (On Healthy 

Development of the Corn Industrial Processing Industry: Ideas for Guidance). Unpublished report. September 2007.

China National Grain and Oils Information Center (CNGOIC). Feedgrains 

Supply and Demand Situation Monthly Report. Various issues. 

China National Grain Bureau. “Wo Guo Jiujing Chanye Fazhan Xuyao Guanzhude Jige Wenti (Some Issues Related to Demands of Our Country’s 

Ethanol Production Growth).” March 3, 2008. http://ls.zhangye.gov.cn/

lskx/lsyj/200803/71052.html.

Chicorn. Corn Processing Industry Report. Various issues. 

Corn Refiners Association. Corn: Part of a Global Economy. Annual Report. 

2007. http://www.corn.org/CRAR2007.pdf

Fei, Zhongjia. “07/08 China Corn Supply and Demand Analysis.” Presentation at International Corn Outlook Conference. Dalian, China. September 

2008.

Ma, Ming. “Guangyu Jinyibu Tuidong Jilin Sheng Nongchanpin Chukoude Yanjiu (Research on further promoting Jilin Province’s Agricultural Exports).” Economic Review No. 9. 2007. http://lw.china-b.com/

jjlw/20090209/86049_1.html

Qi, Lu. “Lin Chu Yumi Tuo Shi Xiaoguo Xian Zhao (Prominent effects of 

Temporary Corn Reserve Market Intervention).” Zhonghua Liangyou 

Xinxi Wang (China Grain and Oils Information Net). September 30, 2009. 

http://www.chinagrain.cn/yumi/2009/9/30/200993016303091574.html

References
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Trostle, Ronald. Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices. WRS-0801. U.S. 

Department of Agriculture, Economic Research Service. July 2008. 

www.ers.usda.gov/publications/wrs0801/

Wang, Xiaoxia. “Yumi Jiagong Qiye Mianlin Tingchan Kunjing (Corn and 

Soybean Processing Enterprises Face Shut-down Predicament).” Jingji 

Shibao (Economic Times). August 31, 2009.

Yu, Zuojiang. “Analysis on China’s Corn Deep Processing Industry.” 

Presentation at International Corn Industry Conference. Dalian, China. 

September 2008.

Yue, Guojun. “Analysis on China’s Corn Processing Industry.” Presentation at 

International Corn Outlook Conference. Dalian, China. September 2009.

Zhao, Jixiang. “Yumi Shen Jiagong Ye de Fazhan yu Liangshi Anquan Xingshide Taolun (Discussion of Development of Corn Processing and Grain 

Security Situation).” China Starch Industry Association. Unpublished 

report. November 2007. http://www.cn-mds.org.
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Appendix

Appendix table—China exports of corn industrial products, 2008/09

Product description HS code Quantity Value

Thousand metric tons Million dollars

Corn (unprocessed) 1005 172.2 48

All industrial products of corn 2,888.0 1,734

Corn starch 110812 279.6 89

Crude corn oil, not chemically modified 151521 5.5 7

Refined corn oil and fractions, not modified 151529 12.4 18

Glucose (dextrose), under 20 percent fructose in dry form 170230 358.5 142

Glucose and syrup containing 20-49 percent fructose 170240 25.5 26

Chemically pure fructose in solid form 170250 0.2 1

Fructose 170260 35.6 20

Other sugar, including inverted sugar and syrup 170290 130.4 105

Bran sharps and other residues derived from milling corn 230210 340.3 52

Residues of starch manufacturing 230310 421.9 88

Brewing or distilling dregs and waste 230330 70.9 13

D-glucitol (sorbitol) 290544 49.7 29

Citric acid 291814 597.5 523

Salts and esters of citric acid 291815 92.7 91

Lysine and its esters 292241 84.5 102

Glutamic acid and its salts 292242 232.3 293

Dextrins 3505 150.8 133

Note: HS = harmonized system. Data are for October 2008-September 2009 market year. 

Source: USDA, Economic Research Service analysis of China customs statistics.