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China Fishery Products Annual Report

Monday, January 10, 2011

USDA Foreign Agricultural Service

China's aquatic production in 2011 is forecast at 53.6 MMT, up two percent over the estimated 52.5 MMT in 2010, according to the USDA Foreign Agricultural Service. The production growth is driven by strong domestic consumption due to growing disposal incomes, and export-oriented aquatic processing, according to the latest USDA Foreign Agricultural Service.

Executive Summary

China’s fishery sector is comprised primarily of aquaculture facilities, both fresh and seawater, and a much smaller wild catch component. Continued expansion of the aquaculture sector, which accounted for about 71 per cent of total aquatic production in 2009, continues to boosts China’s aquatic output. The increase is attributable to growing domestic demand, a robust processing industry and strong export market. China’s 2011 aquatic production is forecast to reach 53.6 MMT, up two per cent from an estimated 52.5 MMT in 2010.

Rising disposable income is influencing domestic consumption and the economic recovery of major import markets is further stimulating consumption of China’s aquatic products. Aquatic trade is forecast to produce an $8.1 billion trade surplus in 2011. The United States is the second largest market for China’s processed aquatic exports and the second largest supplier of China’s seafood imports, particularly in the “Fish/Frozen” (HS Code 0303) category. High quality natural aquatic products, including salmon, are expected to steadily increase in volume and value.

Definition of terms in China: China’s definition of aquatic products includes both cultured (farm-raised) and wild caught products; Aquatic products include fish, shrimp/prawn/crab, shellfish, algae, and other; Aquatic catch production is total volume of both fresh and sea water caught wild aquatic products; Aquatic culture production is the total volume of both fresh and seawater cultured (farmed) aquatic products. This report will use Chinese terminology to maintain consistency between Chinese statistics and product categories. Total aquatic trade statistics in this report do not include fishmeal.

General Information: Production

Aquatic production is forecast to reach 53.6 MMT in 2011

China remains the world’s largest aquatic product producer with 2011 total aquatic production forecast at 53.6 MMT, compared to an estimated 52.5 MMT in 2010, and 51.2 MMT in 2009. Rapid economic growth, rising disposable incomes and a strong export market have culminated to increase demand and stimulate production. Total aquatic production in 2009 increased 4.5 per cent over the previous year (compared to 2006-2008 average yearly growth rate of three per cent). According to China’s Ministry of Agriculture (MOA), aquatic production for the first three quarters of 2010 reached 34.8 MMT, up 2.5 per cent over the same period last year. Cultured production of 25.2 MMT, a 4.8 per cent rise over last year, is leading the growth curve, while wild caught production of 9.6 MMT, lags three per cent behind last year. Unusually cold weather in the Yellow Sea, Bohai Bay and Eastern China Sea in the first half of 2010 hurt the summer seawater catch harvest.

As a result, total caught production in 2010 is expected to be smaller than the previous year. Potential growth in total aquatic catch (seawater and freshwater) has remained elusive for the past five seasons and future prospects remain dim due to declining wild fishery resources, both domestically and worldwide.

Growth prospects for aquaculture production, both fresh and seawater, are easier to identify. China’s National Statistics Bureau’s (NSB) data shows that annual cultured aquatic production, from 2004 to 2009, grew at more than six per cent per year. In 2009, among cultured products, freshwater production grew 6.9 per cent, seawater grew 4.8 per cent, overall accounting for 71 per cent of total aquatic production and topping 36.2 MMT, a 2.1 MMT rise from the previous year.

Total fish production stood at 29.9 MMT in 2009 (up 1.3 MMT from the previous year), accounting for 58 per cent of the total aquatic production, followed by shellfish and crustaceans at 23 and 10 per cent, respectively. Cultured fish continued to dominate with total production of 20.4 MMT, accounting for 68 per cent of total fish production in 2009. Carp, the most popular cultured freshwater fish with total production of 14.5 MMT in 2009 (from the 13.5 MMT in 2008), accounted for 74 per cent of total freshwater cultured fish production.

