Liberalization of China s Fishery Trade: The Environmental Impacts

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1 Prepared for the 5 th Meeting of the 2 nd Phase of CCICED Working Group on Trade and Environment Liberalization of China s Fishery Trade: The Environmental Impacts Chinese Academy of International Trade and Economic Cooperation May 2001

2 Table of Contents EXECUTIVE SUMMARY PREFACE CHINA S FISHERY DEVELOPMENT: ITS STATUS QUO AND FUTURE TREND FISHERY RESOURCES THE CURRENT SITUATION OF CHINA S FISHERY PRODUCTION An Overview Fishing Aquaculture Fishery Processing CHINA S AQUATICS CONSUMPTION The Structure of Food Consumption in China The Consumption Structure of Aquatic Products Regional Distribution of Aquatic Consumption The Price Trend of China s Aquatic Products MANAGEMENT SYSTEM OF CHINA S FISHERY INDUSTRY Ineffective Management System Stricter Quality Control and More Efficiency Required Aquatic Quarantine Loose Enforcement of Established Laws and Regulations DEVELOPMENT TRENDS OF CHINA S FISHERY INDUSTRY TRADE LIBERALIZATION AND CHINA S AQUATICS TRADE STATUS QUO OF CHINA S AQUATICS TRADE Export Import CHINA S TRADE POLICY OF AQUATICS Tariff and Non-tariff Measures Trade Rights China s Measures to Encourage Aquatic Exports LIBERALIZATION PROCESS OF THE CHINESE FISHERY SECTOR IMPACTS OF ENTRY INTO THE WTO ON CHINA S FISHERY INDUSTRY Impacts on Local Aquatics Consumption Impacts on Aquatics Production Impacts on Aquatics Trade Impacts on the Aquatics Competitive Advantage ENVIRONMENTAL IMPACTS OF TRADE LIBERALIZATION OF CHINA S

3 FISHERY INDUSTRY MAJOR ENVIRONMENTAL ISSUES OF CHINA S FISHERY INDUSTRY Degradation of Natural Population Destruction of Fish Habitat Deterioration of Germ Plasm Resource Imbalance of Ecological System of Aquaculture Water ENVIRONMENTAL IMPACTS OF TRADE LIBERALIZATION Tariff and Tariff Structure on Environment Green Barriers on the environment Fishery subsidy on Environment CONCLUSION RECOMMENDATIONS AND SUGGESTION ON POLICIES AND CONTROLS FOR CHINA S FISHERY INDUSTRY REFERENCES

4 Executive Summary Fisheries are an industry of rapid growth in China, and the growth rate of the industry s output value has surpassed that of the nation s GDP. China s aquatic production has ranked number one in the world for 10 years, with output up to one third of the world total. China is the only one country among the world s major fishery countries that outpaced captured produces by cultivated produce. Most of the aquatic products in China s market are basically domestic supplies, as the exchanges with international markets remain to be further facilitated. The structure of aquatics consumption is determined by the structure of the production, the share of aquaculture products in the Chinese market is estimated as 60 per cent and the share of naturals, roughly 40 per cent. China s fishery development in future will focus on its sustainable development; the pursuit of aquatic output should be taken over by a pursuit of quality, efficiency and profits as a way of fishery growth. Compared with the fishery administrative system of developed nations, China s fishery industry management still faces many problems, which can be summarized as the following: 1) ineffective management system; 2) stricter quality control and more efficiency required; 3) aquatic quarantine not readily performed, and 4) loose in enforcement of established laws and regulations. The aquatic sector is basically an area protected by tariff measures in China. In recent years, in complying with the trends of economic globalization and trade liberalization and participating in international competition and cooperation according to the WTO rules, China has adopted a series of practical measures to liberalizing its trade. In the process of trade liberalization of the Chinese fishery industry, the market structure has changed dramatically and the trade policies and administrative regulations are under constant adjustment and amendment. Because of imperfection of the socialist market economy system, there inevitably exists both market failure and policy failure, which cause some environmental problems, such as degradation of natural population, destruction of fish habitat, deterioration of germ plasm resources and imbalance of ecological system of aquaculture water. In recent years, the government has been fully aware of the seriousness in resource degradation and water pollution, leading to an unsustainable fishery development. Various steps have been taken, including taking control over the number of fishery boats and horsepower, off-season fishing, enforcement on the drain to sea and fee collection for the drain to prevent marine resources. China will speed up its economic structural reform after joining the WTO and the country s economic performance will yield substantial benefits accordingly. Accession to the WTO improves the efficiency of economic operations and provides a better chance of increasing the income level, which will contribute to a rise in the consumption of aquatic products both in quantity and quality terms. After accession to the WTO, both the Chinese fishing sector and the fish farming sector will experience a long and rapid adjustment, shifting from extensive production to intensive production. Under the principles of sustainable development, the quality of the product and sustainable use of the resources are emphasized, rather than maximization of the output. The import and export trade of aquatic products will continue to grow on the assumption of reducing trade barriers and enhanced market access and improved market security, transparency and predictability both inside and outside of China. But Chinese 1

