When China initially outlined its fresh produce export plans, feelings of trepidation rippled through the international industry. Was the gigantic country, with its huge production of fruit and vegetables, to be feared? Or could its vast hungry population be fed by international fruit producers?
Many observers believe that questions still need to be answered. Yes, China has made inroads into global markets with garlic, ginger and to an extent apples and pears, but the mainland still only exports a tiny proportion of its production - just 0.9 per cent of vegetables and 0.5 per cent of fruit.
As the world’s largest producer of apples, citrus and even potatoes, Chinese producers and exporters are certainly ambitious and a growing number are aiming high.
However, as the years have gone by and China has opened, albeit slowly, its doors to international trade, more fresh produce marketers have also been thinking about how they can enter China’s vast and largely untapped market.
Capespan has been involved in China for the last seven years and has handled many products. “Our main business is topfruit but we have shipped green and red kiwifruit, garlic, ginger, pomelos, lychees and citrus from China,” says Rod Hill, Capespan’s China procurement manager. “There is very little that China cannot produce due to its enormous climatic range.”
As China continues its expansion and exporters start shipping increasing volumes, there are fears that China could flood export markets with cheap fruit. However, Hill doesn’t think Europe has anything to worry about just yet.
“Freight costs are high and China is at a stage of development where it is difficult to find fruit with the correct traceability, production certification and packing facilities for Europe’s organised retail sector,” he says. “With existing tariffs, freight rates and increasing costs in China I don’t envisage a real threat to European production.”
A number of Chinese producers and exporters have been targeting the UK market for years. Having already made gains, some exporters are keen to diversify into other products.
Jinzhou Cici Co Ltd is confident Chinese fruits will have a good future in the UK and Europe. “Apples, pears, pomelos, citrus and grapes are now of good quality and some growers have achieved EurepGap and HACCP certification,” says Jack Guo of Jinzhou Cici Co.
Guo claims that fruit quality has improved and with the new varieties coming to market at a lower price, this could help accelerate sales in Europe.
Jinzhou Cici ships Chinese pears to the UK and achieved EurepGAP certification this year. Once it has gained EurepGAP for its grape operations, the company is hoping to make further headway in the UK.
Shandong Province-based Jining Sanlong Vegetable and Fruit Co Ltd agrees that the UK is certainly an attractive market.
“UK imports of fresh fruit and vegetables are huge from all over the world,” says a Sanlong spokesman. “China also produces a lot of fresh produce to supply the world demands at the most competitive prices.”
Like many other world importers, a number of Chinese exporters understand that the UK only wants the best. “It is not so easy to enter the market unless you have all kinds of certificates and facilities approved by the retailers or their customers,” Sanlong says.
In order to be competitive, Sanlong has been investing in its facilities and farms since 2000. “We offer full traceability and have achieved EurepGAP, HACCP and ISO9000 certificates for our facilities and farms,” says Sanlong. “We are also working on organic products.”
David Lam of Rokewood Ltd thinks that if you have a good imagination and are willing to take the ‘risk’, you could produce anything in China from exotic mushrooms, blueberries and asparagus to onions. “These can then be shipped to the UK economically,” he says.
“China is a country with low production costs and excellent infrastructure but the greatest challenges are getting the post harvest treatments right as well as finding a good counterpart in China,” Lam continues.
Indeed, it’s not all plain sailing. Hill says a popular myth surrounds Chinese production and availability. The majority of production remains disorganised and centred on small holdings from which marginal farmers earn an income. In regions most producers farm the same product with little or no diversification. “It is very difficult to get farmers to invest and plant new varieties,” Hill explains.
“Farmers plant for the local market and are very rarely planting in an organised manner for export. It is difficult to reach the criteria required for a viable export business.”
Products which are short in supply or are high value are most at risk in the short term. “China fulfils an important export requirement for garlic and ginger and an increasing following for Chinese Fuji and Asian pears but outside this, products tend to be specialised or niche products,” Hill tells FPJ. “This can change quickly if the production can be organised and produced with better technology and less waste.”
Sources also say quality control remains an issue and short-term speculators looking to make a quick buck are always around to offer poor quality fruit at cheap prices. Not only does this create a bad impression of Chinese fruit but it also harms the reputation of those in the business for the long haul.
Guo advises caution and urges importers to choose a company that has links with good-quality, consistent production.
“I feel what the producers and exporters in China need most is co-operation and partnership with UK companies, working hand-in-hand to keep a close check on issues such as production programming, quality and logistics,” Lam says. “Consumers demand a wide variety of produce and choice all year round and we should take this as an opportunity. There are benefits not just for Chinese operators but also for UK companies.”
When it comes to apples, the majority of observers are optimistic about China’s progress and future expansion.
Matthew Tang of Hong Kong-based Linkage Holdings, is confident about prospects for Chinese apples. “I think that China hurt the US apples in the South East Asian markets and is now cutting into the Middle East and perhaps soon in Central and South America markets,” he says. “Chinese fruits will have a very good price advantage in the mid to low range market. For the Indian sub-continent, a supply has already gained good access in the last five years.”
China’s apple exports are expected to be similar to 2005/06, despite an estimated 30-35 per cent production rise in the main growing areas of Shaanxi and Shandong. “Production is not really a factor as China is the largest producer of apples in the world and a high percentage are the Fuji variety,” Hill explains. “There is always sufficient volume available.”
