Marketing and Trade

Seafood is one of the most favorite table food in China and will be gaining more and more popular as people’s living standard has been continuously growing. In 1985, the per capita availability of meat was 18.2 kg, egg 5.1 kg, milk 2.7 kg and seafood 6.7 kg, while they reached to 49.5 kg, 16.3 kg, 6.2 kg and 26.7 kg respectively in 1996 The share of seafood increased from 20% to 27% (see Chart 16, Chart 17 and Chart 18).

The major species available on the markets include silver carp, bighead carp, grass carp, common carp, Chinese bream, crucean carp, hairtail, cod, yellow croaker, butterfish, squids, shrimp, mussel, scallop, razor clam, clam, mud-clam, oyster and crabs. The supply of these species is abundant as the market prices are generally accepted by the middle class. Some high value species have also started to take their shares of the markets such as mandarin fish, eel, rainbow trout, river crab, soft-shelled turtle, grouper, abalone, sea bream etc. as the growth of consumer purchasing power has led to increasing demand for the high value species.

Development of China seafood distribution system is divided into two stages. The first stage is considered to start from the time after the socialist transform in 1950s to introduction of economic reform in 1978. During this period, the management of distribution system was highly centralized by the government. The prices and quantities were all set by the State, regardless of roles market mechanism. Every year, the state assigned each province a certain amount of quotas which were allocated by themselves from the fishery production areas. Without any competition, the state-owned enterprises monopolized the markets and little space was left to the initiate of non-state ownership. There was little difference in price between regions and seasons, resulting in negative effects on the production and distribution.

The second stage started from 1978 when the government began to readjust the distribution system. Firstly, the quota assignment was gradually reduced, and totally canceled in 1985. Since then, fish prices have been completely fluctuated in accordance with the markets. As reforms have been introduced, market monopolization by the state-owned enterprises was broken. Many small traders, cooperative commercial companies and fishermen’s cooperatives have become involved in seafood distribution and have injected tremendous vitality into the markets. Selling and purchasing can now interact directly through smooth channels connecting the cities and rural areas. Regional barriers have been broken, removing obstacles for product distribution among different areas all over the country. Ports and trading areas have resumed their collecting and distributing functions, further enlarging the scope of distribution.

According to the statistics in 1996, seafood commodity amounted to 20 million tons excluding those self-consumed by fishermen or farmers, and provided as raw material for feed and other industries. The business by enterprises of different ownership is indicated below:

**Table 17 Seafood trade by enterprises of different** **ownership in 1996 (10,000 tons)**
State-owned	Collectives	Private	Processing enterprises	Fishermen
360	400	680	240	320

Chart 19 Proportion of seafood trading by various ownership in 1996

With increased inter-regional trade, new modern wholesale markets have become necessary. In order to promote its development, the Ministry of Agriculture, based on the market survey and foreign experiences, has put forward the criteria of seafood wholesale market and the layout of key wholesale markets, and worked out a Program on Development of National Seafood Wholesale Markets which has been brought into line with the state overall planning of the market development. So far, there have been 13 specialized seafood wholesale markets being determined by the Ministry of Agriculture as Central Seafood Wholesale Markets which are mainly located in the fishery production areas, such as Weihai in Shandong Province, Shidao in Shandong Province, Shanghai, Shengjiamen in Zhejiang Province, Wenzhou in Zhejiang Province, Ningbo in Zhejiang Province, Fuzhou in Fujian Province, Guangzhou in Guangdon Province, Beihai in Guangxi Province, Nanjing in Jiangshu Province, Qidon in Jiangshu Province, Dongting in Hunan Province and Jiangmen in Guangdon Province.

At the same time, various provinces, based on their local conditions, set up the related office responsible for the management of distribution and promoting building up local seafood wholesale markets. Up to the end of 1996, there were 298 registered seafood wholesale markets in China, twice as many as in 1993. A law entitled Regulation for Management of Seafood Wholesale Markets was issued jointly by The Ministry of Agriculture and the Industrial and Commercial Enterprise Management Bureau. Various local authorities have also issued the related implementation rules.