5 exports probably will be hindered by higher product standards in the major importing market. Under the intensified competition, Chinese enterprise will be very eager to invest in high technology and high efficient production methods, which has both positive and negative environmental effects. Recommendations and suggestion on policies and controls for China s fishery industry includes: Shifting from resources development to resources management; Introducing new rules and regulations for the industry s development; Focusing on capacity building and providing greater scientific backing to the industry s decision-making process; Building up the infrastructures and an industry support system; Improving the quality of aquatic products. 2

6 1. Preface Accession to the WTO is the logical and inevitable end-result of China s reform and open policy. The transformation toward a WTO-initiated market economy, which has been ushered in by the country s reform of its economic system, has brought unprecedented vitality to the domestic fishery industry, and made China the largest producer in the world fishery market. The reform, sustained over two decades, has removed many barriers to China s integration into the world economy and sharpened the nation s competitiveness. However, the entry into WTO necessitates further market opening as well as deeper integration into the global economy and multilateral trading system. This means China will have to strengthen its capacity for sustainable fishery industry development with effective use of more external resources and markets and also confront more uncertainties, risks and the increase of readjustment costs in that sector s expansion. China s fishery industry will also incur direct and indirect environmental effects as the country joins the WTO. The direct effects stem from the adaptation of domestic fishery policies and management of multilateral rules and regulations, while indirect effects come as a result of the changes in the production, consumption and trade of aquatic produce. This paper begins with a general review of the development of China s fishery industry, its consumption and trade since the country began to transform from a planned economy to a socialist market economy at the end of 1970s. It then conducts an in-depth analysis of the changes in production, consumption and trade following the WTO entry and outlines the upcoming trends in development. It points to the major features of environmental change, based on meticulous research, before putting forward some policy considerations. 3

7 2. China s Fishery Development: Its Status Quo and Future Trend 2.1 Fishery Resources As an industry with a long history, China s fishery will grow prosperously in the future. The country is rich in fish resources, including inland freshwater, seawater resources and many different varieties of fish stocks. By the end of 1999, China s entire inland water area accounted for 17,470,000 hectares, 1.8 per cent of its total land area. There are seven big lakes and 18 rivers, each longer than 1,000 km, in addition to over 80,000 reservoirs that total 2 million hectares in area. The inland water areas have a rich variety of fish resources, with the cultivable areas in the inland waters accounting for 6.75 million hectares. Table 1: China s Inland Waters Areas (1,000 Hectares) Total Cultivable Cultivated To Be Cultivated Total 17,471 6,749 4,669 2,080 Pools 1,922 1,922 1, Lakes 7,524 2, ,327 Reservoirs 2,302 1,884 1, Rivers & Brooks 5, Others * * Indicates an industrialized aquaculture and net aquaculture in the non-cultivable areas. Source: China Statistics Yearbook China has a large sea area of up to million hectares, among which the fishing fields account for 28 million hectares. Table 2: Sea Areas and Fishing Fields (1,000 Hectares) Total Sea Areas Continental Shelf Fishing Field Areas Total 472, ,000 Bohai Sea 7,700 7,700 Yellow Sea 38,000 35,300 East China Sea 77,000 54,900 South China Sea 350, ,100 Source: China Statistics Yearbook Among the 11,967 species of sea water fish worldwide, 3,248 are found in China, 27 4

8 per cent of the world total. Among the 1,694 fish species you can find: airtail, chub mackerel, carangid, pacific herring, Spanish mackerel, Chinese herring, eel, yellow croaker, flounders (left-eyed and right-eyed), butterfish, porgy, cod, black scraper, sardine, anchovy and shark. Major shelled sea species and seaweed include: prawn, shrimp, various crabs, cuttlefish, squid, octopus, scallops, mussels, abalone, jellyfish, kelp and laver. Among the 9,966 species of the world s freshwater fish, China has 709, with 58 sub-species. In addition, there are 64 species of migrant fishes, mainly: black carp, grass carp, silver carp, carp, crucian carp, bream, whitefish, catfish, mandarin fish, triangular bream, and freshwater crabs and soft shelled turtle. 2.2 The Current Situation of China s Fishery Production An Overview The past two decades saw a rapid growth in fishery development; the aquatic outputs increased from million tons to million tons from 1980 to 1999, a growth rate of per cent per year. The output value in the same period increased from 3,285 million RMB to 252,382 million RMB, which is per cent of the yearly growth rate. China s aquatic production has ranked number one in the world for 10 years, with output up to one third of the world total. The average aquatic product per capita is 32.7 kg, double the world average and number one in the world. The rapid fishery development in China has made the country play an important role in the world fishery industry. Many of the measures and experiences that China has taken and collected can be used by other nations, particularly developing nations in their endeavours for agricultural restructuring and efficient food supplies. Chart 1 Yearly Increases of Aquatic Produces 10000tonnes Note: 1. New statistical system began in The estimated figure for 2000 The fundamental changes that have taken place in the structure of China s fishery production and the development trend in future is likely to be: Chart 2 5

