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2 An Overview of China's Fruit & Vegetables Industry Murat Dede Embassy of the Kingdom of the Netherlands Department of Agriculture, Nature and Food Quality 4, Liangmahe Nanlu Road Beijing , P.R. China

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4 Foreword This report on China's fruit and vegetables industry has been written as part of my assignment for the Agriculture, Nature and Food Quality Department of the Embassy of the Kingdom of the Netherlands in Beijing. While conducting this research I learned a lot about agriculture and in specific the Chinese fruit and vegetable sector and the position it takes in the world. During my research I have visited the International Agricultural New and High Technology Industrial Park in Langfang and took part in the ASEM Forum on Rural Development. Moreover, related seminars and exhibitions showed added value for they provided me with insights. In conclusion, this traineeship has been a good overall learning process and I enjoyed being part of the LNV team in China.

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6 TABLE OF CONTENT Chapter 1 Introduction 7 Chapter 2 Introduction to China 8 Chapter 3 China's Fruit & Vegetables Industry 12 Chapter 4 Market and chain characteristics 19 Chapter 5 China's Fruit and Vegetables trade 22 Chapter 6 Technology and Innovations 33 Chapter 7 Conclusion & SWOT 34 References 37 Appendixes 39 5

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8 Chapter 1 Introduction The fruit and vegetable markets together are the largest sectors of the retail food market in China and China is world's largest producer of fruit and vegetables (www. industrialnewsupdate.com, Rabobank, 2006). Both markets developed quickly and showed growth in area and production in the last few years. The vegetable output was 583 million tons in A major objective of the Chinese government is to develop its rural economy and help farmers to become more affluent. Furthermore, the Chinese government is paying more and more attention to food safety and food quality. The Chinese fruit and vegetable sector is developing quickly as the sector is relatively underdeveloped compared to 'western' or more advanced countries. There are changes in different areas in the sector towards modernization. This report aims to get a better understanding of the Chinese fruit and vegetables industry. Moreover, it aims to inform Dutch companies about the potential opportunities in the Chinese market for fruit and vegetables and provide guidance for the Dutch Ministry of Agriculture, Nature and Food Quality that supports and advises industry initiatives. Scope of research The Chinese fruit and vegetable industry is a comprehensive sector and it would be unfeasible to provide detailed information on all elements, for example all types of fruits and vegetables. Only the issues that are important will be paid attention to. In detail, a general description of the fruit and vegetable sector will be given with emphasis on the following subjects: the law and regulations, developments regarding food quality and safety, production, supply chain, and international trade. Research will focus on the sector of fruit and vegetables in general, with specific emphasis on the following fruits: apples, pears, strawberries, berries, and stone fruits; and emphasis on the following vegetables: mushrooms, tomatoes, onions, garlic, carrots, and asparagus. studies about the industry, company websites and official statistics from China's National Bureau of Statistics, United States Department of Agriculture, Euromonitor, and the Food and Agriculture Organization of the United Nations. Additional information is obtained from experts in the field of agriculture, fruit and vegetable sector. A short word of notice on the official statistics with regard to the fruit and vegetable consumption and production used within this report. Most of the data used has been derived, directly and indirectly, from China's National Bureau of Statistics, Euromonitor International, and the United States Department of Foreign Agricultural Service. Upon researching the data, it became clear that there are some discrepancies between statistics produced by the various sources. These discrepancies can be explained from the fact that different methods of data gathering are employed, which therefore lead to other results. Nevertheless, despite these differences, the statistics do provide a general 'picture' of the current situation, and the way certain trends are evolving in the Chinese fruit and vegetable industry. It must be noted that the provided numbers and percentages found in this report are estimated and should not be used as a sole source of information for decision-making. Structure of report This report begins with a general overview of the People's Republic of China with a description of the main economic indicators, political developments, quality systems and intellectual property rights. Chapter three will look into the fruit and vegetable sector and it will cover the production figures of fruit and vegetables and the countries main production regions. In chapter four the retail and the supply chain will be handled. Chapter five highlights China's international trade in fruit and vegetables, followed by chapter six which will handle the innovations and technology in the industry. In the final chapter, chapter seven, the strengths, weaknesses, opportunities and threats of the fruit and vegetable industry will be given together with concluding remarks. Data research Research is conducted through the study of secondary sources taken from EU agencies, articles, newspaper, case 7

9 Chapter 2 Introduction to China The People's Republic of China was founded on October 1, With a population that exceeds 1.3 billion which will grow to about 1.5 billion people in 2030, it is the most populous country in the world. China is situated in eastern Asia on the western shore of the Pacific Ocean, with an area of 9.6 million square kilometers. Despite its huge size, merely 13.2% is suited for farmland. Its continental coastline extends for about kilometers, and along its sea surface there are over islands. The country is divided into 23 provinces, five autonomous regions, 4 municipalities (city provinces), and two special administrative regions. 2.1 General overview In 1978, the Chinese economy gradually transformed from a centrally planned economy to a more market-oriented economy. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since Even in recent years, the annual growth rate of the Chinese economy (about 10%) is among the highest in the world, while most nations are faced with faced economic slowdown or even recession. China's growing economy has impacted the population's food consumption patterns. As the population's living standards have improved, the quantity of food consumed has increased and the values, patterns and food consumption habits have changed. Economic development has been more concentrated around coastal provinces, explaining the large differences in income per capita between rural and urban regions. Millions of surplus rural workers move between villages and cities, taking on part-time, low-paying jobs for a living, whereas deterioration of the environment, caused by the rapid economic development, could be seen as a long-term threat to growth. Nowadays, the Chinese government is taking measures to decrease the gap between the regions, especially the rural and urban differences. Figure 1: Map of China Table 1: Comparison China and The Netherlands Year 2007 Area Population Number of households Gross Domestic Product (USD) GDP per capita (USD) Import from Netherlands (EUR) Export to Netherlands (EUR) Currency (Source: EVD, CIA, and China Statistical Yearbook, 2007) People's Republic of China km 2 1,315 million million trillion million million Renminbi The Netherlands km 2 16 million 7 million billion Euro 8

10 2.2 Political developments China became an official member of the WTO in December The Chinese government has been focusing on marketoriented developments, while its national economy is still officially directed according to Five-Year Plans that lay out growth goals in various industries. These guidelines are put together by a group of experts from various fields to ensure it covers every aspect in relation to China's economic and social development. In October 2005, the Central Committee for the Chinese Communist Party approved the draft version of the 11th Five-Year Plan ( ). Its main aim is to boost modern agriculture, develop new relationships between industry and agriculture, cities and the countryside and increase rural affluence (Naughtons, 2005). The construction of New Socialist Countryside is a major objective in the 11th Five-Year Plan. It is believed that the country can only ensure sustainable development of its national economy and continuous expansion of domestic demand, by developing its rural economy and helping farmers to become more affluent. Raising rural household incomes is of great importance as the urban-rural gap has widened greatly since 1985, which has become a large source of social inequality. The Chinese government aims to modernize its agriculture by establishing major farming and processing plants, and adjusting geographical distribution. Measures to reach this objective include: increased rural investment, agricultural subsidies and improved social services. This new policy is a significant change from the previous focus on economic development since more attention will be given to the redistribution of resources and a rebalance of income. The central government has further pledged sustained increases in farmers' incomes, more industrial support for agriculture and faster development of public services. In 2006 agricultural tax was ended and farm subsidies were raised. The government will also increase rural health subsidies to revitalize the cooperative health system. These measures promise greater protection and more stability in rural areas. More efforts will be invested in the development of public rural services and agricultural infrastructure (www. anhuinews.com; Naughtons, 2006). Priorities in the 11th Five Year Plan regarding agriculture are green, organic agricultural products and customized high-end products. The government is also focusing on building strong brands with high added value. The agricultural production processes have to become more standardized, less polluting, larger in scale, safer and plant diseases must be prevented better (11th Five-Year Plan). 2.3 Laws & regulations In recent years the Chinese government is paying more and more attention to food safety and food quality. The National People's Congress and the State Council are the main policy makers related to food safety and food regulation (State Council, 2007). A dozen other institutions are involved as well and the major policy and implementing institutions include the Ministry of Agriculture, the State Administration for Quality Supervision, Inspection and Quarantine, the Ministry of Health, the State Administration for Industry and Commerce (Liu et al, 2004) and the State Food and Drug Administration. The latest development regarding food safety is China's new draft on Food Safety Law. The law is formulated to prevent, control and eliminate food contamination and hazards to prevent and reduce the occurrence of food-borne diseases, to assure food safety, safeguard people's health, and to enhance people's health. Moreover, the law comprizes of the following subjects: Surveillance and Assessment of Food Safety Risks, Food Safety Standards, Inspection and Testing of Food, Food Production and Trade, Food Import and Export, Prevention of, and Response, to Food Safety Incidents, Supervision and Administration, Legal Liabilities, Supplementary Provisions (The PRC Food Safety Law 2008). This law has been drafted and is waiting for approval. Despite these laws and regulations China still has major deficiencies in food safety standards, food safety monitoring, interagency cooperation in food safety management, and food safety results. No consistent system of standards and monitoring exists that clearly reveals China's food safety status. However, fragmented evidence indicates that food safety is a significant issue for the country's fruit and vegetable markets. A report by the State Council estimates that 500,000 Chinese suffer from pesticide poisoning every year and that the death toll from pesticides may exceed 500. For fruits and vegetables, scattered tests show that often up to 30% of samples of vegetables have residue levels in excess of the norm. There are still major problems with pesticide residues that result from inadequate control and enforcement of pesticide production, marketing and use. A second and growing problem is heavy metals and other contaminants from emissions of industry, power generation and transport (World Bank, 2006). Furthermore, in general farmers are not well educated and therefore they know little about the proper use of fertilizers and pesticides. The high usage of these fertilizers and pesticides on vegetables and fruits has been the norm due to lack of good knowledge about the crop and the risks of the residues. Another reason for the high usage is that China wants to be selfsufficient in food production. It accomplishes the high level of food production by doubleand triple-cropping and applying large quantities of fertilizers (Gale, 2002). A remark has to be made that the above mentioned is not wholly applicable for the export-oriented production. The fruits and vegetables produced for export have much higher safety standards and separate inspection and monitoring systems. Moreover, products for the export market often have separate production and marketing chains from products for the domestic market (Calvin, Gale, et al, 2006). 9

