Market Information
Asia Pacific

Seafood - Market Overview
China

June, 2003

Prepared by the Canadian Embassy, Beijing

1. Introduction

The potential market for seafood in China in the longer term is huge. China imported US$1.6 billion of fishery products in 2002 which is nearly triple the value of five years earlier. It is expected that Chinese seafood imports will continue to increase at a healthy rate, in large part because of the increasing interest by foreign companies to have the processing done in China where costs are much lower and a higher recovery rate can be achieved. Currently, the consumer market for seafood is primarily located in the coastal cities of China where consumers tend to have more disposable income as well as being more familiar with seafood products. Many Canadian seafood products will be geared to the high-end premium market of the affluent and middle class consumers with increasing incomes.

China's accession to the WTO will result in major reductions over the next several years to the high customs tariffs levied on imported seafood products and create excellent longer term market prospects. Tariff reductions on major Canadian seafood export products including cold water shrimp, lobster, crab and salmon in particular will create significant opportunities for enhanced export levels of these products.

2. Market Characteristics

China has the world's largest fishery products output with some 45 million tons of production. About 60 percent of the production is aquaculture and the balance caught at sea. The per capita consumption of fishery products is not high, about 4 kilos per capita in rural areas and 10 kilos per capita in urban areas.

China is a vast potential market for seafood which will grow as living standards of the Chinese people increase. Seafood processing is currently concentrated in coastal cities like Dalian and Qingdao. Due to poor nation-wide infrastructure, shortage of refrigerated equipment and short shelf life of fresh seafood, the market is primarily oriented to coastal-2- cities like Beijing, Shanghai and Guangzhou. Seafood consumption in inland China is low, mainly because of people's relatively low income and general inaccessibility to seafood.

The fish products market comprises both seafood and freshwater products. Supplies come from China's own coastal sea waters and offshore fisheries, freshwater products raised in local waters, farmer's rice fields or ponds, and imported product. Seafood, due its generally high cost, is consumed by the affluent population in coastal cities of China while freshwater products are consumed throughout China.

Foreign seafood is generally more expensive because of the importation costs. Despite the higher prices, the younger, affluent Chinese are keen on trying out foreign seafood which may be different from domestic product. Familiar products, such as cold water shrimp are in tremendous demand as China's shrimp aquaculture stocks were almost wiped out in the early 1990s from disease.

Other seafood market opportunities available to foreign exporters are related to the local market preferences in China. For example, Chinese traders are interested in fish heads and bellies which are usually discarded or sold at minimal prices in North America when fish is processed for fillets. Also there is a good market for "undersized" fish. In China, a 200-500 gram fish, with its head and tail on, is regarded as the perfect size for steaming, a popular way to cook fish in China.

Unlike the younger generations, the older generations of Chinese people are very price sensitive and therefore, price becomes the determining factor in their purchasing decisions. Furthermore many of the older generations prefer to shop at traditional wet markets where there are fewer opportunities to know the origins of the seafood. Seafood sold at these markets are either fresh or alive in barrels of water. They are not packaged or labeled with information about the products' geographic origin and nutritional value.

In general consumers prefer live seafood. When live seafood is too expensive, frozen seafood is the next choice followed by canned or dried seafood products like dried cuttlefish, a very popular Chinese snack.

There is a large variety of foreign seafood in the local market and suppliers include Canada, the United States, Denmark, Russia, Iceland, Ecuador, Thailand, Indonesia, Australia and Norway. There is no single dominant supplier of seafood products.

Canadian companies are exporting primarily crab, shrimp, herring, salmon, geoduck and hokkigai clams, livers and roes to China. The market for Canadian fish and seafood products is in the larger affluent cities such as Beijing, Shanghai, and Guangzhou. The primary end users of Canadian product are the higher end hotels and Chinese seafood restaurants.

3. China's Seafood Imports

China's imports of seafood products have increased at a dramatic rate during the past five years nearly tripling in volume to US$1.6 billion in 2002.