9 The Comparison of Seawater Aquatics and Freshwater Aquatics tonnes With simultaneous growth of the sea fishery and the freshwater fishery (a stable ratio between sea and freshwater aquatics of 6:4),there is a smaller proportion of fishing produce than that of cultivated produce and the aquacultural outputs outpaced fishing produce in China, where fishery cultivation comes first, is the only nation among the world s major fishery countries that outpaced fishing produces by cultivated produce. Chart tonnes The Output Comparison, Fishing and Aquaculture fishing aquacul t ur e Aquaculture in the sea areas is the fastest growing sector among the fishery industry, its proportion in the total aquatic outputs increased year by year. seawat er f r eshwat er 6

10 Chart 4 China s Various Fishery Sectors, the Output Comparison 100% 80% 60% 40% 20% 0% Seawater fishing Seawater aquaculture freshwater fishing freshwater aquaculture Investments from governments of various levels, farmers and investors come into aquatic farming because of its advantageous position in big agriculture. Between 1996 and 1999, the so-called Ninth Five-Year Plan period, the fixed fishery assets investment increased from 2,276 million RMB to 3,284 million RMB, a 44.3 per cent growth. Among the total fishery assets investment in 1999, 6.5 per cent came from within the nation s budget investment, 20.8 per cent from domestic loans and foreign investment and 72.7 per cent from self-collected funds and other kinds of investments. Rapid fishery development contributes not only to meeting the market demand and improving people s living standards, but also to the increase of more job opportunities and agricultural restructuring. In 1999, the number of people in the fishery labour force was up to million, 6 million more than the 1985 figure. The aquatic farmers accounted for about 70 per cent of the million fishery labourers. The income per fishermen increased from 626 RMB in 1985 to 4,474 RMB in 1999, a great deal of peasants improved their living standards by fishery operations. The fishery development brought about various related industries such as warehouse storage, processing, transportation, sales and marketing and feeds Fishing Sea and Ocean Fishing China s sea and ocean fishing operations come mainly from the Bohai Sea, Yellow Sea, East China Sea and South China Sea, which account for more than 90 per cent of total fishing outputs. 7

11 Chart 5 Fishing Outputs in Different Coastal Seas Sout h Chi na Sea 23% Ot her ar eas 6% Bohai Sea 11% Yel l ow Sea 23% East Chi na Sea 37% China s fishery labours can be divided into two major parts; state owned and other, privately owned by individuals. The individual fishery is larger in production scale and output, accounting for 90 per cent of the country s total sea aquatic products. The state owned fishery is proud of its advanced equipment and strong investment backup. The number of state owned fishing engine boats in 1999 was up to 9,995, a total of 480,079 tonnes and a total horsepower of 897,833 kilowatts, accounting respectively for 3.57 per cent, 8.57 per cent and 7.37 per cent of the nation s total. The state owned fishery, with sufficient investment and high tech support, plays a key role in China s ocean fishing operations. Trawling ranks number one in the China s sea and ocean fishing operations, followed by set netting and flowing gill netting. Chart 6 Structure of Sea and Ocean Fishing Operations others fishing 14% 3% set netting 18% flowing gill netting 14% purse netting 4% trawling 47% Offshore Fishery As a traditional fishing nation, China has traditionally depended on natural resources for its market needs. The aquatic output could only grow with an increase of fishing output, for instance, the fishing output in 1978 took 74 per cent of the nation s total aquatic production. The 1970 s saw such extreme over-fishing in the offshore sea areas that the great loss in resources has yet to be recovered. With the exception of the hairtail output, which still remains high, other species such as yellow croaker and cuttlefish are still far from their historically high records. Although their output grew recently, there is still a trend of 8

12 degeneration. Table 3 Outputs of China s Major Seawater Fishing Products (10,000 Tons) Yellow Yellow croake croaker r (big) (small) Hairtail Chub Carangi Black macker el d scraper Anchov y Shells Soft shelled Seaweed Jellyfish NA NA NA NA A new summer no-fishing system was implemented in the East China Sea and Yellow Sea in 1995 and in the South China Sea in This system plays an important role in protecting resources and improving economic profits. Case 1 The first no-fishing summer, good effect in the South China Sea June and July, 1999 was the first no fishing summer in the South China Sea. A tracing survey was conducted to follow up fishery resources in three provinces, Guangdong, Guangxi and Hainan. The survey displayed that the output in August 1999, beginning a month after the no-fishing season, was increased by 30 per cent over the output in August In a year when the no-fishing system wasn t implemented, the KG/H increased several times. As a result, many kinds of fish increased in dimension and the resources partially recovered, even though there were no big changes in output before and after the no-fishing season, most were still fish born in the current year. 9