Further more, in order to meet the demands of increasing expansion of economy, a seafood market information network was built up in 1993 jointly by the Fishery Bureau of MOA, China Fishery Distribution and Processing Association and The Information Center of MOA. With more than 60 partners, the network can collect information from various places and publish it over the country through China Central Television and Economic Daily. As the information timely reflects the situation of various markets, it has been well recognized though out the country. Some local fishery administration also set up fish market information centers and make use of the information from the network to guide the decision making for the leadership and instruct fishery production.

Nowadays, consumers can receive fish supplies from all channels of markets, including private and collective retailers, not only from the state-owned stores. As the competition has broken down the old barriers, there are more choices for consumers in terms of price and quality.

The main retailers in seafood include the state-owned fish stores, collective stores, private stores, processing companies, and even fishermen and fish farmers themselves. Most of seafood goes through at least two separate operators before being sold to the consumer. This usually involves the producer selling directly to an independent retailer or through an intermediary. The private sector has played a more and more important role in the retail structure as they usually make a good showing in terms of price, quality and even service.

Many retailers, especially the state-owned and collective stores, are not specialized only in the sale of fish but retail a wider variety of foodstuffs. Supermarkets have developed rapidly in recent years and will be expected to take more and more share of markets. Take Shanghai as an example. Up to the end of 1996, there were 850 supermarkets with a total sales of 4.5 billion RMB, accounting for 3.9% of the total retail sales. It was reported that per capita GDP in Shanghai now is close to US$ 3000 and the supermarkets will be expected to reach 1500 by the year 2000 with a total sales of 18 billion RMB, making up 10% of the share. Seafood is supposed to have larger room to play as an investigation showed that the foodstuffs took 23.6% share of the total sales in 1995, while seafood only 0.8%. Shanghai Fishery General Co. has connected itself with about 500 supermarkets, supplying seafood to them at any time.

Apart from some large hotels and restaurants source partly from abroad, most catering institutions including ordinary restaurants, hotels, hospitals, schools etc. buy seafood from wet markets and wholesale markets.

A serious obstacle to efficient distribution has been lack of infrastructure and modern transportation. Although the modernization of China, with heavy investment in road building, is alleviating this problem, there is still a long way to go before distribution as known on the Western markets is possible. Regional differences are wide. In the central and southern provinces of Eastern China where the most intensive freshwater aquaculture activities are situated, live fish is transported either to local markets or exported to Hong Kong by trucks equipped with compressors. In some places, lack of adequate refrigeration and transportation equipment may result in reduced quality and spoilage of products.

According to the statistics from the State Customs, seafood imports to China was 1.39 million tons valued US$ 1.21 billion in 1996, increments of 3.5% and 25.5% respectively in comparison of that in 1995. China’s major top fish products importers range in order of provinces and cities include Beijing, Shandong, Guangdong, Fujian, Liaoning, Tianjin, Shanghai, Jiangsu, and Zhejiang. The total import volume of all the above provinces and cities put together were 714,000 tons, taking up 51.1% of the country’s total; the import value USD 530 million, 43.8% of China’s total.

In 1996, China imported seafood from 58 countries whose trade volume exceeding 10,000 tons to China were Peru, Russia, The United States, Chile, Japan, India, Ecuador, Thailand and New Zealand, accounting for 46.6% and 46.3% of China’s total imported volume and value respectively.

Major types of imported products were fish meal, cod fish, unnamed frozen fish, ink fish and squids, frozen flounders, frozen herrings, frozen fish eggs, and frozen crabs. The reasons for fast expansion of China’s seafood importation are as follows:

With the fast growth of China’s distant-water fishery, more and more seafood caught overseas was sent back to China’s domestic markets apart from the sale on the spot or export to Japan and Europe. As this part of products enjoyed privilege of duty-free in the local countries, the costs were comparatively low and the prices in China’s domestic markets were accepted by Chinese consumers. Besides, some of them can be re-exported after being processed.