11 To ensure quality for the export market enterprises are contracting with farmers and companies at the end of the supply chain are backwards integrating. This way enterprises have direct control over the chemicals to be used (Huang & Gale, 2006). Nowadays, the quality gap between domestic products and export-oriented products is decreasing. One of the reasons for this is the growing domestic market and the growing awareness of food quality and safety among consumers. The response is that consumers demand more organic food and green food. Furthermore, the government is trying to strengthen the inspection and supervising of the products. A part of these efforts is the enforcement of the Action Plan for Pollution-free Agricultural Products (APPAP). Another step the government takes towards food quality and safety is schooling farmers in how to produce, and make them aware of the dangers of some pesticides to their own health and their environment. 2.4 Pollution-Free products, Green Food and Organic Food The enforcement of the Action Plan for Pollution-free Agricultural Products (APPAP) is a government response to solve food safety problems. Its overall objective is to supervise, inspect and control the whole process of agricultural production and marketing for food safety purposes and to improve the overall level of agricultural product safety in China (Liu et al, 2004). The APPAP was launched in 2001 with the Ministry of Agriculture (MoA) in charge of it. The two main quality labels in China, managed by the Center for Agri-Food Quality and Safety and the China Green Food Development Center (CGFDC), both under MoA, are the pollution-free (Wugonghai) label and the green food label. The first label was launched in 2002 and since then the number of certified products and companies has grown exponentially. Up to the end of 2006, 23,636 products have been certified, equivalent to 144 million tons (against 1,971 products and 12 million tons in 2003). By the end of 2007, 24% of China arable land used for crop and plant production has been certified as pollution-free (Scoones, 2008). The second label, green food (Lüse Shipin) is a food certification program and it includes two levels: grade A is the basic integrated management system and grade is AA is presented as equivalent to an organic standard. As for the pollution-free label, the green food label is promoted very actively by the MoA (Scoones, 2008). According to Paul (2007) green food has been a remarkable successful Chinese innovation in quality food production. Furthermore, he states that because of its success, it is a strategy that could be considered for replication elsewhere. Besides testing residues, green food includes field inspections and inspections of processing procedures (Paul, 2007). In 2006, 2046 manufacturers were certified to produce 5,676 certified green foods (Agr. yearbook, 2007). Compared to 2005 it is an increase of 12.2% and 11.8% respectively. By the end of 2006 a total of 4,615 manufacturers were producing 12,868 kinds of certified green food with an export value of US $2 billion. Until now the total of certified green food has reached 17,520, of which 2,568 are certified vegetable products and 2,213 certified fruit products. In 2003, the GFDC was divided into two departments: the Green Food Department and the Organic Food Department. The latter is responsible for developing organic food and organic food certification. According to a report of the European Union (2008) on organic farming in millions hectares were certified as organic farmland in China. This places China as the third largest country in the world in terms of certified organic farmland after Australia (11.8 millions hectares) and Argentina (3.9 millions hectares). Moreover, organic agricultural products reached 2,278 by the end 2006 with an export value of US $110 million. The export value of green food is much bigger than the organic food at the moment. Nevertheless, the number of organic products is growing rapidly. In 2006 it grew by 78.4% (Agr. yearbook, 2007). Furthermore, local certification bodies expect the following development in the coming ten years (Scoones, 2008): - Average annual increase in production volume will be 30-50%; - Organic agricultural production volume and area will be 1-3% of China total agriculture production; - Organic exports will reach or exceed 5% of total food exports by volume; - China's organic food will gain 5% global market share. In addition to above expectations, Mr. Ma Aiguo, director of the Center for Agri-food Quality and Safety, announced that China will certify another 20,000 kinds of pollutionfree farm produce, green food and organic food during the 11th Five-Year Plan ( ) period and increase their share in all of the agricultural products on the market to 35% ( Looking nowadays, there is a rapid development in pollution-free, green food and organic food. Since 2003, the average growth rate for the three product groups has been 83% and enlarged 4.3 times in volume, which accounted for 18% of the total volume of national edible agricultural products and processing commodity. The main reason for companies to begin organic farming is achieving a premium price. However, Chinese consumers generally did not understand the organic standard, or whether it was beyond the purchasing power of the consumer. So far, the domestic consumer market remains poorly informed about organic produce and is skeptical of its certification (Scoones, 2008). 2.5 Intellectual property rights In 1997 China agreed to the 1978 version of the convention for the International Union for the Protection of New Varieties of Seeds (UPOV) (USDA, 2005). The responsible organizations are the MoA Department of Science and Education, which receives all applications for new varieties 10

12 of crops and plants who should be protected by breeders' rights and the State Forestry Administration (SFA) receives applications for trees and shrubs. In contrast to the Netherlands it is not possible to apply for a Plant Variety Right for all type of plants. A plant Genus or Species has to be listed by MoA or SFA (list can be found in appendix one). When it is listed the government will examine the varieties novelty, distinctiveness, uniformity and stability. The approved applications receive registration breeders' rights (PBR). The PBR holder is entitled to compensation when propagating material of the protected variety is produced or sold for commercial purposes without the right holder's consent. There are two exceptions: breeding and other scientific activities, and for farmers propagating material of a protected variety harvested on their property for their own use ( According to Plantum NL, a Dutch trade organization, the reason that it is not possible to protect all varieties of plants is because the responsible Chinese authorities don't have the technical expertise to conduct breeders' rights examination (Press release, 2008). Since 1999 several Dutch companies applied for Plant Variety Protection (PVP) at the SFA and MoA. Until now 20 plant varieties were approved (1 potato, 1 lily, 1 carnation, 4 chrysanthemum, 3 African daisy and 10 rose) from the 108 applications. The rest of the requests are pending. Usually it needs three years for a variety to get the registration. The total applications for vegetables are 196, mostly for watermelons, Chinese cabbage, capsicum and potato. There are 59 registered vegetable varieties and they include watermelon (9), Chinese cabbage (17), capsicum (6), tomato (10), potato (5), cucumber (6), cabbage (4), and radish (2). The total applications until April 2008 for fruits are 126, mostly for apple, pear, grape, peach and kiwi varieties. There are 32 registered varieties and they include pear (14), apple (4), peach (9), kiwi (1), citrus (3) and litchi (1). During the 11th Five-Year Plan period, the number of China's new agricultural plants on the protection list will increase from the current 62 to more than 100 varieties according to the MoA. Furthermore, the general goal is to further improve laws and regulations and related policies on the protection of new varieties of plants. Though China is strengthening its legal framework and IPR laws and regulations, IPR infringements of agricultural products remain a problem. Examples include stikering, labeling and branding domestic and third-country products with other identifications. Moreover, mixing of domestic and third-country products with other identifications and unauthorized sale and use of PVP protected plant materials (USDA, 2005). Therefore, companies have to be keen on protecting their products. Three methods to protect the IPR of plant products in China are trademark, method patent and new plant variety right. 2.6 Details of relevant authorities and organizations Institutions for food safety: - Ministry of Health ( - Ministry of Agriculture ( - State Administration for Quality Supervision, Inspection and Quarantine ( - State Administration for Industry and Commerce ( - State Food and Drug Administration ( - State Environmental Protection Administration ( New Plant Variety Protection: - Ministry of Agriculture PVP office ( - State Forestry Administration PVP office ( - Intellectual property protection ( - State intellectual property office ( Figure 2: Authorities in charge of food safety at different stages FARM Planting, harvesting, transporting etc. managed by MoA PROCESSING Managed by AQSIQ, MOH SFDA RESTAURANT Managed by MOH MARKETING Managed by AIC, MOH (Source: presentation prof. Feng-Qin, National Institute for Nutrition and Food Safety China) 11

13 Chapter 3 China's Fruit & Vegetables Industry The fruit and vegetable markets together are the largest sectors of the retail food market in China ( Moreover, China is the largest fruit and vegetable producer with over one-third share of total world production. Both markets developed quickly and showed growth in area and production in the last years. The volume output of fruit was 96.5 million tons in 2007, while the output of vegetables is much higher, 583 million tons in Together, with the increase in output the consumption of fruits increased as well, while the consumption of vegetables stayed stable. This chapter, and chapter four and five, are composed according to the rank of links in the fruit and vegetable supply chain, shown in figure three. The first link in the supply chain is the agricultural input like water, seeds, fertilizer, and labor. The concentration at the input side will be on planting seeds, described in the next paragraph. Paragraph 3.2 and 3.3 will explore the Chinese fruit and vegetable production. Most Chinese prefer fresh fruit and vegetable, but processed products are becoming popular. This will be shown in paragraph 3.4. Before explaining how big the consumption market is and how fruit and vegetable finds its way to the end consumer, the transportation and storage facilities will be handled in paragraph 3.5. Chapter four and five will address the last link in the supply chain, namely the sales. 3.1 Planting seeds Vegetable and fruit seeds are produced throughout China, which enables them to be bred and marketed to suit local preferences and requirements. Export oriented seed production is concentrated in the eastern China provinces (USDA, 2005). Mainly in the province of Shandong where also the main fruit and vegetable production takes place. According, to the FAS USDA (2007) China is one of the largest seed producers and 100% self sufficient in planting seeds for the main crops, like grain, major oilseeds, and 85% self sufficient for cottons. The rate of self-sufficiency for fruit and vegetable is about 95%. The seed production and marketing is fragmented and there are numerous seed companies. Figures also show this: the 50 largest seed producing companies had a market share around 30% in 2006 (USDA, 2007). Furthermore, developers of seed are mostly state research institutes and universities, like the International Agricultural New and High Technology Industrial Park in Langfang and China's Academy of Agriculture Science. Seed companies are responsible for breeding and marketing, although institutes are sometimes involved in it as well. The major seed companies posses over their own research facilities to develop their own varieties. Major seeds producers from the Netherlands, Rijkzwaan, Syngenta, Nunhems, De Ruiter, Seminis, and Bejo are represented in China. Contact details of leading companies can be found in appendix two. Official seed production statistics are not available, however industry sources estimate annual seed use at 12.5 million tons with total seed sales for the marketing year 2006 and 2007 over US $2.9 billion. Moreover, the annual commercial seed production is estimated at 8.5 million tons (USDA, 2007). The annual seed use and commercial seed production did not change over the last three years, while the value increased US $0.4 billion since 2004 (USDA, 2005). Figure 3: China's fruit and vegetable supply chain (Source: Rabobank 2006) 12

14 3.2 Fruit production Since the 80's the developments of China's fruit industry were strong after the markets and prices were liberalized. The expanding growing area and improvement in production had their shares for the developments in the industry ( Like the fragmented seed production at the input side of the supply chain, the fruit production is even more fragmented and consists of millions of smallscale farmers, with an average acreage less than 0.5 hectare. The fruit cultivation area in China rose from 8 million hectares in 2002 to 10 million hectares in 2007, while output grew from 69 million tons to 96.5 million tons over the same years (shown in figure four). Apples are the leading fruit produced in terms of volume. Other commonly produced fruits are pears, citrus, peach and banana. Apples and pears account respectively for 27% and 13% of the total fruit output. The main fruit production areas are located in the northeastern and northwestern part of China (see figure one for map of China) due to the favorable climatic conditions there; table two gives an overview of the top 10 producing provinces. The major fruit-producing province is Shandong with a production of 12.5 million tons in 2006 accounting for 12% of China's total fruit output. Table 2: Top 10 fruit producing provinces in 2006 Region Shandong Hebei Guangdong Shaanxi Guangxi Henan Fujian Sichuan Liaoning Xinjiang Others Total Output Output/tons 12,588,158 9,685,262 8,934,688 8,819,450 6,128,590 5,917,943 4,954,033 4,238,147 3,437,027 3,431,435 27,857,514 95,992,247 (Source: China Agriculture Yearbooks) Main product Apple, Peach Pear, Apple Citrus, Banana Apple Citrus, Banana Apple, Pear Citrus, Banana Citrus, Pear Apple, Pear Grape Figure 4: Hectare and output of fruits. (Source: China Agriculture Yearbooks, FAS USDA) Figure 5: Major fruits in 2006 Apple Pear Citrus Peach Banana Grape Jujube Persimmon Litchi Pineapple Other Fruits Total output Output/tons 26,059,298 11,986, ,98,328 8,214,700 6,901,249 6,270,756 3,052,860 2,320,346 1,507, ,701 13,288,627 95,992,247 (Source: China Agriculture Yearbooks) 13