13 KG/H in Guangdong, After the No Fishing Season Operations Fishing Areas KG/H Increase (%) August August Double trawling Pearl River Mouth Double trawling Northern Bay Shrimp trawling Xinzhou Double trawling Pearl River Mouth Shrimp trawling Chuanshan Islands Purse netting West Guangdong Double trawling East Guangdong Single trawling East Guangdong Shrimp trawling East Guangdong Single trawling East Guangdong Purse netting East Guangdong Shrimp trawling Xinzhou Purse netting West Guangdong The two month no-fishing system is good for resource protection and the ecological environment of the fisheries. However, economic profits after the no-fishing season were just flat, since a great number of fishing boats went to fishing, which pushed the cost up and induced the price low. In 1997, the Ministry of Agriculture proclaimed the Implementation Measures on the Control of Sea and Ocean Fishing Operations During the Ninth Five-Year Plan period, according to which the new fishing licenses were issued for all coastal provinces to gradually set up a new management system for sea and ocean fishing production, protect fishery resources, upgrade fishery efficiency and proficiency and transform the growth of the fishery industry. In 1998, a zero growth for sea and ocean fishing operations was implemented, which rapidly lowered the sea and ocean fishing output. In 1999, the zero growth was basically targeted. 10

14 Chart 7 China s Sea and Ocean Fishing Output, Changes in Growth Rate 25% 20% 15% 10% 5% 0% Control of offshore fishing will remain effective as a development trend in the future, its measures including: The fishery management system internationally available, the TAC system, will be implemented. Total fishing output, with the bio environment, economic, social and political interests considered would be set up in a given period of fishing seasons. Traditional offshore trawling operations will be changed. The structure of fishnets will also be changed so that trawling may be conducted between different layers of sea waters instead of on the seabed. To promote targeted fishing operations, the resources should be targeted as high quality varieties instead of traditional varieties, i.e. local and regional varieties instead of traditional bulk aquatics. Stronger and further enforcement on control measures over the fishing boat horsepower, boat upgrading and boat license review and renewal. Further implement the no-fishing season system, so as to protect offshore resources. Ocean Fishing In March 1985, China began to send its fishing boats to West Africa, and since, as many as 1,300 fishing boats have been engaged in ocean fishing. There are 16 provinces in China that have established ocean fishing companies and over 60 various fishing enterprises were set up in over 30 countries, with a labour force of up to 30,000. Table 4 China s Ocean Fishing Development, (1) Outputs (tons) Fishes Shrimp & crab Cephalopod Others Total ,064 6, ,889 9, , ,708 6, ,116 16, ,091 11

15 China s Ocean Fishing Development, (2) Ocean Fishing Boats Number of boats Tonnage (ton) Horsepower (kw) Workforce , , ,552 21, , , ,074 36,370 Source: China Fishery Statistical Yearbook China s ocean fishery development is featured by: Remarkable economic efficiency. The total of overseas ocean fishing income in 1999 reached US$520 million with net profits up to US$423.7 million, while 1999 was a lost year for the fishing enterprises domestically, and the fishing sector as a whole. More supply to domestic aquatics market. The overseas aquatic products transported to domestic markets in 1999 accounted for 570,000 tonnes, good to ensure market supply and stabilize the aquatic prices. The development and exportation of China s fishing boats, related equipment and supplies have been sped up, which meets the needs of China s ocean fishing operations and narrows the gap in fishing manufacturing between China and the developed nations. China s ocean fishing ventures cover five operations: cod fishing in Bering Sea and Sea of Ochotsk, ocean trawling in the nine nations along the West African coast, squid fishing, tuna fishing in the South Pacific and ocean areas along Southeastern neighbouring nations. Seventy per cent of China s ocean fishing output comes from economic regions of the coastal countries (200 sea miles), and only 30 per cent from high seas. There is a clear-cut stipulation on fish resources of coastal nations in the UN Convention on Ocean Law. After the implementation of this Convention, every coastal nation established exclusive 200 sea miles economic regions and enforced measures to protect resources and environment, which, because of their higher threshold, made China s ocean fishing operations high in cost, but low in profits. The development of ocean fishing operations should be targeted at the high sea areas, restructuring operational needs such as changing traditional seabed trawling operations, (which account for 90 per cent) and developing the high value fishing operation. For instance, the tuna fishing operations in the South Pacific started in 1988 and the squid fishing operations in the North Pacific started in 1989, accounting for 12 per cent of the output in the nation s ocean fishing operations, but with a shared value of 30 per cent and above. More international cooperation is needed to get a preferential threshold in the coastal nations exclusive 200 sea miles economic areas. Freshwater Fishing Before 1963, China s inland fishery was mainly natural fishing, which has since been surpassed by aquaculture. After the 1960 s, the freshwater fishing output stayed at the same level year round without increase, due to over fishing, water irrigation projects and industrial pollution that damaged the ecological environment and resources declines. Beginning in the 1980 s, measures have been taken to establish effective management, making cultivated land into aquaculture areas, as they were previously, to establish channels for fish to migrate, restructure fishing facilities and control the waste pollution. As a result, the inland aquaculture Comment: US RMB? Comment: US RMB? 12