Most of species imported to China were hairtails, Sciaenidae, cod and squids, which were purchased by China’s import and export firms from the product origins at a competitive price.

It has become an important foreign trade means to process on imported materials. Many of China’s state-owned, collectively-owned firms, joint ventures and other kind of fish product processing firms imported a lot fish as raw material fish products to be processed. By making full use of the advantages of low cost of labor and high processing technology, these part of products were processed into new products or semi-products to be re-exported to the international market. Major species of them include codfish, ink fish and squids, frozen flounder, frozen herrings and frozen fish eggs.

China needs to import great quantity of fish meal due to the fast development of aquaculture and animal husbandry in recent years.

With China’s fast growing economy, the domestic demand is also growing for the high-grade of fish products such as prawn, salmon, crabs, squids, and lobsters.

The import quotas are determined annually by The Ministry of Agriculture and approved by the State Customs according to the situation of production and sale of various distant-water fishery firms. The imported products have to be in accord with the regulations formulated by the State Customs, the State Quarantine Bureau of Animals and Plants and the State Commodity Inspection Bureau.

In 1977, the Chinese government re-lowered the tariff rate and the average tariff rate is about 40% down. This indicates that China’s fishery has been patterned into the world’s as China’s fishery development is not independent of the world’s and visa versa.

In 1996, China seafood export volume was 802,000 tons, increased by 8.4%, compared with that in 1995. However, the export value was US$3.05 billions, decreased by 7.3%. China’s major top fish products exporters range in order of provinces and cities include Guangdong, Shandong, Fujian, Liaoning, Zhejiang, Jiangshu, Shanghai, Tianjin and Beijing.

China’s fish products were exported to 48 countries and regions in 1996, of which the major ones were Japan, Republic of Korea, The United States and Hongkong. They took up 77.2% of the volume and 83.2% of the value in China’s total exports.

Eel. It is one of the top money making species in the international markets as both the price and demands are high. It has been mostly exported to Japan, Hongkong and Taiwan. It is reported that Japanese consume about 100,000 tons of fresh eel and baked eel each year. Besides, the demands in European and the North American markets are also increasing recently. The quantity was estimated about 20,000 tons. Many European countries import baked eel as their people especially like this type of product. In 1995, China exported 5,200 tons of live eel, 1,450 tons of frozen eel and 2,700 tons of baked eel.

Shrimp. China used to be the top country as a shrimp exporter. However, the exportation has been continuously down in recent years due to the serious diseases in the aquaculture. According to the report, the export volume in 1995 was only 14,500 tons. The record was ever up to more than 20,000 tons in the past years. Thailand and Indonesia have exceeded China in this area.

Frozen fish fillet. A large quantity of fish fillet is processed by most Chinese fish product processing enterprises as China have a large number of skillful workers and low labor cost. The quite amount of raw material comes from overseas and re-exported to international markets after processed base on the users’ requirements. In 1995, the export volume was 110,000 tons and the most went to The United States.

Cephalopod (including squid, ink fish, octopus etc.). The export volume in 1995 was 34,000 tons and the most was sent to Japan.

Live fishes ( primarily fresh-water fishes). These products target mainly at Hongkong and Macao. The volume in 1995 was 59,500 tons.

The State strategic readjustment. As the rate of tax refund decreases and delays after the readjustment, the processing cost is growing and results in the weakness in the market competition. A preliminary study indicated that with a re-lowered tax refund alone the cost has increased by 0.34 RMB for each US dollar exported. As a result, the enterprises suffer from a heavy financial burden.

China can not enjoyed the right of multi-agreements as she has not been a member of WTO yet and therefore, in a weak position of market competition in the world. In addition, the restrictions on the seafood quality from some countries such as The United States, European Union and Japan also put China in an unfavorable position in the international trade.

Less varieties of the products, small scale and scattered production organization and domestic competition between the enterprises have all resulted the lower prices on the export products.