The UK sheep market is well-positioned to serve the growing global demand for products in the coming years.
But the industry is being disadvantaged by slow EU progress in negotiating free trade agreements (FTAs) with other countries and areas.
These were the findings of an AHDB and International Meat Secretariat (IMS) report, World Sheep Meat Market to 2025.
In the report, its author Lionel Colby said: "The emergence of China is changing the dynamics of the global sheepmeat market. China is now the largest producer, consumer and importer of sheepmeat."
AHDB said the UK was the third largest exporter of sheepmeat and was in a good position to increase its trade both within and outside the EU. With the global supply situation expected to remain tight, there could be a positive outlook for prices, the levy body claimed.
"Some liberalisation in the global sheepmeat trade, through FTAs, is taking place, although the EU has been slow in negotiating them," Mr Colby added.
The EU is currently involved in negotiations for several trade agreements.
It has recently negotiated the comprehensive economic and trade agreement (CETA) with Canada and is currently in talks on the Transatlantic Trade and Investment Partnership, a potentially huge bilateral deal which could create the world’s largest free trade agreement.
Agriculture is understood to be one of the main battlegrounds for negotiation.
Charles Sercombe, livestock board chairman at the NFU, urged caution in putting too much emphasis on the Chinese market for future sheepmeat exports. He claimed there was massive potential in China but the country would not solve all the UK’s issues.
He said: "China needs to be explored. If nothing else they take parts of the carcase we do not and it helps carcase balance."
Speaking about trade agreements, Mr Sercombe pointed to a potential FTA with Australia and New Zealand which is currently in discussion. He suggested the EU may have more to lose from the negotiations than it would gain.
China’s economy grew by 6.9 per cent in 2015, compared with 7.3 per cent a year earlier
China’s economic power is seen as a driver of the global economy and its reduced growth is a major concern for investors around the world
The news comes as the International Monetary Fund said it expected China’s economy to grow by 6.3 per cent this year and 6 per cent in 2017