16 areas and freshwater resources began improving, output increased and China s freshwater aquatic output in 1999 reached million tonnes. Nevertheless, the fishing output takes per cent of the country s total freshwater aquatic output, since the rapid growth of freshwater aquaculture Aquaculture Traditional fishing methods were unable meet the needs of market demand for aquatics with the upswing in economic development and society s upgraded lifestyles, so the aquaculture industry was developed. From the 1970 s on, China s aquaculture grew rapidly, supported by the government and pushed by market demands, the aquacultural areas increased to 6.29 million hectares in 1999 from 2.86 million hectares in 1979 and the output increased to million tonnes in 1999 from 1.23 million tonnes in The output increase takes up 14.45per cent outpacing the per cent growth rate of the entire aquatic output in the same period. According to FAO statistics, China ranks first in aquaculture, contributing to two-thirds of the world s aquacultural growth, its share of the world s aquaculture accounted for 67.4 per cent of the total in China s freshwater aquaculture is highlighted by a large role for aquaculture in the agricultural and fishery restructuring. China is the sole nation with the aquacultural output surpassing its fishing output, the ratio of its fishing and aquacultural output stands at 42:58. Fundamental changes have taken place in China s fishery industrial structure along with the development of aquaculture. The expansion of freshwater aquacultural areas and innovations of aquacultural technology have brought about a yearly increase in aquacultural output. As a result, the peasants achieved great deal of economic proficiencies. Chart 8 Freshwater Aquaculture, Its Areas and Output Output (10,000 tons) aquacul t ur e out put aquacul t ur e ar eas Diversity and high quality, the development target for restructuring aquaculture While developing the regular aquacultural species, efforts should be made to develop new and special aquacultural species to meet the needs of export and domestic demand. Take eels for example, 90 per cent of the eels are for Japan s market, and remarkable economic Areas (1,000 hectare) 13

17 profits from the exports too. Seawater aquaculture outpaces freshwater aquaculture Compared with the inland freshwater aquaculture, which is high in both economic and environmental costs because of almost full utilization in every aquacultural area, the seawater aquaculture still has more than 50 per cent of the total a1quacultural areas to utilize. In fact, the pace for seawater aquaculture has surpassed the freshwater aquaculture and the percentage of seawater aquaculture grows annually, its share in the total aquacultural output increasing to 41 per cent in 1999 from 23 per cent in Diversity in aquaculturel models China s aquaculture is highlighted by the diversified aquacultural models, the combination of modern technology models, such as seawater net case aquaculture, traditional models like fish farming in rice fields, ecological farming in the salt soil land and the recently popular leisure fishing. Inland freshwater aquaculture Inland freshwater aquaculture comprises a major part of China s fishery development; its output in 1999 was up to 60 per cent of the total aquaculture output, which accounts for 58 per cent of the total fishery turnover. In others words, the inland freshwater aquaculture alone takes more than one-third of China s total fishery output. The inland freshwater aquacultural areas are located mainly in the provinces of southern China, the region with more rain and more water areas. In 1999, there were 21 provinces, each with an inland aquaculture output surpassing 100,000 tonnes, Guangdong ranks number one, its output topped 2.07million tonnes, 14.6 per cent of the nation s total. The aquaculture output surpassed 1 million tonnes, covering another four provinces, Hubei, Jiangsu, Anhui and Hunan, their shares among the nation s total are 13.2 per cent, 12.4 per cent, 8.7 per cent and 7.7 per cent respectively. The increase of inland aquacultural output mainly comes from pool farming. Compared with 1985, the 1999 output of inland freshwater aquaculture increased million tonnes, 75 per cent of the increase came from the pool farming. Pool aquaculture is located mainly in the Yangtse River Valley and the Pearl River Valley, the six provinces covering Guangdong, Jiangsu, Hubei, Hunan, Anhui and Jiangxi in these two valleys produced in per cent of the nation s total pool aquaculture output. The provinces in North China, Northeast and Northwest China such as Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Shaanxi, Gansu, Ningxia, Xinjiang, by way of turning non-cultivable land into aquaculture pools, have increased their share of the nation s entire pool aquaculture output, their total share increasing from 1979 s 2.8 per cent to 1999 s 10.6 per cent, and remains very prospective. 14