15 Hard Fruits Apple production China is by far the world's largest apple producer: in 2007, 23 million tons of apples were produced over 1.95 million hectares. The production has increased by 8% since 2001, but there is a decrease of 3 million tons compared to 2006 because of the bad weather conditions. Furthermore, there is a slight increase in the apple acreage and according to the USDA it is driven by high prices and demand for juicing apples. In terms of apple variety in China, Fuji is the primary apple variety (sweet taste and crispy), accounting for about 60% of total production. Chinese consumers favor sweet and crisp apples. Chinese consumers favor less early maturing varieties, like the Gala apple (USDA, 2006). Other common improved apple varieties include Delicious (Yuanshuai), Golden Deli (Jinguan), Jiaona jin, Gala (Thornsbury and Woods, 2007). Shandong and Shaanxi are the leading apple production provinces, accounting for 50% of the total output. Other large production provinces are Hebei, Shanxi, and Henan. Most apples are for fresh domestic consumption, 4% are for fresh export, and 26% are for processing. Besides, the world's largest apple producer, China is also the world's top producer of juicing apples. The Chinese government stimulates to plant more sour apple breeds in China. The main aim for production is for the juicing industry (Groot et al, 2004). Pear production Pear production in 2007 was 12 million tons over an area of 1 million hectares. The major pear-producing province is Hebei province with an output of 3.3 million tons. Shandong is the second largest producing province with an output of 1.1 million tons in In contrast to apple production, pear production showed a slight increase over the same period in 2006, and was less affected by the weather. About 89% of pear production is domestically consumed and about 3.5% of the pear production is exported and 7.5% is processed. The pear production in 2001 was 8.8 million tons over nearly the same area as present day. Production of different types of pears takes place throughout China. According to Groot et al (2004) the 'white pears' are mainly produced in northern china, and they are crispy, juicy, and sweet of taste. The 'sand pear' or 'apple pear' is produced along the Yang Tse river and taste similar to the white pears. Furthermore, the 'ussurian pear' is produced in northeastern China, but from less quality compared to other kinds. The P. communis, the 'European pear' is scarcely produced in China. New and early mature varieties like Golden and Huangguan are gradually replacing traditional Ya and Snow pears. Soft Fruits Strawberry production The three provinces Hebei, Shandong and Liaoning (in northern China) are the major strawberry-producing provinces. These regions are the leading regions in production because of the favorable weather conditions for strawberry production (Carter et al, 2004). According to an outlook report from the USDA (2004) the strawberry production in 2002 was 750,000 tons and China was at that time the 7th fresh strawberry producer in the world. In recent years, China has increased its production and became the second largest strawberry producer. In 2007, 900,000 tons of strawberry were produced over hectares and future growth is expected. Comparable to apples and pears the major part of the strawberries, about 75%, is consumed fresh. Of the remaining 25% of production that is processed, about 42% remains in China and is consumed in the form of jams, jelly, juice, or is used in confectionary and dairy products like yogurt. Frozen strawberry production is forecasted at 147,000 tons in 2009 (USDA, 2008). Stone fruit production According to the USDA (2008) peach production is forecasted to increase by eight percent to 8.6 million tons in Plum production is forecasted at 2.2 million tons, up 10% from the previous year, as earlier plantings have begun bearing fruit and come into full production. Apricot production is forecast at 1.7 million tons in 2008, up nearly 14% from the previous year, mainly attributed to an increase in planted area. Cherry production is forecast at 174,000 tons in 2008, an increase of 16%, as more cherry plantings have also reached their full production cycles. Despite increased production, stone fruit prices are likely to remain stable or slightly increase during The central government has taken actions to help farmers cope with rising production costs, especially the huge increases in fertilizer prices. Fresh stone fruit is mainly consumed in cities that are close to production areas. Cherries are widely popular throughout China and consumption is increasing rapidly (USDA, 2008). 3.3 Vegetable production The Vegetable Basket Program (VBP), launched by the Chinese central government in 1980's, was aimed to increase vegetable production in China (Lui, 2004). At a later stage ( ) it shifted its aim from production to diversity of vegetables. The latest aim of the VBP is at improving the quality and safety. Since the VBP, the vegetable industry of China developed rapidly. Statistics from Lui (2004) show that the sown area in 1980 was 3.2 million ha with an output of 80.6 million tons. In 2006 the total output of vegetable was 583 million tons over an area of 18 million ha. Figure 6: Hectare and output of vegetable (Source: China Agriculture Yearbooks) 14

16 The main vegetable producing provinces are concentrated in the central and eastern part of China. The regions have good natural conditions and well-developed facilities for vegetable production and marketing (Lui, 2004). The two main provinces Shandong and Hebei are also the main production provinces for fruit. In detail there are three major regions for vegetable production in China (Liu, 2004) (see figure one map of China): 1) The northern region, which includes Shandong, Hebei and Liaoning provinces. Because of its unique natural conditions and well-developed facilities for vegetable production and marketing, this region sells its vegetables quite broadly to other regions and for export. In the Shandong province there are many international vegetable companies; Table 3: Top 10 vegetable producing provinces in 2006 Region Shandong Hebei Henan Jiangsu Sichuan Hubei Guangdong Hunan Guangxi Liaoning Others Total Output Output/tons 83,093,182 66,467,786 64,000,000 36,576,808 29,712,287 29,441,445 26,467,865 25,268,218 22,478,212 21,297, ,451, ,255,339 2) The southern region, which includes Guangdong, Guangxi, Hainan, Sichuan and Yunnan provinces. This region has advantages in terms of climate: it produces vegetables in the winter for the markets in north eastern, northern and north western China; 3) The central region, which includes Henan, Jiangsu, Hubei, Hunan and Anhui provinces where vegetables are mainly produced for the demand within the region and are marketed in nearby areas in general. The Chinese consume mainly fresh vegetables according to Lui (2004). The major produced vegetables in terms of volume are watermelons, cabbages, tomatoes, cucumber and gherkins. Watermelons account for 12% of the total output in 2005 followed by cabbages. Tomato production China continues to expand tomato production and processing capacity and is world's largest tomato products producer and exporter. China's tomato production was 25.9 million tons in According to the United States Department of Agriculture (2007) the total tomato production for the period July 2007 to June 2008 is forecasted at 37.2 million tons, up from 36.5 million tons (data differs from the Rabobank data, 31.6 million tons) in the previous year. The main production province for tomatoes is Xinjiang. Furthermore, about 85% of total production is for fresh use. Processing tomato production is expected to reach 5.2 million tons (over 80% is used for paste) this year and is expected to continue rising over the next few years due to expanding acreage in Inner Mongolia (USDA, 2007). (Source: China Agriculture Yearbooks) Figure 7: Major vegetables in 2005 Major vegetables Watermelons Cabbages Tomatoes Cucumber and Gherkins Onions Eggplants Cantaloupes & Melons Chilies & Peppers, Green Garlic Other Vegetables Total output Output/tons 69,315,000 34,101,000 31,644,040 26,559,600 19,047,000 17,030,300 16,138,000 12,531,000 11,093, ,055, ,514,876 (Source: Rabobank2006, China Agriculture Yearbooks) 15

17 Onion production According to the United Nation's Food and Agriculture Organization (FAO), onions are grown in at least 175 countries. Of those countries, the leading producer is China, with 2.2 million hectares that harvested 746,000 tons of onions (including shallot) in 2005 (FAO). Important production provinces for onion are Shandong, Fujian, and Gansu. Garlic production China is by far the largest producer of garlic with approximately accounting for over 75% of world output. According to the Agriculture statistics of the MoA the total output of garlic was 18.3 million tons in 2006 (data differs from the Rabobank data, 11 million tons). The total output in 2003 was 15.5 million tons and it showed a steady increase. The main producing provinces of garlics are Shandong and Henan. Mushroom production In 1986, the mushroom output was 858,000 tons in China. The outputs in more recent years, in 1990, 1997, 2000 and 2002 were 1 million tons, 3.42 million tons, 6.6 million tons and 8.7 million tons, respectively. In 2002, China had realized the per capita mushroom output of 6.9 kg. In 2007, the value of Chinese mushroom production totaled about US $9 billion, 5% higher than a year earlier. The growers harvested about 10 million tons of mushrooms, including wild mushroom. The most common variety is the Oyster mushroom with an output of 3 million tons. Other common varieties are shiitake, wood ear mushroom, white mushroom and enokitake. A steady increase is forecasted for the Chinese mushroom production and export for 2008 (Mushroom business, 2007). The leading mushroom producing provinces are Zhejiang, Fujian, Hubei, Henan, and Shandong. Carrot production Chinese carrot production has increased 129% between 1995 and 2005 and this increase made a large contribution to the 46% increase in world production during this period. World production of carrots was estimated at 24.2 million tons from a cropped area of 1.11 million hectares in 2005 (Western Australia, FAOSTAT data, 2006). China is by far the largest carrot producer, accounting for 34.6 per cent of world production in The output of carrots from 2003 till 2006 was 13.1 million tons, 13.3 million tons, 13.3 million tons, and 14.5 million tons. The main producing provinces of carrots are Shandong and Henan. Asparagus production China's key asparagus production provinces are Shandong, Shanxi, Fujian and Jiansu, which combined account for 80% of all acreage. White asparagus accounts for around 80% of total output, a high proportion of which is processed for export (Worldgrower, 2006). Green asparagus accounts for about 20% of total production, and 2/3 of green asparagus is for domestic fresh consumption. Post forecasts the share of green asparagus will increase steadily within the next three years driven by the demand from both international and local markets (USDA, 2006). Moreover, asparagus is a labor-intensive crop while China is a low-price producer because of its comparative advantage in labor. Low prices make China's asparagus highly competitive in international markets despite its comparatively low quality. According to the data of FAS/USDA the production of asparagus was 587,500 tons in A year later the production dropped around 150,000 tons because of land constraints and weather. China's production is estimated to recover to 500,000 tons in 2007 (USDA, 2008) 3.4 Processing The perishable nature of fruits and vegetables requires consumption soon after production. A climate controlled post harvest chain increases the shelf life of fresh fruit and vegetable, but available storage facilities in China are very poor and can only accommodate 15% of total production (USDA, 2007). Processing provides a longer shelf life. Another aim of processing is to prepare fruit and vegetable as a ready-to-use ingredient in the food-processing and beverage industries. Processing methods are drying, salting, pickling, sweetening, canning in tins and glass jars and deep freezing. Dried and frozen fruit, dried vegetables, fruit juice concentrates and preserved fruit and vegetable are mainly used as ingredients for the food processing industry (Wijnands et al, 2006). Rapid economic growth combined with higher disposable income means stronger demand for high quality processed food by Chinese consumers. According to the USDA (2006) only about 30% of food in China is processed, compared to about 80% in western nations. While most consumers still prefer to purchase fresh foods, the market for processed food is growing in China, especially in urban areas. China's current sales of packaged food is nearly 4% of the world market and is estimated that in 2009 it will rise to more than 5% with a value of over US $71.9 billion (USDA, 2006). Fruit and vegetable juice The fruit and vegetable juices are showing great potential. There is much demand in urban markets, which drives the growth in fruit and vegetable juice. The sales of 100% juice is increasing rapidly, however the juice drinks up to 24% juice rate have the largest share (Euromonitor, 2008). The majority of fruit and vegetable juice products are economy brands, because pricing is an important factor in the consumers purchasing decision. Furthermore, leading retailers, such as Carrefour, are launching private labels. They sell their products at similar prices to branded products. An overview of the brand shares of fruit and vegetable juices is given in table four. 16