Tilapia, another popular farm-raised fish, saw 2010’s production fall due to last year’s low prices, abnormally cold spring weather that killed fingerling stocks and 3rd quarter floods in Hainan and Guanxi provinces, altogether leading to a 13 per cent drop in 2010 production, from 1.26 MT in 2009 to an estimated 1.1MMT in 2010. Nevertheless, tilapia production, which grew 11 per cent per year from 1999 to 2009, is expected to rebound quickly in response to foreign market demand and increasing domestic consumption.

Catfish, another historical export fish product, is expected to reach 250,000 MT in 2010, rising from 223,000 MT in 2009. Domestic consumption continues to boost catfish production, while exports will rebound when the USDA import policy is finalized.

Shellfish, primarily cultured in seawater, continued to show moderate growth with 2009 production at 10.5 MMT (See table 2), and accounting for 75 per cent of the total sea cultured production.

Crustaceans, on the other hand, are primarily raised in freshwater. 2009 production approached 3 MMT. Cultured Penaeus vannamei (also known as white shrimp) production exceeded 1.1 MT in 2009, accounting for 37 per cent of total cultured crustacean production.

For 2010, Shandong, Guangdong, and Fujian provinces, due to their favorable coastal locations plus freshwater resources/facilities, are expected to remain the largest aquatic producers. Hubei, Guangdong, and Jiangsu provinces, with abundant freshwater, have developed their resources to rank as the top three in terms of freshwater cultured production.

Although there are freshwater aquaculture facilities nationwide, particularly for carp, some species’ production is limited to certain regions due to available resources and climatic conditions. For example, 90 per cent of tilapia production occurs in four provinces, Guangdong, Guangxi, Hainan, and Fujian. 62 per cent of catfish production is located primarily in Sichuan, Hubei, Jiangsu and Jiangxi, with substantial production in Hunan and Anhui provinces.

The largest producers for both cultured freshwater and seawater shrimp and prawn are Guangdong, Jiangsu, Hubei, Guangxi, and Zhejiang provinces. Guangdong is the largest shrimp producer with total cultured production of 537,000 MT, of which Penaeus uannamei production was 428,000 MT in 2009 (402,000 MT in 2008). Eel production is concentrated in Fujian, Guangdong, and Jiangxi provinces with much of it destined for the Japanese market. Shandong, Fujian, Guangdong, and Liaoning provinces continue to dominate the production of cultured shellfish -accounting for 80 per cent of the 2009 total.

Tilapia production continues to be challenged by disease

According to industry sources, streptococcus disease continued to adversely impact tilapia production in 2010. China’s tilapia experts analyzed that the deteriorating water environment and high-density farming resulted in a high bacteria count leading to outbreak of the disease. A vaccine to prevent the disease is still in the trial period. Some industry insiders believe the disease is likely to impact the tilapia production in the near future and it can be prevented only if the culture environment can be controlled properly with the assistance of a vaccine.

Aquatic catch production is shrinking

Although total 2011’s catch forecast of 14.5 MMT is unchanged from 2010, however, it is still an amount lower than the 14.9 MMT in 2009. MOA acknowledges that abnormally cold weather in North China resulted in smaller catch production in the Eastern China and Yellow seas in the summer. According to MOA, total catch production in the first nine months in 2010 was 9.6 MMT, three per cent lower than last year. Industry sources report that total catch is unlikely to increase in the foreseeable future due to limited freshwater and seawater natural resource availability.

The seawater catch production for other territorial seas was 977,000 MT in 2009, down from the 1.1 MMT in the previous year. Most industry insiders believe it is difficult to increase production significantly from other territorial seas.

Aquaculture farming water area expansion continues

Active aquaculture expansion in 2009 saw total area increase more than eleven per cent, with total water area exceeding 7.2 MHA. Aquaculture area increases overall reached 733,000 HA in 2009, with 452,000 HA of freshwater and 281,000 HA of seawater. Liaoning Province in northeast China had the largest net increase of 266,000 HA (compared to a net increase of 158,000 HA in 2008), of which 219,000 HA was seawater. Hubei and Henan also increased aquaculture area by 66,000 HA and 57,000 HA in 2009, respectively.