18 Chart 9 Output Shares among Different Types of China s Inland Freshwater Aquaculture, 1999 Rice fields 4% Reservoirs 10% Rivers & brooks 5% lakes 6% others 3% pools 72% Changes have taken place in the inland freshwater aquaculture. The traditional pool farming has been expanded to extensive farming in vast lakes, big reservoirs and wide river areas, using a netted or fenced case as a new intensive farming method. The output grows annually. The aquaculture in rice fields, already a market-oriented model from a peasant household self-fed model, has grown rapidly. In 1999, the output from rice fields, with a total area of million hectares, stood at 650,000 tonnes. The area increased 1.7 times and the output, four times. Table 5 Output among Different Types of Inland Freshwater Aquaculture, 1999 (kg per hectare) output pools lakes Reservoirs Fish varieties have changed in recent years as the people s living standards improve. However, the silver carp, variegated carp, grass carp and carp continue to be the four major types and the bream, crucian carp, dace, black carp, as well as shrimp and crab, remain the ones people consume in great numbers. Among the freshwater aquaculture output in 1999, the silver carp and variegated carp accounted for 33.5 per cent, the grass carp, 21.5 per cent and carp, 14.4 per cent. Others such as the mandarin fish, eel, soft-shelled turtle, river crab, pond shrimp and rainbow trout, the valued kinds of fishes, only took a small proportion. 15

19 Seawater aquaculture China s seawater aquaculture has developed overwhelmingly since the 1980s, most rapidly in the last decade. The seawater areas expanded from 117,000 hectares in 1979 to million hectares in 1999, while the output in the same period, from increased from 416,000 tonnes to million tonnes, the year s growth rate of 18.1 per cent, much higher than the growth rate of freshwater aquaculture. Big changes have also taken place in the seawater aquaculture structure. The share of valued fish such as shrimps and shells amount to the total output increased; with types such as prawn, scallops, abalone, red porgy, black porgy, grouper and blue crab. Table 6 Changes in Seawater Aquaculture Types (10,000 tons, and %) total fish share Shrimp s & crabs share shells share seawee ds share The table above shows that in China s seawater aquaculture, shells farming comprises a major a share of the total output in the last five years, over 80 per cent, followed by seaweed. However, the output of valued kinds of fishes, shrimp and crabs in total is no more than 10 per cent. 16

20 Chart 10 The Comparison of Different Types of China s Seawater Aquaculture, hectares shallow seas beaches bays As for the types of aquaculture, beach farming comprises a major part, its place among seawater aquaculture in 1999 had risen to 57.5 per cent; and 24.0 per cent for the share of aquaculture in shallow seas, which increased fastest from 1989 to 1999, with the area growing from 25,200 hectares to 263,300 hectares, an increase of 9.4 times the original. China has long coastlines with numerous bays, beaches and vast seawater areas for aquaculture, particularly the shallow sea areas. The current share of utilization is merely per cent, so there is vast potential for further aquacultural development. The large-scale aquacultural operations are mainly located in China s economically developed regions, farmed in offshore bays and beaches where transportation is convenient. However, these areas are over farmed, going beyond the environmental capacity, which damages the ecological environment and reduces economic profits from aquaculture. For a healthy development of China s seawater aquaculture, the following targets need be met: An overall and rational planning for the aquaculture sea waters; Widespread ecological farming model and aquaculture technology; Protection of the waters ecological environment and species resources; For sustainable development of the seawater aquaculture, efforts must be made to control the seeds and feeds. Table 7 A Comparison, The Farmed Areas and the Cultivable Areas 17

21 Total Shallow seas Beaches Bays The farmed areas The areas cultivable Utilization (%) rate Note: the farming areas in bays may be larger than the cultivable areas since industrial farming and netted farming case adopted in the non-cultivable areas. Source: China Statistics Yearbook Fishery Processing The aquatic processing industry is developing along with rapid fishery development, the increased market needs for aquatics and the processing of technological innovations. The water and fishery resources are rare in China s inland regions, particularly the western regions. However, the demand for more aquatic supply and a shift in food structure is growing along with economic development and improvement in people s living standards in these regions. There are special requirements for aquatic products in warehousing storage, transportation and preservation, that unlike other commodities, the aquatic processing is growing specifically in the frozen, dried, preserved and canned products to meet the needs in the inland areas. Table 8 The Development of China s Aquatics Processing ( ) Firms Processing Processed volume (tons) number capacity Total Frozen Dried Preserved Fish meal & Others aquatics protein feeds Growth rate()