18 Table 4: Brand Shares of Fruit/Vegetable Juice by Off-trade Volume % Off-trade volume Hui Yuan Minute Maid President Master Kong Wahaha Beijing Hui Yuan Beverage & Food Group Corp Coca-Cola China Ltd President Enterprises (China) Investment Co Ltd Ting Hsin International Group Hangzhou Wahaha Group (Source: Euromonitor) The total off-trade consumption (fruit and vegetable juice sold in retail shops, and consumed off the premises) volume sales of fruit and vegetable juice increased from 3,210 million liters in 2002 to 9,687 million litters in 2007 (Euromonitor, 2008). The total volume sales increased by 18% and total value sales increased 17%, reaching 76,154 million RMB, in Euromonitor is forecasting that the volume sales and value sales will double within 5 years. Orange is the most favored flavor in fruit and vegetable juice, followed by apple. However, orange juice is favored most in China, the orange juice production is very low. The orange juice production is estimated at tons for this year (USDA, 2008). On other hand the production of concentrated apple juice (CAJ) has almost doubled in the last three years. The production in 2005 was 540,000 tons and last year it reached 1,000,000 tons. The province Shaanxi is the top producing of CAJ with a volume share accounting for 37%, followed by the province Shandong with a share of 19% (USDA, 2006). Canned fruit and vegetables Due to the lack of innovation in canned/preserved food, the sector is not developing at a fast rate (Euromonitor, 2008). According to the USDA (2007) fruit canning is small and one of the least profitable sectors in the Chinese canning industry. Moreover, Euromonitor (2007) forecast a total decline around 8% in domestic sales volume and value for the next four years. However, the production is mainly driven by world demand, which is increasing. Therefore, China exports most of the canned fruit it produces, except for yellow peaches, which also have a domestic market. Chinese consumers believe fresh fruits and vegetable are healthier and therefore canned fruits and vegetables face strong competition. Moreover, fresh fruits and vegetables are more affordable. The main canned fruit products are canned peach, canned pear, canned apricots, and canned mixed fruit. The canned peach production was 310,000 tons in 2003 and forecasted at 269,000 tons in 2007 (USDA, 2007). Canned pears are forecast to reach 64,000 tons in 2007 up 59% from Canned apricots and canned mixed fruit are forecasted at 13,500 tons and 33,000 tons in 2007, up 31% and 19% respectively from 2003 (USDA, 2007, 2005). The sales value of canned fruit in 2007 was RMB 4,308 million, down from RMB 4,742 million in In contrast to the canned fruit domestic sales volume and value, Euromonitor forecast total growth of 28% in the next four years for the canned vegetable sector. The sales value of canned vegetable in 2007 was RMB 468 million, up from RMB 384 million in 2002 (Euromonitor, 2008). The main canned vegetable products are canned mushrooms, canned asparagus, and canned tomatoes (Wijnands et al, 2006). Canned Mushroom The volume of domestic consumption of canned mushroom is different to Europe and the US. As said before Chinese prefer fresh products and therefore most canned mushrooms are for the export market. However, in recent years, some canned mushrooms have sold well, the Bailinggu is an example. Exact data on canned mushroom production is not available. However, export figures for canned mushrooms are available in chapter five. Tomato paste Fresh tomato production for processing is expected to reach 5.2 million tons in 2008 and is expected to continue rising over the next few yeas due to expanding acreage in Inner Mongolia (USDA, 2007). Over 80% of fresh tomatoes for processing is used for paste, and the paste production is estimated to reach 750,000 tons this year (USDA, 2007). Like other canned or processed products the production is export driven. Furthermore, the Chinese government encourages the development of the tomato processing industry through favorable taxes. Frozen vegetables According to Euromonitor the frozen processed vegetables market in China remains negligible. Although, other frozen processed food, for example frozen meat, and frozen dessert, are growing quickly. Apart from the main cities frozen processed vegetables are rarely found in small cities or rural areas. Frozen processed vegetable is much more expensive than fresh vegetables and Chinese perceive that it is not healthy to cook frozen vegetables. For the present frozen vegetables are mainly sold in modern supermarkets and hypermarkets. Exact production figures are not available but trade data will be handled in chapter five. 3.5 Logistics & Storage Agricultural products are losing heavily during the process of logistics and the loss rate of fruit and vegetable is 20% (Fruittimes, 2008). China's rapid growth has placed increased pressure on the country's logistics and distribution structures. While the Chinese government has made efforts in upgrading its existing transportation infrastructure over the past decade, its logistic and distribution sector stays fragmented. Furthermore its warehousing and other storage facilities are underdeveloped, despite this they are critical to an efficient marketing system. The country's logistic system is underdeveloped due to three main reasons. First 17

19 of all, the Chinese landscape is characterized by large mountain areas, altitude differences, desert sand, and some regions suffer from seasonal flooding. Next, China's transportation networks are heavily fragmented due to regulatory barriers that hinder consolidation. Local governments are known to protect its local transportation companies by raising barriers, which includes license requirements, fees, and inspections. Lastly, the country's logistics capabilities are greatly restricted due to inferior equipment, which is geared towards the movement of bulk commodities, and workers who are often not well trained in handling goods (USDA, 2003, Poon, 2006). With China's growing consumption of high-value frozen and perishable foods, cold warehousing and transport facilities are becoming an important link in the country's marketing chain. Many cold storage facilities have been built but not in the same pace as the developments of the fruit and vegetable industry. Available cold storage facilities can accommodate only 15% of production, leaving 85% of the harvest to be disposed within a short period (USDA, 2007). A lack of cold chain facilities is hampering food and drink multinationals from expanding into China's secondtier and third-tier cities, the sites of strong future growth ( Moreover, imported chilled products can only reach the biggest cities like Beijing, Shanghai and Guangzhou, which are close to ports. It is common to see perishable high-priced fruit placed outside of temperature controlled areas because of lack of awareness or lack of cold storage all along the supply chain from importers to wholesale and retailers (USDA, 2007). Although there is room for improvement of cold chains, road transport and port handling, the system for export is well developed (World Bank, 2006). Nowadays, more major enterprises in the fruit and vegetable production, processing or retail set up their own logistic and storage facilities. 18

20 Chapter 4 Market and chain characteristics 4.1 Fruit and Vegetable consumption China's national income has risen along with its economic growth and more people are able to buy more fruit and vegetables. It is not only about the quantity, Chinese consumers are also demanding greater quality, convenience, and safety in the food they consume and are willing to pay modest premiums for food with safety-related certifications (Gale, 2006, 2007). Consumers tend to diversify their food purchases to include more poultry, fish, dairy, fruit, and beverages, while purchases of rice, flour, pork, and vegetable remain about the same (Gale and Huan, 2007). Moreover, the popularity of tropical fruits has grown, for example bananas can be found in markets, fruit stalls, supermarkets and hypermarkets throughout the country (USDA, 2006). Table five gives a statistical overview of the per capita consumption of fruit and vegetables by urban and rural households. Total consumption of fruit by urban households and rural households is respectively 60 kg and 19 kg. And consumption of fruit is respectively 117 kg and 100 kg. Looking to table five the following trends can be seen; first of all, the per capita consumption by urban households is higher for both fruit and vegetable. The main reason for this is the higher incomes of urban households. Urban people have spent about 35% of their total income on food in 2006, which is 3111 RMB. Rural households have spent significantly less on food, 1217 RMB in A study done by Hsu et al. (2002) shows that increases in income significantly affects the purchase of fruit and vegetables. Furthermore, the study shows that price changes also have an important effect on food demand. Chinese consumers are sensitive to price changes, and more sensitive to price changes of fruit than vegetables. Higher food prices have been the trends last couple of years. At the moment the prices of food are rising and according to the National Bureau of Statistics the consumer price index (CPI) grew eight percent in the first quarter of 2008 compared to the first quarter of The CPI of vegetables grew dramatically with 23% in the first quarter of 2008 compared to the same period last year, and the CPI of fruits rose by 8.5%. The higher food prices will mainly have an impact on people with low incomes as they are most influenced by price changes. Secondly, the consumption of vegetables by rural households dropped from 104 kg to 100 kg, while the consumption by urban households increased with 1.1 kg, from kg to kg. When looking further back in time China's per Table 5: Consumption of fruit and vegetables Per Capita Consumption of Major Foods by Urban Households Fresh Vegetables (kg) Fresh Fruits (kg) Per Capita Consumption of Major Foods by Rural Households Fresh Vegetables (kg) Fruits and processed products (kg) (Source: Statistical yearbook 2007) capita consumption of vegetables was much higher than nowadays. According to Lui (2004) the consumption was 124 kg for rural households and 152 kg for urban households in Lui (2004) gives three reasons for the decrease in consumption of vegetables: people in northern China have started to consume more fine vegetables; people in southern China consume more aquatic products as a substitute for vegetables and an increase in fruit consumption has reduced vegetable consumption. The third trend is that the per capita consumption of fruits for both urban and rural households increased respectively 73.3% and 68% from 1995 to Market segments The authors of The World Bank report on China (2006) divided the production and supply of the fruits and vegetable market into three segments. These market segments are (a) the traditional local fruit and vegetable markets, (b) markets in industrial countries, and (c) the emerging modern urban domestic markets. A: Traditional local fruit and vegetable markets segment More than 90% of the volume of fruit and vegetables in China is produced for traditional local markets. These market consist of millions of small-scale farmers, who have on average less than 0.5 ha of land and is highly fragmented. The small-scale farmers are specialized in certain products, and their products are collected by traders and transported large distances to serve urban demand (World Bank, 2006). The farmers also sell directly to local urban and rural markets (often called wet markets), including restaurants, street markets, or grocery stores. Wet markets can be defined as a place where local farmers supply products direct from the