Industry insiders feel this level of active growth of aquaculture is not sustainable, with both seawater and freshwater culture area likely to grow more moderately in the future. Limited water resources and environmental challenge the feasibility of further expansion of aquaculture areas. Additional production gains will be found through technology and innovation.

MOA promotes healthy aquaculture and high quality products

The MOA recently pledged to continue to modernize the fishery industry and promote a “Healthy Development of the Aquaculture Industry” to produce high quality and safe aquatic products. In 2010, MOA invested an estimated $1.2 billion to reconstruct 260,000 HA of fish ponds. MOA also called for more technology transfer and protection of water resources. In an effort to promote “healthy aquaculture”, MOA continued (started in 2009) the re-construction plan of 1.3 million hectares of fish pond for repairing the eco-system, and standardizing the pond (within next 5 to 10 years).

MOA has also intensified its monitoring and supervision of the quality and safety of aquatic products. They expect 90 per cent of aquaculture production facilities to be licensed by the end of 2010. MOA has established agricultural product quality test stations in 1,200 counties (out of the total more than 2,400 counties) nationwide.

To ensure the quality of aquatic products, particularly goods for export, MOA and the Administration for Quality Supervision, Inspection and Quarantine of China (AQSIQ) adopted a strict licensing regime for all export-oriented farms and processing establishments. MOA and AQSIQ conduct frequent field audits of export-oriented aquaculture farms. Aquatic products for export are subject to mandatory inspection and must be accompanied by AQSIQ inspection certificates.

The aquatic processing for re-export rebounded in 2010

The aquatic processing for re-export sector (processing trade) rebounded in 2010 following a multi-year slowdown from the global economic recession. According to MOA, in the first three quarters of 2010, the export volume and value for processing trade stood at 798,500 MT and $ 3.2 billion, up 10 and 15 per cent, respectively over the previous year. Industry sources stated that increased exports under processing trade reflected a rebound in demand for aquatic products by major importing countries, and an increase in prices for raw and processed aquatic products in the world market.

The share of export value under the processing trade accounted for 33 per cent of all aquatic product export value, three per cent lower than same period of 2009, in part showing an increased export of cultured aquatic products in 2010. Another trend for processing is that more aquatic product manufacturers opted to purchase raw materials and process them for export, instead of “processing for a client and only earning a processing fee.” Based on MOA data, the import volume (purchased by China’s manufacturers for processing trade) increased by almost 20 per cent in the first three quarters of 2010. Based on the Global Trade Atlas (GTA), China’s imports of frozen fish in the first ten months of 2010 approached 1.6 MMT, up 11.5 per cent over the same period in 2009.

The imports of mollusks also increased to 227,000 MT, up nine per cent over the previous year. These imports have historically been destined for the processing trade. However, China’s industry insiders reported that the aquatic processing trade sector is increasingly challenged by rising production costs and a “shortage of labor,” and the situation is expected to become more serious in the coming years.

Aquatic processing for domestic consumption grew steadily

Processed aquatic products using domestic raw material (mostly cultured products) is highly export focused. Domestic consumption of processed aquatic products remains relatively small compared to the total annual domestic aquatic product consumption. Most Chinese consumers’ preference to live or fresh aquatic goods instead of processed products.

According to MOA, the total number of aquatic processing facilities declined to 9,635 in 2009 from 9,971 in 2008. Total processing capacity, however, remained stable at 22.1 MMT (compared to 22 MMT in 2008). The decrease in facilities indicated an industry restructuring following the recent economic downturn in 2009.