22 The total amount of processed aquatics increased 44.7 per cent between 1996 and 1999, while the processing capability increased only 9.2 per cent in the same period. Processed products that increased the fastest include internal organs, pharmaceuticals and flavours and fish meals and animal proteins. One of the factors that contributes to rapid growth of the aquatic-processing amount is the improvement of China s processing technology, but the most basic reason is the factor of market needs. Fishmeal was the major aquatic product to be imported from abroad in the past. Since the domestic supply was short and the needs so large, about two-thirds of the nation s fishmeal supply depended on foreign markets. In recent years, the demand for fishmeal grew explosively as a result of a rapid development of fish farming, which gave rise to a growing processing capability and increased amounts of processed fishmeal. As a result, the domestic fishmeal supply can meet more than half of the market needs. It is not guaranteed that as long as China s fish farming development and domestic processing technology improve that the fishmeal production will remain a fast growing trend. Frozen aquatic products have longer storage periods, and maintain their original flavour and nutrition better than the preserved, dried and smoke dried and canned. As a major part in the nation s total amount of processed aquatic products, frozen products accounted for 52.2 per cent in The market for frozen aquatics remains extensive and prospective, even tough its value-added is lower and its growth rate slower than other processed aquatics, because the needs will increase with the restructuring of population, food and people s lifestyles in the development process of China s West. Moreover, frozen aquatic food are also a major player in export. The frozen fish exported in 1999 amounted to 370,000 tonnes, 28 per cent of the total 1.33 million tonnes of aquatic exports. The processing trade combines with the frozen processing sector, accounting for 37 per cent of total aquatic exports in The aquatic processing trade is focused, with the advantage of China s low priced workforce, on processing cheap overseas resources like frozen cod, frozen chum salmon, frozen flounder and frozen mackerel into the frozen sliced fish meat, then re-exported. Chart 11 The Structure of China s Frozen Aquatics 19

23 ot her s 32% bi g- packed seawat er fish 44% f r eshwat er aquat i cs 2% smal l - packed seawat er fish 22% The fish, mainly seawater fish, take a major part of the frozen aquatics; its share in 1999 s total frozen foods was up to 68 per cent, since Chinese people prefer fresh food. Freshwater fish is usually supplied alive in the market, very few remained frozen as its products are distributed almost everywhere throughout the nation. With convenient and easier preservation, the cost for freshwater fish transportation and storage is lower than seawater fish, which must be conditioned during transportation because it is hard to keep it fresh. 2.3 China s Aquatics Consumption The Structure of Food Consumption in China Fundamental changes have taken place in China s economic system, which is experiencing a transition from a planned economy to a socialist market economy. Therefore, the liberalization of China s economic operations must be facilitated and enhanced. The key impacts of a liberalized economy for China, a country containing one-fifth of the world s population, can be counted as maximum vigour mobilized massively and actively in social and economic events and activities, a high efficiency upgraded constantly in economic operations, and increasing the national income as a whole. According to a survey conducted by the State Statistics Bureau, China s average salary rose to 8,346 RMB in 1999, equivalent to US$1,000, the salary level in Shanghai reached 16,641 RMB, equivalent to US$2,000, and in regions as Beijing, Comment: US or RMB Comment: US 20

24 Tianjin, Zhejiang, Guangdong, Fujian and Jiangsu the salary level may reach 10,000 RMB. As a result, an obvious change has taken place in the structure of food consumption. Instead of the grains and vegetables previously eaten, diversified foods consist of the major food consumption structure at present, as a pattern transited from stuffing the stomach full to good foods to enjoy. In the meantime, the structure of China s agricultural production and distribution has changed accordingly. The structure of agricultural production before the 1980 s was ruled by the grain production ranks the first ideal, and the production of other agricultural by-products was ignored. Since April 1, 1985 when the policy of grain wholly purchase by the State was abolished and a contracted grain purchase policy was adopted, China s grain production and distribution became more market oriented. Under the market economy and ruled by its laws, various agricultural products are balanced in their production and distribution by market forces, and the policy of grain production is number one. With various agricultural products sufficient in market supply, people have more choice in the variety of food consumption. The food sector goes closer to domestic as well as international markets as China s market increasingly opens to the outside, and more food can be supplied from abroad. For instance, many foreign foods like rice from Thailand, milk powders from the Netherlands and citrus from U.S. are available in China s market, which enables Chinese consumers to have more alternatives in their food choices. U.S. products like Nestle Café produced in Guangzhou, the Taiwanese instant noodles made in Tianjin and many other foods from foreign invested firms, have enriched China s food market for the diversified needs of consumers. Comment: Explain? The consumption structure becomes obviously diversified in view of the food consumption per capita in the township households. A survey by the State Statistics Bureau shows that in 1999 expenditures per capita in household foods was 1,932.1 RMB, 41.9 per cent of a household s total expenditures for living. This, an Engel coefficient measuring the quality of life, has decreased 9 percentage points from the 1992 s 41.9 per cent. Among the food consumption expenditures, bigger spending amounts and their shares are respectively as follows: grains, RMB and 11.1 per cent; meat and birds, RMB and 21.1 per cent; aquatics, RMB and 7.5 per cent; 21