21 field to the end consumer. A prediction by the World Bank is that the traditional market will remain the biggest domestic supplier for many years to come. Today, many wet markets in big cities are being closed or consolidated since local authorities in most cities view the markets as unsanitary (Poon, 2006). B: Emerging modern urban domestic markets segments Chinese consumers are increasingly shopping in supermarkets and convenience stores that carry processed, prepared, packaged, and frozen foods. Outlets that did not exist in China until the early 1990s. Since China's easing of restrictions on retailing in 2004, international hypermarket retailers initially made full use of the opportunities available to expand into first-tier cities such as Shanghai, Beijing, Shenzhen and Guangzhou. Now attention has shifted to lower-tier cities, due to the increasingly saturated environment for retail outlets in first-tier cities (Euromonitor, 2008). The hypermarkets still face a lot of competition from the wet markets and the World Bank (2006) reported that the fruit and vegetable section in supermarkets and hypermarkets are not very profitable. According to Woods (2007) the main reasons are the difficulties of quality and safety control of fresh fruits and vegetables, short shelf life and higher prices. However, a sales growth of % per year is expected (Woods, 2007). C: Export markets in industrial countries At present, the export market segment probably constitutes not more than two percent of the volume of fresh production of fruit and vegetables, and perhaps twice this share in value added (World Bank, 2006). Further growth of Chinese exports will depend on improvement of technology, quality, and safety, as well as broadening the assortment and supply base in China to meet opportunities and requirements in different export markets. The international trade of China's fruit and vegetable is broadly shown in chapter five. 4.3 Fruit and Vegetable supply chain The Chinese fruit and vegetable supply chain model is shown in figure three, chapter three. In the previous chapters different themes passed the revue. In this paragraph the fruit and vegetable supply chain will be described on the basis of the classification made by the World Bank, table seven. Supply chain of the traditional local fruit and vegetable markets The supply chain of traditional markets can be characterized, as an open supply chain that is supply driven. There are hardly any contractual relations and little trust between buyers and sellers. Most fruit and vegetables are marketed in nearby areas. Wholesalers and processing companies normally purchase fruit at farms, sort and pack them in baskets or cartons and deliver them to nearby wholesale markets. From there they are distributed to retailers. Some farmers collectively rent trucks and deliver their fruit to wholesale markets directly. Competitiveness depends mainly on supply at low cost and there are no constraints for participation of small-scale producers. Supply chain of the emerging modern urban domestic markets The modern domestic markets are characterized by emerging constraints for producers in meeting requirements of quality and safety, regular supply, tighter supply chain, and trust between sellers and buyers. Table 6: Top 10 retailers (Source: Rabobank 2006) Shanghai Brilliance Group Dalian Dashang Group Carrefour Beijing Hualian Group China Resource Suguo Shanghai Nonggongshang Wu Mart Trustmart China Resource Vanguard Xinyijia The supply chain of emerging supermarkets and hypermarkets is a mix between an open supply chain and a coordinated supply chain. The characteristics of coordinated supply chains are durable arrangements among producers, processors, and buyers about what and how much to produce, time of delivery, quality and safety conditions, and price. These chains often involve exchange of information and sometimes assistance with technology and Revenue EURO (mln) 6,241 2,203 1,499 1,476 1,281 1,265 1,225 1,107 1,016 0,784 No. of Outlets 5, ,345 1,

22 finance. The chain is usually initiated by large producers or buyers and sometimes producer organizations, which also act as chain leaders. Farmers act as the fruit and vegetable supplier, and the company provides farmers with the pre and post-harvest support services. Output quality of products at the coordinated supply chain is most times better than output of the open supply chain. The potential role of the producer cooperatives are: economies of scale, finding and developing markets, and scaling-up volume with consistent quality. Participation of small-case farmers depends on meeting requirements of quality, safety, consistency of product, and regular supply of products. Supply chain export markets in industrial countries The supply chain of the export market is a mix of coordinated supply chain and a full-integrated supply chain. Companies in full-integrated supply chain perform all activities from production to processing to wholesaling without partnering with other entities. The supply chain of export markets is strongly demand driven where relations within the chain are important and durable. Moreover, cooperation among buyers, exporters, and growers are normal. They share information and sometimes there is a financial cooperation. Furthermore, there is a high food safety concern in the supply chain and the chain leader is the processing company or exporter. Competitiveness depends mainly on large quantities, flexible response to changing demand and market and product innovations. Small-scale farmers can participate only if they are well organized in out-grower schemes and are able to guarantee safety and uniform quality. Exporters and processors for export markets more and more organize their own supply rather than buying at traditional wholesale markets. They organize their supply under strong supervision by the China Entry/Exit Inspection and Quarantine Bureau (CIQ). The requirements of quality, safety, volume, consistency and delivery schedules are high. Increasingly, buyers require tracking and tracing of food safety throughout the supply chain with independent certification. As a result of these trends, coordinated and integrated supply chains have become the dominant institution in sourcing perishable products. Table 7: Characteristics of three types of markets Type of market Traditional local fruit and vegetable Emerging modern urban domestic markets Export markets in industrial countries Market markets (supermarkets, tourist hotels/restaurants, (retail markets, modern food services) Characteristics educated affluent consumers) Participation Participation of small-scale No constraints Emerging constraints in meeting Only if well organized in out-grower producers requirements of quality, safety, consistency schemes and able to guarantee safety and of product, regular supply uniform quality Organization Chain leader/ coordinator Usually none Large producer or buyer, sometimes Processing company or exporter; producer organization sometimes importer on behalf of retailer; rarely the retailer directly Potential role of producer Countervailing power, economies of scale Economies of scale, finding and developing Reduce transaction and information costs cooperative in acquiring inputs and market access markets, scaling-up volume with consistent in supply chain; trust-worthy partner for quality planning and coordination Supply-driven Efforts by retailers to control quality, safety, Strongly demand driven Supply-chain organization Transaction-based and reliability of supply Durable relations within supply chain, often Little or no net benefit from coordination Net financial benefits from coordination on contractual basis Little durability in relation among private still fragile Cooperation among buyers, exporters, actors Emerging coordination, occasional growers on technology, information, No technical cooperation technical support sometimes finance Trust between buyers and sellers Not very important Of emerging importance Crucial factor for long-term successful relations Results Competitiveness depends Supply at low cost Sufficient quantity Large quantity mainly on Improved quality Efficient, effective coordinated supply chains Flexible response to changing demand Market and product innovation Price level for grower and Relatively low Limited willingness to pay Moderate Relatively high consumer for quality and safety Moderate willingness to pay for quality High willingness to pay for quality and and safety safety Value added Very low Low/moderate Moderate/high Standardization, grading, supply Virtually absent Emerging importance of grading, stable High requirements of grading, consistency, Irregular supply supply supply schedule Food safety control Unreliable Improving Effective Little consumer awareness, concern Emerging consumer awareness, concern High consumer concern Little private effort, limited government Retailers try to control and sell "safety" High retailer requirements imposed on control suppliers (Source: World Bank 2006) 21

23 Chapter 5 China's Fruit and Vegetables trade Trade has been one of the key drivers of economic growth since China joined the WTO in Since 2004 China is the third largest trader after the EU and the US ( eu). Before 1979 China's foreign trade was exclusively conducted through national foreign trade corporations under import and export plans assigned by the former Ministry of Foreign Trade. With the adoption of the "open door" policy in 1979 China began to reform its foreign trade sector, very gradually decentralizing and deregulating control over its foreign trade. With its WTO accession, China is revising many of the laws governing foreign trade to honor commitments made under the WTO protocol. At present, the authorities in charge of imports and exports in China include the Ministry of Commerce (MOFCOM), the General Administration of Customs, the State Administration of Foreign Exchange (SAFE), the State Exit and Entrance Inspection and Quarantine Bureau (SEEIQB) and the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) ( In the last paragraph of this chapter more information about import & export regulations and phytosanitary requirements are highlighted. China's import and export value of agricultural products reached US $78.1 billion in 2007, up 23% from a year ago (MoA). The total export value of agricultural products was US $37.01 billion, and import reached US $41.09 billion. China's agricultural trade is concentrated in the eastern region. The provinces Shandong, Guandong and Liaoning are the leading provinces in the export of agricultural products, with a value of US $9.9 billion, US $4.1 billion, and US $3 billion respectively. The major importers of agricultural products are the provinces Jiangsu for US $7.86 billion, Guangdong for US $7.61 billion, and Shandong for US $7.13 billion. The fruit and vegetable import and export have been increasing over the last 5 years. China's fruit and vegetable export grew tremendously from US $5.45 billion in 2004 to US $9.96 billion in The import of fruit and vegetables over the same period, US $682 million in 2004 and US $1.07 billion in 2007, is less spectacular. Before going into the details of the Chinese fruit and vegetable trade the trade in planting seeds will be highlighted. 5.1 China's planting seeds import and export trade Vegetable seeds are the largest category, accounting for over 40% of the total value of seed imports, which was US $122 million in Fruit seeds account for about 5%, with a value of US $6.3 million, of the total value of seed import. The import of fruit seeds, in both volume and value has been steady over the last few years and will continue growing. The United States and Australia took Taiwan over as the largest supplier of fruit seeds in volume in recent years. In 2007 the import volume reached 1.2 million tons. Japan continued to be the largest supplier of vegetable seeds to China with a total export value of US $15.6 million in 2007, up from US $14 million in However, Thailand has ranked as the highest in export volume for the past three years. Other main countries that export vegetable seeds to China are Denmark, Australia, and the United States. In 2007 the imports of vegetable seeds slightly decreased in volume, but not in value, because of government support to plant trees and grasses (USDA, 2007). In the same year the value was US $53 million, and the import volume reached 5.5 million. Industry experts believe vegetable seed imports will recover and continue growing, driven by strong growth of exports of vegetable products (USDA, 2007). Moreover, they expect growth in popular varieties like onions, asparagus, squash, eggplant, and tomato. Figure 8: China's planting seeds imports and exports (Source: FAS USDA, 2008) 22

24 On the export side vegetable seeds are also ranked as the largest category. They accounted for over 45% of the total value of seed exports, with a value of US $40 million in Moreover, the export and import show similar trends, decline in volume and increase in value. However, the import of vegetable seeds is higher in both volume and value. The total volume of vegetable seeds exported reached 4.5 million in The three largest export markets for Chinese seeds in value are the United States, South Korea, and the Netherlands. However, South Korea ranked first in volume. The Netherlands imported 450,239 kg in 2007, worth US $5.7 million. Strong exports reflect China's price advantage in seed breeding whether these are imported (for re-export) or new domestic varieties (USDA, 2007). Export of fruit seeds ranked third of the total seeds export in value last year. The export reached a volume of 975,105, with a value of US $9 million. The major destinations are South Korea, Japan, and the Netherlands with a volume of 375 thousand, 294 thousand, and 45 thousand kg respectively. 5.2 China's fruit import and export trade According to the statistics of the MoA, China's fruit import and export reached a surplus of US $2.8 billion in 2007, an increase of 163% compared to The total fruit export (including fresh and frozen fruit, fruit juice, canned fruits, and other processed fruit) grew from US $1.65 in 2004 to US $3.75 billion in The export volume of fruit was 4.8 million tons last year Fruit exports China exported a total of 4.8 million tons of fruit products in 2007, up from 3.7 million tons in The main varieties within the exported fruit products are fresh apples, fruit juice and citrus and they count for nearly 50% of the total export. China exported for 738,000 tons of fruit juice in 2006 and it accounts for nearly 20% of the fruit export. Fruit juice is the fastest growing product group within the fruit export, output in volume grew 300,000 tons in four years. Figure 9: Chinese fruit imports and exports (Source: Ministry of Agriculture) Figure 10: Chinese fruit exports by product group (Source: Ministry of Agriculture) 23