In 2009, 18.2 MMT of aquatic products were processed, compared to 16.4 MMT in 2008. Total processed aquatic product volume stood at 14.8 MMT, of which 9.4 MMT was frozen or frozen processed goods. The share of frozen and frozen processed volume accounted for 63 per cent, compared to the 62 per cent in 2008. Industry sources indicate that this situation reflects domestic consumers enduring preference for live aquatic products, however, the net increase of 1.8 MMT of aquatic processed in 2009 also shows a steady growth in processed aquatic products.

Aquatic processing bases are located in or near major aquatic production regions. Of the total 9,635 processing facilities, 6,389, or 66 per cent are concentrated in Zhejiang, Shandong, Fujian, and Guangdong provinces. These provinces are also major aquaculture producers and are equipped with port and cold storage facilities. Many foreign traders have also entered the processing trade industry in these provinces.

Consumption

China’s per capita aquatic consumption growth is forecast to continue in 2011. Post estimates per capita consumption for urban dwellers in 2009 was 14.7 Kg, up from the estimated 14.3 Kg in 2008, while NSB reported that rural residents consumed 5.27 Kg, up slightly from 5.25 Kg in the previous year. NSB did not provide consumption of aquatic products for urban dweller in 2008 and 2009. Chinese industry insiders expect that the consumption of aquatic products in 2010 is higher than the previous year mainly because of adequate supply at increased but still affordable prices, and the continued growth in consumer incomes. Per capita consumption is expected to increase steadily, with strong growth potential in the rural sector due to relatively low consumption.

Based on MOA survey results (among 80 major aquatic product wholesale markets), the average wholesale price for aquatic products in the first three quarters of 2010 increased by about ten per cent over the previous year. Sea water products increased by 14 per cent, and the price of fresh water products increased by five per cent. Prices for aquatic products are expected to grow in 2011 reflecting increases in the price of feed and other inputs.

Table 6 lists the ten provinces and municipalities with highest expenditures on aquatic products in 2009. The per capita consumption of aquatic products is highest in coastal regions (where aquatic products have been a traditional source of protein) and places with relatively high disposable income. The rankings are almost unchanged from 2008.

Most Chinese consumers are price sensitive when purchasing aquatic products. Freshwater cultured products such as carp and shrimp or prawns are popular for home consumption and in restaurants due to their affordability. Seawater aquatic products, including yellow croaker, ribbonfish and squid continue to be favorites in Northern China. Imported seawater products popular domestically include cod, squid, plaice, and mackerel. Processed shellfish/shrimp/prawns and tilapia fillets are increasingly popular among city consumers with busy lifestyles. High-value imported seafood such as lobster, geoducks, salmon, and crab are widely used by hotels and restaurants for high-end consumers. Based on the GTA, China’s imports of salmon from Norway reached 12,288 MT in the first ten months of 2010, up 80 per cent over the previous year. The Norway Seafood Association expects China in 2010 to exceed Japan as the largest salmon market. A booming economy producing a growing middle-class in large cities and coastal regions provides promising potential for these products as Chinese families opt for a more diversified and nutritious diet.

Trade

China is expected to be the world’s largest aquatic trading country in 2010

Total aquatic trade value in 2010 is estimated at $16.5 billion, up 22 per cent over the $13.5 billion in 2009. Some industry leaders expect China’s total aquatic product trade value will exceed $17 billion in 2010, surpassing the United States as the world’s largest trader. The aquatic trade surplus is expected to hit $8.1 billion in 2010, up from the $6.2 in the previous year.

Export value is estimated to surge to $12.3 billion in 2010, up 25 per cent over the previous year. This significant growth is in part a result of increased unit price, as export volume is only expected to increase by 12 per cent.

Import value is estimated at $4.2 billion in 2010, up 15 per cent from the $3.6 billion in the previous year, mainly due to recovered demands for aquatic products both globally and domestically. According to GTA, in the first ten months of 2010, total export volume reached 2.4 MMT, up 11 per cent, while the import volume stood at 1.9 MMT, up 12 per cent, respectively, over the same period in previous year. Industry sources stated that the high growth in export value and lower growth in volume reflects increased production costs as well as a shift toward more value-added products. Most Chinese industry insiders believe that a stable recovery of world economy, and the keen competitiveness of the Chinese industry, will result in higher aquatic exports in 2011.