Although Hill reports reasonable quality fruit in the Shaanxi region, sizes are smaller than usual and colour is not as good as a normal season. Therefore, he predicts a high percentage of fruit will not make the export grade due to blemish and colour. Shandong was predicting a bumper harvest but fruit has suffered from unusual weather, during the de-bagging to harvest period.
The de-bagging process normally takes around 10-16 days from taking the bag off the fruit when it is light-green to achieving full colour. However, a lack of cooler nights has meant that fruit has not coloured enough during this period. “Fruit has been left on the tree longer, risking poorer skin finish and fruit greening,” Hill says. “Despite this, colour is still not satisfactory. Strong domestic demand, however, has kept local prices high.”
Meanwhile, pears are generally of ‘good quality’ although there have been problems with hail in some areas of Hebei reducing Ya pear production. “Generally there is a good supply of Nashi pears and as yet there are limited volumes of Ya pear in the market,” Hill says. “Capespan’s European programmes are increasing every year mainly as a result of new customers entering the market and some increases with existing customers.”
Lam feels there are more opportunities to introduce some new varieties of apples, pears and other fruits into the UK market. “Maybe thorough breeding programmes would work on older varieties making them more suitable for European tastes?,” he says.
When it comes to citrus and grapes, opinions differ over how the export deal will pan out in the short term future. Sanlong says China is a big Navel orange consumer but plantations are limited and there is insufficient supply.
Large scale Navel projects are being undertaken in the south west of China and Sanlong predicts that within the next four to five years, China will become one of the leading suppliers of Navel oranges.
Similarly, Sanlong says Red Globe is very popular among Chinese producers. The variety is in strong demand and sells at high prices.
However, the firm says production is insufficient to fulfil demand from the big mainland cities such as Beijing, Shanghai, Dalian and Guangzhou. “As long as the growers are happy with the income, they will increase production as much as possible,” Sanlong says.
China has increased its grape shipments this year but many observers believe these are mainly opportunistic exports. A shortage of Crimson Seedless grapes this season has allowed some exporters to make gains and there are also extensive plantings of Red Globe (which are destined for the Asian market), in addition to Crimson and White Seedless.
“In the next few years grapes will become increasingly available and it is inevitable that exports will increase depending on year and availability from European production,” Hill predicts.
Tang feels there is more hype about grape and citrus exports rather than action. “Class I fruits are good enough to sell locally at a high price but there’s no hurry to send overseas,” he says. “The practice on export is more on the Class II fruits to buffer the oversupply in China. Based on this, good export fruit is not there. In the longer term, it is possible, perhaps in eight to 10 years time.”
Much has been made of China’s red kiwifruit and the opportunities available to the colourful fruit but some importers believe that for the time being, red kiwifruit will remain a niche product rather than enter the mainstream.
“We sampled red kiwifruit three years ago and at the time there was limited interest,” Hill says. “It’s very sensitive as a product with a relatively short season.”
“The crop was decimated this year by the drought in Sichuan but we think it is an excellent product for speciality lines and in particular the catering sector due to its attractive flesh colour.”
When it comes to finding opportunities to ship to China, Hill acknowledges that fruit is expensive for Chinese consumers. However, as incomes increase and the economy strengthens, he believes the Chinese local market will grow much faster than the export market.
The price of European fruit competing against local fruit in season means that Chinese growers are unlikely to face too much competition, but Hill predicts that if China continues on its current trend, it will become the largest consumer market in the world and high quality imported fruit may find a market.
“China has the highest reserves of any country and the fastest growth,” Hill says. “I can only see positives in the long term in the expansion of China as a consumer market for producers worldwide,” he states.
Sinclair International feels that opportunities in China do not present themselves without effort. “In China you have to search for them, and that is what we’re doing with local knowledge and native-speaking people,” says Neil Winney, Sinclair International Ltd’s marketing manager for South Africa, China and Thailand.
“It is very difficult to manage a country so large and diverse as China from afar and you need people on the ground making daily contact to ensure the industry takes you seriously.”
Winney says the opportunities for any produce equipment supplier to China comes on the back of growth - not only in the export of produce from China, but also in domestic growth.
“The shift of people from rural areas to cities and the increase in general in high-tech work opportunities is driving up labour costs and reducing labour availability to the agricultural industry,” he explains.
“This is hastening the need to introduce automation to reduce costs and to replace the diminishing labour resources. Equipment suppliers who can help to reduce costs through improved efficiencies, help to fill the voids left by the shifting workforce and provide better quality produce for the increasingly discerning Chinese public.”
Local Chinese equipment suppliers are also trying to satisfy these market needs and according to Winney, very often target the more cost-conscious customers. “The advice for equipment suppliers to China is to seek out those customers that value advanced and proven technologies endorsed by those that the Chinese industry is seeking to emulate,” he says.
Sinclair opened a representative office in Yantai, Shandong province in September. “From there, our native Chinese sales manager can be close to existing and prospective apple customers in Shandong province, as well as have good connections to Guangdong province where we have service engineers maintaining the Sinclair equipment on citrus lines in that region,” Winney says.
Sources agree that despite the many opportunities available, it pays to be as committed and knowledgeable about the market as possible.
When targeting consumers in China, shippers need to realise that the fresh produce market is a tiered system. “Traders have to adapt their products and not just for the supermarkets,” Tang says. “The main volume is sold through the traditional wholesale markets. That is the key.”
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