25 Figure 11: China fresh fruit exports (Source: Global Trade Atlas, China is the number one apple producer in the world, and apples are the country's leading export item. Followed by pears, mandarins and all other fresh fruit. The major export markets for fruit (including fresh and frozen fruit, fruit juice, canned fruits, and other processed fruit) are the United States (657,000 tons), Japan (380,000 tons), Russia (507,400 tons), the Netherlands (250,000 tons), and Germany (191,000 tons). These countries have been the major export markets for several years Fruit imports In 2007, China imported a total of US $1 billion worth of fruits, increasing US $100 million annually since China's fruit import is more diversified and exotic fruits are consumed more and more by Chinese consumers. The main imported fruits are bananas (298,900 tons), kiwifruit (115,500 tons), oranges (71,500 tons), citrus juice (56,800 tons), and grapes (41,900 tons). Thailand is the largest fruit exporter to China, other main countries include, the United States, the Philippines, Vietnam, Brazil and Chile. Fruits from Southeast Asian have achieved greater access to the Chinese market since China signed the free trade agreement (FTA) with the Association of South East Asian Nations (ASEAN). Table 8: Chinese fruit imports origin in 2006 Countries Thailand The United States The Philippines Vietnam Brazil Chili Million USD (Source: Chinese Ministry of Agriculture 2006) Volume/tons 258, , , ,400 44,700 44,800 Import in 2006 from the United States grew around 14% in both value and volume compared to the year Outstanding from the rest are the imports from Vietnam, which had an increase of 24.6% in volume and an even more remarkable increase of 72% in value over the years 2006 and The product range included durian, orange, dried litchi and banana ( A marginal comment is that Chinese statistics are not always accurate, because a large volume of imported fruits that enter China from Hong Kong are re-exported to Mainland China trough gray channels (Bin and Jiang, 2004) Fruit import and export provinces The five main fruit exporting provinces in 2006 were Shandong (US $835 million), Shaanxi (US $297 million), Zhejiang (US $229 million), Guandong (US $154 million), and Fujian (US $153 million). Shandong is the leading food supplier to mainland China, but is also the largest fruit export base and ranked 7 years in a row as the number one export province (USDA, 2008). Besides, the largest export base, Shandong is the largest food processing and manufacturing base, with a total of, 446 food processors and 945 food manufacturers in 2006 (USDA, 2008). Major cities include Jinan, Qingdao, Yantai, Weihai and Rizhao with Qingdao and Yantai as the two largest port cities in Shandong. Much imported fruit products enter China via southern Guangdong province. The Nanhai Lishui fruit wholesale market in Guangdong is the largest fruit wholesale market in China (Bin and Jiang, 2004). Other main import bases for fruit are the provinces Guangxi, Hebei, Liaoning, and the cities Beijing and Shanghai (Rabobank, 2006) 24

26 Figure 12: Fruit import and export provinces (Source: Ministry of Agriculture, Rabobank 2006) Fruit items Fresh apple trade World apple trade is dominated by four major players: the EU-27, China, Chile, and the United States. The EU is the largest exporter in terms of volume followed by China. In value terms the United States is the largest exporter followed by the EU and China. Chinese exports of fresh apples are mainly to Asian countries. Russia is the top importer (141,232 tons in 2006), followed by Indonesia, the Philippines, Vietnam, and Thailand. The total exports of apples reached 804,318 tons in 2006, down from 823,988 tons in From the year 2002 the exports of apples grew rapidly. Export in 2002 was 438,738 tons. However, the current export is likely to slow down because of the tightened supplies, higher prices and stringent control over exported fruit. The AQSIQ requires that all exported fruit is sourced from registered orchards and packing houses (USDA, 2008). China's imports of apples are mainly from Chile and the United States. The total imports of apples in 2005 and 2006 were respectively 33,204 tons and 31,074 tons. It is expected that apple imports by China will increase to 50,000 tons, because of the decrease in domestic production in 2007 (USDA, 2008). Fresh pear trade The world trade of fresh pears is dominated by Argentina and China on the export side and Russia and the EU on the import side (USDA, 2008). China's main export market for fresh pears are Indonesia, Russia, Malaysia, Hong Kong, Vietnam, Thailand, Singapore, and the Netherlands. The total export of fresh pears grew less rapidly compared to the export of apples. The exports of pears grew from 273,000 tons in 2003 to 420,000 tons in The pear exports are expected to continue growing, but main export markets will remain in Southeast Asia, because Asian pears are not traditionally favored by western consumers. Chinese imports of pears are marginal and therefore negligible (USDA, 2008). Strawberry trade Most frozen strawberries produced in China are processed for export. China's frozen exports are forecast to increase to 130,000 tons in The export in 2007 was 120,000 tons. The Netherlands is the largest market for China's frozen strawberries, accounting for 28% of China's total exports in The European Union as a whole accounted 44% of all exports in Japan is the second largest market accounting for 11% of total exports. The exports of fresh strawberries are very limited due to high costs of exporting perishable fruit. Main export countries for fresh strawberries are Asian countries, including Russia and Hong Kong (USDA, 2008). China does not grant market access for imports of fresh strawberries. In 2008, frozen strawberries imports are expected to increase to 18,000 tons, up from 15,000 tons in The majority of China's frozen strawberries are imported for processing and re-export. In 2007 Morocco and Chili represented 75% of all imports (USDA, 2008). Stone fruit trade China exported a record of 24,386 tons of fresh peaches and nectarines in 2007, up from 20,196 tons in Russia, Vietnam and Hong Kong are expected to remain the top buyers of Chinese peaches. The export of fresh plums was 6,195 tons in 2006, down from 7,451 tons in The export of in 2007 recovered and reached, 7,328 tons, about the same level as in 2005 due to a much larger crop. Russia, Vietnam, and Hong Kong were the main countries for export. The imports of plums exceed the exports, mainly imported from the countries Chile and New Zealand. Plum imports from Chile in 2007 jumped to 8,240 tons from zero after the Free Trade Agreements between these countries. Import totalled at 10,824 tons in Russia is the main buyer of Chinese apricots, about 95% of total export, with volume increasing quickly. Chinese apricot exports were 3078 tons in 2007, up 45% from China's cherry exports are very 25

27 limited, because it is mainly domestically consumed. Export was only 57 tons last year, while import was 611 tons, mainly from the United States and Chile. The export volume of stone fruits is expected to continue growing because of overall production increases and improved fruit quality. However, a factor limiting stone fruit export is the short shelf life. Therefore, China's exports of peaches, plums, and apricots are concentrated in the harvest season between June and September (USDA, 2008). Apple Juice More than 90% of concentrated apple juice in China is exported, and it makes China the leading apple juice exporter in the world. Exports are mainly to the United States, the EU, Russia, Japan, and Australia. Foreign apple juice producers and exporters face fierce competition and lose export markets to China. The exports of concentrated apple juice increased from 613,766 tons to 930,000 tons in the last three years. The Netherlands imported 82,532 tons in 2006, up from 73,430 tons in China's imports of apples juice are negligible, only 354 tons in 2007 (USDA, 2007). The leading juicing companies in China can be found in appendix two. 5.3 China's vegetable import and export trade The Chinese vegetable import and export reached a surplus of more than US $6 billion in 2007, up from 5.3 billion in China is one of the top exporters in vegetables in the global market, while imports are very limited. For example, in 2007 the value of import accounted for only 1.8% of the value export. The imports of vegetables consist mainly of foreign varieties and processed vegetables to meet the demand of international tourism, but also the rising demand for more food varieties by Chinese consumers (Lui, 2004) Vegetable exports China exported 8.1 million tons of vegetables (including fresh and frozen vegetables, preserved vegetables, and dehydrated vegetables). In 2007, the export was valued at US $6.2 billion. In 2004, the export volume was 6.2 million tons, valued at US $3.8 billion. Over the years the value grew more rapidly compared to the volume. Processed products, preserved and frozen vegetables are the main exported products and they compete with other processed fruit exporters like the Netherlands, Belgium, the United States, Canada, and Brazil. The Chinese exports in 2006 by volume of fresh & frozen, preserved, and dehydrated vegetables are 4.3 million tons, 2.5 million tons, and 380 thousand tons respectively. Currently, the main items within the processed products category are tomato paste, canned mushrooms, frozen vegetables and dehydrated vegetables. Around half of fresh vegetable exports, in value, are now accounted by garlic, mushrooms and truffles. Other vegetables include carrots, onions, radishes and turnips. Garlic is an important export product for China and one of the country's leading export items. Figure 13: Chinese vegetables imports and exports (Source: Ministry of Agriculture) Figure 14: Chinese vegetable exports by product group (Source: Ministry of Agriculture) 26

28 Figure 15: China's exports of processed vegetables (Source: Global Trade Atlas, Figure 16: China's fresh vegetable exports (Source: Global Trade Atlas, Figure 17: China's vegetable export destinations (Source: Global Trade Atlas, FAS/USDA) China's vegetable export markets are concentrated mainly in Asia. Among them Japan is the main export market for vegetables. In 2006, Japan imported 1.6 million tons of vegetables around a quarter of China's total export (MoA). Moreover, its share in value is around a third looking to figure 17 (statistics are drawn from FAS/USDA and total value differ from the MoA statistics). Other important markets for Chinese vegetables are the ASEAN countries, the United States, South Korea, Russia, and Germany. According to the MoA the ASEAN countries imported 1.6 million tons of vegetables worth US $800 million in 2006, main exports where to Malaysia, Indonesia, and Thailand. Furthermore, South Korea, Russia, and the United States imported a volume of 721,300 tons, 589,800 tons, and 400,700 tons respectively in The largest importers from Europe are the Netherlands and Germany (Lui, 2004). For China's vegetable export, different forms of vegetables have different export markets. Fresh vegetables are mainly exported to Japan, Korea, Singapore, The USA, and the Middle East. Some special vegetables (e.g. ginger) are mainly exported to the UK, Australia and France. Pickled vegetables are mainly exported to Japan, Korea, the USA and Singapore. Dried vegetables are mainly marketed to western Europe, 27