China’s aquatic export trade destinations with export value over $100 million rose from 17 countries in 2009 to 22 in 2010. Japan continues to be the largest export destination, followed by the United States and South Korea.

Based on GTA, salmon imports decreased sharply to 134,393 MT in the first ten months of 2010, down 20 per cent compared to the previous year. The salmon imports from Russia and Chile plummeted, down 65 and 60 per cent, respectively over the year before mainly due to decreased production in both countries. The industry sources reported the smaller production is due to a sea catch policy change in by Russia government and an outbreak of a disease in Chile. Imports from the United States increased to 58,943 MT, up 4 per cent. Import price for salmon in the first ten months of 2009 averaged at $ 3,213/MT, up 40 per cent from the previous year. The United States is the largest supplier of salmon to China, followed by Japan.

Russia is expected to remain China’s largest supplier of aquatic products, distantly followed by the United States and Japan. Total imports from Russia are estimated to exceed $1.2 billion in 2010, similar to the previous year, accounting for 29 per cent of China’s total 2010 aquatic imports.

Qingdao and Dalian continue to be the two largest arrival ports for aquatic products, accounting for 75 per cent of the total import volume in 2009. Well-established facilities, including processing factories in Qingdao and Dalian, solidify the two cities’ status as the largest seafood import hubs in China.

Aquatic trade with the United States continues growing

Although the United States is the second largest importer and exporter of aquatic products to China, we still have a large trade deficit in this area with China. In the first ten months of 2010, China’s aquatic imports from the United States increased in value (to $ 587 million), up 24 per cent over the previous year. During the same period, frozen fish remained the largest category (valued at $475.5 million), accounting for 81 per cent of the total imports from the United States. More specifically, salmon ranked top valued at $176 million, followed by plaice at $112 million (out of the total $115 million for all flatfish). Salmon is increasingly popular among middle class consumers at home or dining out in Japanese restaurants or hi-end hotels in large cities. Industry insiders believe China will become one of the world’s largest salmon markets in the near future.

Total aquatic exports to the United States in the first ten months of 2010 rebounded to $1.9 billion, up 20 per cent over the previous year. Major product category includes fish fillet ($871 million, up 19 per cent over the previous year), followed by prepared/preserved crustacean/mollusks ($424 million), and prepared/packaged fish and caviar ($ 214 million).

Fishmeal imports are forecast at 1.2 MMT in 2011

Fishmeal imports in 2011 are forecast at 1.2 MMT, up from the estimated 1.1 MMT imports in 2010. Fishmeal imports in 2009 exceeded 1.3 MMT mainly due to a steady recovery of the animal husbandry. Fishmeal imports and consumption in 2010 are restricted by the price spike. According to GTA, China’s imported fishmeal price in the first ten months of 2010 soared to $1,616/MT, up 60 per cent from the same period in 2009 mainly due to smaller supply from major producing countries. Total fishmeal imports declined by 24 per cent (in particular from the top two suppliers, Peru and Chile, down by 23 and 61 per cent, respectively) in the first ten months of 2010 over the previous year.

Feed industry sources reported that fishmeal is still regarded as the best animal protein source provided the price remains acceptable and reasonable. Other protein meals are added as substitutes when prices for fish meal are too high. Domestic fishmeal production continues to be low and expected to be less than 250,000 MT in 2010. Despite the high price, imports for 2011 are forecast at 1.2 MMT given the large scale of China’s animal husbandry and aquaculture. Peru remains the largest fishmeal supplier, accounting for 59 per cent of China’s total imports in the first ten months of 2010. Imports from the United States are expected to be smaller than the past years at approximately 70,000 MT in 2010 mainly due to increased price.