25 vegetables, RMB and 10.1 per cent; dried and fresh fruits, RMB and 6.7 per cent; wines and drinks, RMB and 4.9 per cent; eggs, RMB and 3.4 per cent; edible oil; RMB and 3.8 per cent; milk and the products, RMB and 2.9 per cent; and dining out, RMB and 12.9 per cent. Recent years have witnessed a decline in food consumption in China s township households; the volumes of grain, vegetables, pork, beef and mutton consumed have decreased from 1985 s kg per household to 1999 s kg. The less valued foods like grains, vegetables, sugars and flavours declined in consumption volume, the share of grain between 1985 and 1999 went from 40.7 per cent to 32 per cent, vegetables from 43.6 per cent to 43.4 per cent and sugars from 0.8 per cent to 0.7% per cent In the meantime, the consumption of valued foods like edible oil, meat and egg, aquatics and wines have increased remarkably, edible oil in grew from 1.7 per cent to 2.9 per cent, meat and egg from 8.7 per cent to 13.5 per cent, aquatics from 2.1 per cent to 3.9 per cent and wines, from 2.4 per cent to 3.6 per cent. Table 9 Consumption Volume per Capita in China s Township/Urban Households (kg) Grain Vegetabl Edible Meat / Aquatics Sugar Wines Total e oil egg

26 In view of the food consumption per capita in rural households, the foods they consume are mostly grains because of their limited incomes. Their consumption in vegetables, edible oil, meat and eggs, aquatics, sugar and wines are consumed less compared with urban households. A statistical figure from State Statistics Bureau displays that China s rural household expenditures per capita in foods stood for RMB in 1999, 52.6 per cent of the total expenditures for living, an Engel coefficient higher than 1978 s 67.8 per cent and 1985 s 57.7 per cent, also higher than the urban household share in food consumption. In general, the living standards in rural areas are relatively low and the food consumption remains to stuff the stomach full,even though there s not enough food to eat in some poor areas. Statistics show that among the average expenditures for food consumption in rural households in 1999, grain was RMB, 34.1 per cent of the total; non-stable foods, RMB, 42.5 per cent and other food expenditures, RMB, 15.4 per cent. It should be noted that the living standards in rural households have been upgraded in recent years, however, relatively slower than the improvement in urban households and therefore the structure of food consumption in rural households improved only by a small amount. Grains usually take about 60 per cent and vegetables, 30 per cent among the structure of food consumption in rural households, while edible oil, meat and eggs, aquatics, sugar and wines, total merely 10 per cent of the total diet. Table 10 Consumption Volume per Capita in China s Rural Households (kg) Grain Vegetabl Edible Meat / Aquatics Sugar Wines Total e oil egg 23

27 Generally, the structure of food consumption in township and rural households has been improved in recent years, although there remains a gap between the two. Importance is not necessarily attached to healthcare when people pay attention to improvement of their food structure. Several diseases such as cardiovascular diseases and diabetes become common due to an increased intake of fats and cholesterol from foods. International organizations and several countries have put forward food nutrition instructions, and some nations have worked out their nutrition guidelines with reference to the standards stipulated by Food Agriculture Organization, World Health Organization or the United States. Based on the internationally available food nutrition standards with a main reference to China s own conditions as the people s living standards and food structure, these eight principles for food nutrition guidelines have been worked out by the China Food Nutrition Association: 24

28 Diversified foods and balanced nutrition absorption More vegetables, fruits and potatoes in food shares More milk, beans and bean products More fish, birds, eggs and lean meat instead of fat meat and animal oil A balance between food intake and physical exercises to keep normal weight Light food instead of salted food Limited wine drinking Clean and healthy food A large number of consumers acknowledged the importance of more shares of aquatics in their food structure for a healthcare purpose, therefore China s consumption of aquatic products will expand in its domestic market The Consumption Structure of Aquatic Products There was no free production and no free distribution for aquatics in the past when centralization featured the planned economy. At that time, fuels, seeds and everything else were linked with aquatic production and the distribution plan that had to be fulfilled by the enterprises. There was no diversified structure of production and consumption and four kinds of aquatics like hairtail, carp, silver carp and kelp were the highlighted supplies. The aquatic production plan assigned to the enterprises in the late 1970 s and early 1980 s included 21 varieties including yellow fish, hairtail and cuttlefish. The plan stated that about 60 per cent of the output must be completed before the remaining 40 per cent, was allowed to be sold to enterprises in the market. Since 1990 s, the consumption structure has been readjusted in an improving trend, the market in production and distribution is diversified and enriched. However, most of the aquatic products in China s market are basically domestic supplies, as the exchanges with international markets remain to be further facilitated. The structure of aquatics consumption is determined by the structure of the production, the share of aquaculture products in the Chinese market is estimated as 60 per cent and the share of naturals, roughly 40 per cent. The improved structure of China s aquatics is motivated mainly by the following factors: The role of market leverage is more actively played in fishing and aquaculture activities, therefore the fishing and aquacultural capabilities outpaced the previous planned assignments made to the fishermen and fishing enterprises, they became 25