29 Japan, the USA, Australia, Korea, and Singapore. Canned vegetables are mainly exported to western Europe, the USA, Japan and Korea. Frozen vegetables are mainly exported to Japan, Korea, the USA, western Europe, New Zealand and Australia (Liu, 2004) Vegetable imports China's import of vegetables is very limited compared to its export. According to the MoA China imported vegetables were worth US $110 million in Statistics drawn from the FAS/USDA show different figures (US $720 million), but they give a good insight, from which countries China imports vegetables. Although the imports are lower compared to the exports, China's vegetables imports increased considerably looking at figure 18. Thailand and Vietnam have been China's main suppliers for quite a few years. However, Canada's share has increased considerably from A major part of Chinese vegetable imports consist of processed vegetables and foreign varieties. The import of processed vegetables is mainly driven by the westernization of the Chinese diet. The major imports by product are asparagus, cabbages, cauliflower, manioc, arrowroot, and sweet potatoes (mainly French fries), beans, pumpkins, chilies & peppers, yams, and bamboo (Rabobank, 2006; Vietnam Ministry of Agriculture) Vegetable import and export provinces The main provinces were the export of vegetables takes place are Shandong, Fujian, Zhejiang, Jiangsu, Xinjiang, and Guandong. The Shandong province is by far the leading vegetable exporter (also for fruit) and its exports were around US $1.8 billion, accounting for 36% of the total export. The values of the remaining provinces are: Fujian (US $800 million), Zhejiang (US $380 million), Jiangsu (US $300 million), Xinjiang (US $218 million), and Guandong (US $240 million). The regions that import vegetables are located at the east coast. The Guangdong province is an important region were vegetables enter China. It accounts for about a third of the total vegetable imports. Other important regions were vegetables are imported are the provinces Shandong and Fujian, and the municipality Shanghai. Figure 18: China's vegetable import origins (Source: Global Trade Atlas, FAS/USDA) Figure 19: Vegetable import and export provinces (Source: Ministry of Agriculture, Rabobank 2006) 28

30 5.3.4 Vegetable items Tomato trade China's fresh tomato imports and exports are very limited (USDA, 2007) and China ranked 18th in the top exporters of fresh tomatoes, and even lower as a importer of fresh tomatoes (FAO). Its share in the world trade for tomato paste is totally different. China became a significant exporter of tomato paste since 2000 and is currently the world largest tomato paste producer and exporter, followed by the EU and the United States. China produces tomato paste mainly for the export market, with export accounting for more than 80% of production. China exported 650,000 tons of tomato paste in 2007, up from 590,434 tons in Its tomato paste exports have had an average annual increase of 30%. The main importers of tomato paste in the world are Italy, Germany, the United Kingdom, Japan, Mexico and Russia. The main exporters of tomato paste are China, Italy, Spain, Turkey, and the Unites States (FAO). Onion trade In 2005, the total export volume and value of onions was 571,000 tons and US $118 million respectively. Dry onion accounted almost for 100% of the total exports in volume and value (FAO). The export value over the years 2002, 2003, and 2004, were US $46 million, US $86 million, and US $91 million. The export volume was 260,000 tons, 456,000 tons, and 420,000 tons over the same period. More than half of the Chinese onion exports (incl. dry onions and shallots) are to Japan. Other main export markets are Russia and Malaysia, accounting for 14% and 11% of the total exports respectively in 2005 (FAO). Garlic trade Garlic (fresh or chilled) is China's top vegetable export product and in 2005 a volume of 1.2 million tons was exported, up from 456,000 tons in The volume export of garlic remained stable from 2002 till 2005 and grew with 100,000 tons. However, the export value grew from US $346 million to US $563 million in the same period. The main export market for China's garlic is Indonesia, accounting for 22% of China's garlic export in Other important export markets for Chinese garlic are the United States, Brazil, Malaysia, Japan. The Netherlands imports of Chinese garlic accounted for 3% of the total exports (FAO). While China's garlic exports have increased its imports decreased considerably. The imports in 2005 reached 2000 tons (US $5 million), down from 22,000 tons (US $1.3 million) in 2000 (FAO). Mushroom trade The value of China's exports of mushroom products reached US $734 million, with a volume of 425,000 tons in The export value of China's mushroom products has risen at a rate of nearly 15% in recent years. In 2000, the export value of mushroom products was just US $490 million (FAO). The export in volume grew from 327,000 tons in 2000 to 425,000 tons in Fresh mushroom and truffles accounted for 19% of the total exports in 2005, with a value of US $141 million and a volume of 46,000 tons. Fresh shiitake and matsutake are the key species for export, accounting for nearly 90% of the total fresh exports in value. Japan is the biggest importer of fresh shiitake and matsutake (FAO, Mushroom Business, 2007). China's dried mushroom exports accounted for 38% of the total exports. The export value was US $278 million in 2005, up from the US $164 million value in The volume grew from 34,000 tons to 40,000 tons over the same period. Dried shiitake and wood ear are popular and exported mainly to Japan, the United States, Malaysia and Singapore (FA, Mushroom Business, 2007). Canned mushrooms are the dominant export products and accounted for 44% of the total output, with a value of US $315 million and a volume 338,000 tons in China is the number one exporter, followed by the Netherlands ( The export value over the years 2002, 2003, and 2004, were US $256 million, US $317 million, and US $329 million. The export volume was 238,000 tons, 309,000 tons, and 325,000 tons over the same period. Both volume and value increased over the years. The top five importers of Chinese canned mushrooms are Russia, the United States, Germany, the Netherlands, and Canada, followed by ASEAN countries. The total import volume of mushrooms grew from 23,000 tons in 2000 to 29,000 tons in The highest import of mushrooms was in 2004 reaching 32,000 tons. While the import volume grew over the years the import value decreased from US $64 million in 2000 to US $55 million in The imported mushroom and truffles, dried mushroom, and canned mushrooms are more or less equal in volume, however dried mushroom rated 70% of the total import value (FAO). Carrot trade After the two leading fresh vegetable products, garlic and mushroom, carrots is one of the remaining leading fresh vegetable exports. The export value of carrots increased enormously from US $16million in 2000 US $107 million to The export volume increased from 80,000 tons to 401,000 tons over the same period. Chinese carrots are mainly exported to Japan, ASEAN countries, and South Korea. The imports of carrots are very low compared to the exports. China imported 14,000 tons of carrots valued at US $5 million (FAO). Asparagus trade China mainly exports canned asparagus, valued at $127 million in 2005, and a small amount of fresh asparagus valued at $1.9 million in The canned asparagus market is much larger, because China processes about 80% of its asparagus production. Japan is China's top export destination for fresh asparagus and the EU-25 for its processed asparagus. In 2005, Japan accounted for 50 percent of China's total fresh asparagus exports to the world. Although asparagus is a labor-intensive crop China is a low-price producer because of its comparative advantage in labor. Low prices make China's asparagus highly competitive in international markets despite its comparatively low quality (USDA, 2006). 29

31 Frozen vegetables China's export value of frozen vegetables reached US $499 million in 2005, up from US $355 million in The frozen vegetables showed a steady increase in value as well in volume. The volume increased from 347,000 tons to 565,000 tons over the same period. Japan is by far the largest export market for Chinese frozen vegetables, and accounted for nearly 45% of the total export value and about 40% in export volume. Other prominent export markets are South Korea, the United States, Germany, Canada, and the Netherlands. Together all these countries account for about 90% of the total export value of Chinese frozen vegetables (FAO). The imports of frozen vegetable account only for 5% of the value export. In 2005 China imported 31,000 tons valued at US $25 million in China imports its frozen vegetables mainly from are New Zealand, Thailand, and the Unites States. However, the frozen food market is expected to increase because of the changing eating habits of the Chinese people (FAO). 5.4 Agricultural trade between China and the Netherlands In line with the increasing Chinese international trade the trade with the Netherlands increased over the years, particularly the imports of the Netherlands. In 2007, Chinese exports of agricultural products to the Netherlands reached 634 million and the imports reached 259 million. The import and export value of agricultural products is minimal compared to the total trade between China and the Netherlands. The agricultural trade only accounts for 3% of the total trade. One of the main reasons for the low agricultural share are the phytosanitary and veterinary trade restrictions for agricultural products from the Netherlands Fruit and vegetables exports from China to the Netherlands The total agricultural imports of the Netherlands from China was 634 million in 2007 (2007 data are post estimates), 529 million in 2006, and 416 million in The total imports of agricultural products have been showing a steady increase over the years. This trend is also the same for planting seeds. The Netherlands imported planting seeds from China worth 6.1 million, 7.4 million, and 7.9 million in 2005, 2006, and 2007 respectively. The imports of fruit and vegetables have been changing in the last three years. The imports of fruits, nuts and herbs were the highest in 2005 with a value of 98 million. It went down to 76 million in 2006, but recovered in 2007 reaching 90 million. Fruits, nuts and herbs exported to the Netherlands consisted of tons of apples, tons of citrus fruits, of non-tropical fruit, 4447 tons of other tropical fruits and nuts, tons of groundnuts, tons of dried fruits and nuts and tons of herbs (LEI, 2006, 2007). Vegetables imports in 2005, 2006, and 2007 were valued at 10 million, 31 million, and 29 million respectively. The Netherlands imported a volume of tons of onions and garlic, 839 tons of mushrooms, 161 tons of cabbage and sprouts, 12 tons of paprika, and tons of other vegetables from China (LEI, 2006, 2007). Chinese exports of processed potatoes, fruits and vegetables showed the highest increase and doubled from 67 million to 133 million in three years (LEI, 2006, 2007). Fruit juice had the largest share and the import volume was tons in 2007, and only tons in Other imports from China consisted of tons of frozen and dried vegetables, tons of frozen fruits, tons of processed fruits and nuts, and tons of other processed vegetables (LEI, 2006, 2007). Figure 20: Exports from China to the Netherlands (Source: LEI, 2007 estimated by Post) 30