Fish fillet tops in total aquatic exports

Fish fillet (HS Code 0304) continues to be the largest export category with export value at $ 2.9 billion, accounting for 30 per cent of total aquatic exports in the first ten months of 2010. China’s exports of aquatic products for 2010 are estimated at $12.3 billion, significantly higher than the $9.8 billion in the previous year. Based on GTA, in the first ten months of 2010, China’s aquatic exports increased in both volume (up 11 per cent) and value (up by 27 per cent) over the previous year. All major export categories, fish fillet (HS Code 0304), the prepared crustaceans and mollusks (HS Code 1605), and the mollusk and other (0307) have seen rapid growth in value and volume. Fish fillet (HS Code 0304) exports increased by 10 per cent in export volume, and 17 per cent in value, compared to the previous year. The exports of prepared or packaged fish and caviar (HS Code 1604) increased in value up by 19 per cent, however, decreased in volume by one per cent. The strong exports of aquatic products showed a steady recovery of demands by the customers in major importing markets.

Adding greater value to fish products has increasingly enhanced the industry. The trend is expected to continue and will be made possible through the advancement in technology and management, as the industry strives to meet changing of consumer demand.

In the first ten months of 2010, total tilapia exports reached $731 million, up 34 per cent from the $546 million in the previous year, although the export volume increased by 24 per cent only. Based on the GTA, in the first ten months of 2010, the processed tilapia products (fillet, dried/salted, prepared/preserved) continue to dominate in both export value accounting for 85 per cent and volume at 71 per cent out of all tilapia exports.

The export price for processed tilapia products averaged at $3,396/MT, compared to the $2,937/MT in the previous year. The export of processed tilapia products is expected to continue growing in 2011 mainly due to its competitiveness in price. In the first ten months in 2010, the United States remained the largest destination for China’s tilapia products, accounting for 52 per cent in volume. The net export volume to the United States exceeded 123,000 MT, up 19 per cent over 2009.

The impact of EU catch certificate on sea caught seafood remains limited

According to MOA, based on EU IUU regulation (Illegal, Unreported and Unregulated Fishing Regulation), effective on January 1, 2010, most of the sea caught seafood export to EU needs to be accompanied with “Catch Certificate”. This covers both sea caught products by Chinese marine fishing companies and products imported from other countries by Chinese processors. MOA requested traders/processing facilities to obtain the “Catch Certificate” from the overseas suppliers if the processed products are destined for EU.

Based on GTA, China’s total aquatic exports to EU reached 445,600 MT in the first ten months of 2010, up 13 per cent over the previous year. This growth rate is higher than the export growth to the world at 11 per cent, though some Chinese industry insiders opined that the requirements raised the threshold and created a trade barrier for Chinese aquatic product exports to EU.

China’s catfish industry shows concerns on USDA catfish inspection rule Since the United States Legislation extended FSIS’s inspection jurisdiction to include domestic and imported farm-raised catfish in 2008, the Chinese relevant authorities expressed concerns on the issue in various occasions. The Chinese industry is eager to learn the developments of the USDA proposed catfish rule, and hope it will not affect trade. FAS/Beijing explained to the industry the implementation of the rule will comply with the WTO principles.

Policy

China’s policy favors smooth growth for aquatic production and exports China’s fishery production policy remains unchanged generally. China’s rapid GDP growth will boost domestic demand for aquatic products. MOA continued to promote a more sustainable development model with rational resource utilization through a nationwide plan to build environment-friendly and healthy aquaculture demonstration bases. Through the intensification of the enforcement of relevant laws and regulations and technical extension, the plan is aimed at promoting better use of resources, protecting the environment, producing safe products, and raising farmer income. Other measures included technology extension and drug use supervision.

Some provinces expedited development of local fresh water or seawater resources in 2009. For instance, Liaoning Province added 266,000 HA of water area for aquaculture (compared to the net increase of 158,000 HA in 2008). Hubei and Henan also increased aquaculture area by 66,000 HA and 57,000 HA in 2009, respectively. It is difficult to predict this rapid expansion of culture water area will sustain in 2010 and beyond.