The high import duty rates on seafood products has encouraged many importers to find methods to evade tariffs by shipping their goods via Hong Kong to China without the normal documented records. Consequently official figures from the Chinese government regarding China's seafood imports may not be accurate because some seafood imports enter China through grey channels. It is expected that this diversionary process will be used less as the tariffs reduce significantly under China's accession to the WTO and Customs laws are more vigorously enforced.

4. Major supplying countries

Canada is the fifth largest supplier of seafood to the Chinese market and if present trends continue could become the third largest supplier within a few years. The major export product of Russia, the largest supplier, is Alaska pollock for reprocessing. It is interesting to note that the large majority of seafood imported by China is not for local consumption but for reprocessing with low cost labour and re-export. Approximately 75% of all seafood imports come through the northern ports of Dalian and Qingdao where the seafood processing operations are centred.

5. China's Seafood Imports from Canada

Canadian seafood exports to China have grown dramatically over the last five years, having increase more than four-fold from $50 million in 1997 to $207 million in 2002. Crab and shrimp are the major export items. Of particular interest is the increasing range of products being exported to China.

Source: Statistics Canada

6. Distribution system

After arriving at the ports, frozen seafood products destined for retail markets are shipped via China's railway and highway transportation network to the various cities for sale. The distribution chain is as follows: the primary importers sell to local first-level wholesalers, who then transfer product to dealers, who in turn sell to retailers. The main retail venues for seafood in China are the wet markets and food stores, however, much of the imported product would be sold through supermarkets or high end hotel and restaurants.

In addition to frozen seafood, there is a smaller but substantial market for live seafood in China. Live seafood products are shipped by air and the main points of entry are Beijing and Shanghai. Among the many live seafood products entering China are, dungeness crab, oysters, lobster, and geoduck clams from Canada, rock lobsters from Australia, and oysters from New Zealand.

7. Tariffs

China's high seafood tariffs have been a significant impediment to long term growth of imports to China. However, China's accession to the WTO has resulted in major reductions for a wide range of seafood products of interest to Canada as shown in the table below.

8. Regulations

The importation of fish and shellfish is subject to different regulations and inspections depending on the product and the degree of processing. The State General Administration for Quality Supervision and Inspection and Quarantine (AQSIQ) issued new regulations covering aquatic products which became effective June 30, 2003. These regulations cover the requirements for the inspection health certificate as well as labelling regulations. A translation of the regulations can be found at: http://www.fas.usda.gov/gainfiles/200212/145784909.pdf

Once all inspections have been cleared, seafood products will pass through China Customs where the CIF price (Cost+Insurance+Freight) is subject to the appropriate tariff. In addition to the customs import tariff there is a Value Added Tax (VAT) on the CIF price of 3% for fresh seafood products and 17% for other seafood products.

9. Payment terms

This process can be a challenge. Payment conditions must be carefully negotiated, well understood and mutually acceptable between the buyer and the Canadian exporter before the trade transaction occurs. Importers will aggressively seek the most favourable payment terms possible. Many local companies may have difficulty accessing foreign currency.

For live seafood products the terms are generally cash or telegraphic transfer before they are shipped overseas by foreign suppliers. Telegraphic transfers or wire transfers are simple and inexpensive to set up at the Bank of China but are generally used only for small value trade transactions. A letter of credit is more expensive to set up with the Bank of China and can take some time to process, however, it guarantees that the export company will be paid in a timely manner. Due to the uncertainties associated with doing business in China, many Canadian exporters like the comfort of using the export insurance guarantee provided by the Export Development Corporation.

10. Seafood Importers

For up-to-date lists of Chinese seafood importers please contact the Canadian Embassy in Beijing and the Consulates in Shanghai and Guangzhou.

11. Seafood Trade Shows

8th China Fisheries & Seafood Expo 2003
8th Aquaculture China 2003
Shanghai Everbright Convention and Exhibition Centre
Oct. 29-31, 2003
http://www.chinaseafoodexpo.com/

This annual exposition is the largest international seafood show in China. Last year Canada had a substantial presence at the Expo in Qingdao. Agriculture Canada, together with Canadian Consulate General in Shanghai, are actively planning for this year's Canadian Pavilion.