Large aquatic producing provinces will continue to focus on their most competitive products. Export-oriented aquaculture production/processing will continue to be concentrated in coastal provinces.

Domestic aquatic catch will continue to be restricted by the “Zero Growth” policy for domestic wild aquatic catch although the overseas catch is encouraged. The two-month summer fishing moratorium in China’s seawater extended to two and half months in 2009, and the three-month spring fishing ban in the Yangtze River entered its seventh year. MOA decided that a fishing ban (from April 1 through June 1) will be enforced in the Pearl River region in 2011. In an effort to protect and restore ecological balance, the state and provincial fishery departments conduct frequent releases of aquatic fingerlings to waters nationwide. According to MOA, total catch in other territorial seas declined to 977,000 MT in 2009 from the 1,083,000 MT IN 2008. The catch in other territorial seas is encouraged but the expected production will remain stable in general.

Implementation of aquaculture licensing system delayed

The implementation of an aquaculture licensing system continued in 2010. According to MOA’s 2008 Promotion of Healthy Aquaculture Action Plan, major aquatic producing counties completed the overall water resources development plans and 90 per cent of aquaculture entities would be licensed by the end of 2008. However, MOA reported that, as of the end of 2009, 67 per cent of aquaculture entities had been issued licenses.

This showed the licensing the thousands of small scale aquaculture facilities remained a challenging work. The implementation of the licensing system nationwide is aimed at better regulation of the industry and enforcement of policies. As mentioned above, the HHS and AQSIQ agreement signed in December 2007 will require exporters to the United States to register with AQSIQ and agree to annual inspections to ensure their goods meet US standards.

The policy on aquatic processing trade remains unchanged

China’s government views the processing trade as an advantageous industry due to its role in generating new employment and producing rendered product that can be used as a feed ingredient for the feed industry. Basically, imports under “Processing Trade” will still be free of tariff and value added tax (VAT). Processed products, however, must be re- exported. Imports destined for China’s domestic consumption are subject to tariff and VAT (CH5089).

The share of the processing trade declined slightly, accounting for about 33 per cent of China’s estimated $12.3 billion aquatic exports in 2010. However, China’s industry and official sources both claim that China is actively becoming the world’s processing center for mackerel, salmon, cod, and herring. Industry sources note that the number of enterprises involved in “Processing Trade” is on the rise, especially in Shandong and Liaoning. According to China’s Ministry of Finance, enterprises engaged in primary processing of aquatic products and other agriculture commodities are entitled to a preferential income tax policy, however, no details have been published.

The import certificate for live edible aquatic product amended

On December 11, 2008, AQSIQ published on its website the “Explanations on Amendments to Rules of Inspection and Quarantine on Entering Edible Aquatic Species.” (http://dzwjyjgs.aqsiq.gov.cn/zxjyjyyq/200812/t20081211_100208.html). The amendments request the exporting country to add detailed inspection and quarantine information to the export health certificate (GAIN CH9050). FAS/Beijing, in collaboration with NOAA, APHIS/Beijing, and Foreign Commercial Service/Beijing conducted several consultations with AQSIQ. A NOAA amended version of Health Certificate for live edible aquatic products was approved by AQSIQ, and the NOAA is prepared 50 original copies of the certificate was sent to AQSIQ in December 2010. AQSIQ verbally agreed that the trade would not be impacted during this transitional period.

The import fishmeal subject to a new hygiene certificate

On August 23, 2010 China’s AQSIQ informed the US Embassy Beijing that its Decree 118, which was notified to the WTO as G/SPS/N/CHN/109 on May 15, 2008 and its Regulating Inspection and Quarantine of Import and Export Feed and Feed Additives of July 20, 2009 would both be going into effect at the beginning of 2011. This latter measure was not notified to the WTO. With these measures, US exports of aquatic origin protein would face import requirements that included facility registration and new hygiene and quarantine requirements. China’s new requirements for fishmeal and other aquatic-origin protein and fish oil will have a significant negative impact on US exports of fishmeal and fish oil from the United States.

US-origin fishmeal and fish oil commodities are currently being exported to China in accordance with the US-China Protocol on the Veterinary Health Requirements for Non-Ruminant Derived Animal Feed and Tallow to be Imported from the United States to the People’s Republic of China, signed on November 18, 2004, the provisions of which require facility inspections by the US Government; assignment of approval numbers by AQSIQ; product registration through China’s Ministry of Agriculture (MOA); and export certification by the USDA Animal and Plant Health Inspection Service (APHIS) Veterinary Services.

The US Government have requested that China notify this proposed measure to the WTO promptly and provide a comment period for all WTO Members prior to the adoption and enforcement of these measures. The US Government also requested that China provide the relevant information and scientific justification for these requirements, including a scientific risk assessment or adoption of international standards. The United States and all trading partners need to be given an adequate amount of time to review and comment on China’s proposed new measures.

In the interim, we recommend that Chinese regulatory agencies continue to authorize importation of US-origin fishmeal, fish oil, and other aquatic commodities under existing protocols and requirements until a new agreement can be reached.

Despite all above progress, traders are highly recommended to consult with your importing partners for specific requirements for exporting fishmeal and fish oil to China during the period when the US government is consulting with AQSIQ on this issue.

Marketing (ATO/Beijing)

Demand for imported seafood and aquatic products are expected to grow continuously because of increased consumer incomes and an increasing preference for high-quality and healthy foods. In 2009, China imported $548.68 million of seafood and fishery products from the United States, a 5.8 per cent increase from 2008. The United States continues to be the second largest exporter of seafood to China.

Much of the US seafood and aquatic products exported to China are further processed for re-export purpose. For the non- processed products, they are mostly high-value products and are introduced mainly through HRI foodservice sector in upscale hotels and restaurants. In general, Chinese consumers prefer to consume live and fresh aquatic products, including fish, crabs, clams and others. This is particular true for consumers in coastal provinces in East and South China, either they purchase aquatic products in retail, wet market or they order in restaurants, the products needs to be live and kicking to show its freshness.

With years of market development, more and more imported aquatic products in frozen forms have appeared onto Chinese consumer’s dining table. Salmon, Snow Crab legs, Cod are common products available in supermarkets. Product identification such as brand names, logo and country origin flags are important tools to attract consumer interests amongst many of the same kind products in supermarkets. In that regard, continued education for retailers and distributors are important to help consumers to establish brand recognition and brand loyalty.

Scallops, Salmon, Alaskan Snow Crab Legs, King Crabs, Black Cods, Oyster are also popular items in many five-star hotels, including Hyatt, Shangri-La and Ritz-Carlton. Buffet style restaurant are common in those hotels and it is a good way to promote high-end seafood products to customers. With proper display, customers are certainly attracted by those high-value imported items and consider them as important items for money spend on a buffet somewhere around RMB198 – RMB298 ($30-$45).

Chef demonstration or themed promotion during major Chinese holidays such as Spring Festival and Mid-Autumn Festival are effective in HRI food service sector to promote products in sales. Fish roe is another popular products, with Japanese style restaurants the most common channel for this type of product.

Importers claim high value US seafood products are easy to sell in both first tier and secondary cities, even in coastal cities such as Qingdao. Products such as King crab kegs, scallops and oysters enjoy crisp sales. Major obstacles are inconsistent availability for fish and crab products due to insufficient supply in the US. There are also counterfeit products for snow crab legs, as claimed by restaurant operators in Zhengzhou, Henan province.

Trade shows in China is a good venue for new products to enter the market. In the recent China Fisheries & Seafood Expo in Dalian, live seafood such as geoduck is first seen in recent years with multiple US exporters carrying this product. Importers are keen to this product as it is a popular item in Chinese cuisine, in particularly Cantonese style restaurants, which in previous shows, Canada has dominated this market niche. Over the years, feedbacks from US exhibitors are great as it generates good business, it is also a great channel to obtain face-to-face meetings with new and existing buyers.

January 2011

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