32 Figure 21: Exports from the Netherlands to China (Source: LEI, 2007 estimated by Post) Fruit and vegetables exports from the Netherlands to China The agricultural exports from the Netherlands to China is smaller than its imports. However, the export has been increasing since 2005 from 224 million to 259 million in The export of planting seeds are by far the largest product group compared to the earlier mentioned groups on the import side. The export of planting seeds to China was valued at 4.7 million, 5.4 million, and 5.5 million in 2005, 2006, and 2007 respectively. Exports of fruit to China is very limited and the export was valued at 62,000 in 2007, while the exports in 2006 were valued at 260,000. According to the statistics of the LEI (Agricultural Economics Research Institute of the Netherlands) the Netherlands exported 180 tons of fruit, 39 tons of nuts and 8 tons of herbs to China in Export in 2007 only consisted of 31 tons of nuts and 14 tons of herbs. Zero exports of fruit explain the big difference between 2006 and Vegetable exports in 2007 were very limited as well and was valued at 25,000 with a volume of 28 tons. On the other hand exports of processed potatoes, fruits and vegetables were valued much higher reaching 2.4 million in Processed potatoes, vegetables and fruits export from the Netherlands consisted of 1042 tons of processed potatoes, 42 tons of frozen vegetables, 290 tons of frozen fruit, 115 tons of processed fruits and nuts and 94 tons of fruit juice (LEI, 2006, 2007). 5.5 Import & export regulations, and phytosanitary restrictions One of the main reasons for the low European agricultural export share to China are the phytosanitary trade restrictions. Phytosanitary rules are set up to protect plants and plant related products from pests and diseases. Exporting fruits and vegetables from the Netherlands to China is very difficult because of the strict import regulations. The Netherlands can only export fruits and vegetables to China if there is a bilateral protocol for the particular fruit or vegetable. The Ministry of Agriculture, Nature and Food Quality of the Netherlands and prominent Dutch business engaged in agriculture are negotiating with Chinese Authorities to set up protocols for different products. In 2000 a bilateral protocol for seed potatoes was set up and at the moment negotiations continue for other products, and one of them are pears ( In general, the steps for exporting fruits and vegetables to China are as follow: The exporter has to find a qualified import company, because foreign companies are not allowed to import goods directly to China. These import companies are mostly local companies or foreign investment companies that are authorized to engage in importing and exporting of fruits and vegetables (Fruittimes, 2008). The import company has to apply for an import permit at the local CIQ (AQSIQ) for the agricultural products. Moreover, all the fruit and vegetables that are exported outside the EU from the Netherlands need an export certificate. The export certificate is extended by the inspection authorities Kwaliteits Controle Bureau for groente & fruit (KCB), Nederlandse algemene keuringsdienst voor zaad en pootgoed van landbouwgewassen (NAK), Naktuinbouw and certificates can only be ordered from the Netherlands Plant Protection authority (Plantenziektenkundige Dienst). When the import permit and export certificate is acquired the exporter can ship the products together with the phytosanitary certifications. When products arrive in China the Chinese Customs office will clear the products and invoice taxes and tariffs. After the customs office the CIQ will test the products, and check the phytosanitary certifications and import permit documents. When exporting from China to the Netherlands, one of the main restrictions is that only orchards and packinghouses registered by AQSIQ are allowed to export from China. The Chinese government has set up these regulations. Furthermore, when importing agro products into the Netherlands, European phytosanitary requirements apply. The European phytosanitary requirements are different from the Chinese and differences lay in the allowance in 31

33 plant diseases. The Netherlands will allow agricultural products that 'consist' plant diseases only when they are not hazardous to the health or the environment. In contrast to China that will not allow any plant diseases in the imported products, 'zero tolerance policy', even if they are not threatening. The 'Plantenziektenkundige Dienst' is responsible for phytosanitary controls in the Netherlands. A list of phytosanitary products can be found on the website of the Ministry of Agriculture, Nature, and Food Quality of The Netherlands ( More specific information about import and phytosanitary rules and regulations of the Netherlands can be found on the websites nl and 32

34 Chapter 6 Technology and Innovations China's Academies of Science have always been an important driving force of technologies and innovations in China. With the opening of the markets, and improvements in intellectual property rights, notable research institutes and companies are engaged in developing technologies and innovations. The Chinese Academy of Agricultural Science (CAAS) was established in 1957 and acts under the Ministry of Agriculture (MoA). The CAAS is one of the most important research organizations in China and engages in all agricultural fields and topics, for example plantings seeds, breeding technology, fruit and vegetable planting technology, disease prevention and pest control. Green genetics and new variety development are currently the main interest of the Chinese government. The Chinese government is aiming to produce more over the same level of arable land. Research is done to prevent plant diseases but also to increase the nutritional value. Because of the farmland scarcity, China is also looking for ways to increase the yield per hectare and shorten growing and ripening time of fruits and vegetables. China and the Netherlands have set up several research institutes to deepen agricultural cooperation: the Sino-Dutch Agricultural Innovation and Promotion Center (SDAIPC) initiative of Wageningen UR and the Chinese Academy of Agricultural Sciences. The center is based at CAAS in Beijing. Furthermore, in Hangzhou at the Zhejiang Foresty University the Sino-Dutch Seed Technology Research Center is located, the Potato Genome Sequencing Consortium in Beijing, and a lab for Plant Molecular Breeding in Shanghai (Steentjes, 2007). Both countries have excellent knowledge in agricultural science, and cooperation and knowledge share is important in order to innovate and profit from each other. Innovations in the Chinese fruit and vegetable industry are taking place in different forms and at different levels. Product innovations in the fruit and vegetable industry (including seeds) consist of new fruit and vegetable varieties, new end products and a broader range of processed (frozen, canned, dehydrated etc.) products. The product innovations are driven by consumers needs for diversified products and a considerable amount of companies are engaged in processing. New sales methods like E-Shopping and rising trade in fruit and vegetables through the Internet are defined as transaction innovation. Nowadays, all kind of fruit and vegetable in China can be bought through the Internet. A lot of Chinese farmers and processing/import/export companies offer their products online. Special trade website like have detailed information about products and companies, and these websites are often used to find suppliers and buyers. Process innovations in the Chinese fruit and vegetable industry are especially in the field of new processing technologies and equipments. As said before demand for processed products is increasing and together with stricter regulations on food safety companies are lead to make use of new processing technologies and equipment, because current equipment is out of date and cannot produce high quality products (FAO). Furthermore, more fruit and vegetables are packed and innovation in packaging methods and materials are becoming more important. Most of the processing technologies are in their beginning phase but the entire fruit and vegetable industry is improving and innovating at a rapid rate. However, lack of knowledge and lack of management makes it difficult to implement and maintain it in the most effective way. The well-developed agriculture of the Netherlands can be an example for the Chinese industry and opportunities for Dutch enterprises are to lead the agricultural reform in China. 33

35 Chapter 7 Conclusion & SWOT The fruit and vegetable industry in China is an important industry that is highly fragmented at the moment. The industry showed enormous growth both in production and exports the last years, and future growth is expected. However a factor that could limit future fruit and vegetable production lies in the available farmland. Food quality and safety are becoming a major issue and the Chinese government is making a lot of effort to assure food quality and safety. Current regulations, monitoring and control, which are fragmented, do not meet the high western standards. The pesticide chemicals used are reduced and farmers face stricter rules and regulations, and are educated in the use of pesticides and fertilizers. These actions are just a part of the country's 11th Five-Year Plan. In the coming years the objective of the Chinese government is to modernize its agriculture throughout the whole industry, including farmer incomes, which is in imbalance compared to urban areas. The Chinese government hopes that these measures will strengthen local economy, and lead to better organized and sophisticated technologies. Rising income levels in combination with changing lifestyles, and more concern for food safety, has led to demand for high quality food. In recent years more and more fruit and vegetables are labeled as pollution free, green food and organic food. Recent food poison incidents in the country also made people more concerned. However, the organic food market is still in its beginnings and relatively small and organic products are mainly available in modern supermarkets and hypermarkets that are located in large urban cities. The supermarkets and hypermarkets are leading in offering safe fruit and vegetables, but there is a fierce competition from 'authentic' markets where the quality is lower, but improving. Statistics showed that Chinese consumers are consuming more fresh fruits and processed fruits and vegetables products. They also demand more fruit and vegetable variations lead by rising incomes and changing Chinese diet. In recent years the fruit and vegetable assortment has extended with more foreign, processed and exotic varieties. The fruit and vegetable chain is highly fragmented with a lot of small-scale farmers that produce mainly for the domestic market. The two largest production provinces for fruit and vegetables are the provinces Shangdong and Hebei. A lot of farmers grow vegetables and fruit because it is more profitable than other crops. The technology in production is low and can be inefficient which leads to low yield output per hectare. Vertical integration by retailers and processors in the supply chain is a recent trend in order to control the supply, quality and safety. More cooperation throughout the industry will lead to higher quality and safety. This means a shift from an open supply chain, which is inefficient, supply driven, and with low safety and quality standards, towards a more coordinated supply chain with high standards, more efficiency and high quality. Supply chain management will become an important issue as there is little knowledge and experience currently in China and quality management will be an important a part of it. Processing companies, importers and exporters are nowadays chain leaders and coordinate the supply chain. There is a lot of room for improvement within the distribution and logistics of fruit and vegetables. Especially as the current warehousing and cold storage facilities do not meet the current quality standards and cannot handle the volume of fruits and vegetables. Improvements in distribution, logistics and warehousing are important because significant amounts of products are lost. Moreover well-managed cold chains from end-to-end in the supply chain are needed because frozen fruit and vegetable products will increase its share in the market. Further improvements and innovations are needed in the processing industry as China's processed fruit and vegetable products are increasing and becoming more important. Since China entered the World Trade Organization the export market grew more rapidly compared to the import market. China's trade partly depends on the exported product, however the main countries China exports to are Japan, South Korea, Russia, the United States, and the European Union. China's main export market Japan has strengthened import regulations after food scandals and exports to Japan are expected to decline. The main countries for China's imports are the ASEAN countries and the United States. China's trade with the ASEAN countries is expected to increase because the zero tariff agreements are partly in place. China's import and export mainly takes place in the southeastern coastal regions, which are also the important economic zones. The provinces Shandong and Guangdong are the major trade zones for fruit and vegetables, however more provinces are important and account for the import and export of fruit and vegetables. The strengths, weaknesses, opportunities, and threats (SWOT) of the Chinese fruit and vegetable industry are given in figure 22. The opportunities given for the Chinese fruit and vegetable industry also include the opportunities for the Dutch businesses in this figure. This study is not an in depth study but more a general study of the Chinese fruit and vegetable industry and the themes handled in the SWOT are drawn on the same basis. 34

36 Figure 22: Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis Strengths - Low labor costs - Position in the world market - Juice production - Leader in production and exports for some fruit and vegetable varieties - Government support for agriculture during 11th year plan - Self sufficiency in planting seeds, fruit and vegetables - Consumer spending in urban areas on food is a third of their income - Incomes are growing Weaknesses - Fruit and vegetable industry highly fragmented - Post harvest losses - Low yield per hectare - Distribution and infrastructure - Consumers are price sensitive - Cold storage facilities - Food quality and safety - Image of China on food safety - Lack of know how - Lack of infrastructure - Farmland resources - High use of fertilizers and pesticides - Intellectual property rights - Numerous government authorities involved at different levels - Supply chain Opportunities - Governments emphasis on rural development - Focus on safety and quality - Improving economic situation - Growing domestic market - Increasing demand for pollution free, green food and organic fruit and vegetables - Demand for fruit and vegetable varieties - Demand for fruit and vegetable juice - Demand for processed and frozen products - Demand for exotic fruits - High quality planting seeds - Supermarket and hypermarkets sell more fruit and vegetable products - Supply chain management and quality management - Distribution and logistics facilities - Processing industry is increasing - Cold storage facilities - Production of labor intensive crops, because of low labor costs - Regulations, monitoring and control opportunities regarding food safety - Educational support in farming techniques - Knowledge transfer in general Threats - Food safety and quality scandals - Phytosanitary regulations - Zero tariff ASEAN countries - Stricter control in international trade - More international competition - Restricted regulations by governments - Land resources - Influence of high food prices on fruit and vegetable consumption 35

37 Doing business in China Once the decision has been taken to conduct business in the Chinese market, a company needs to determine the right mode of entry. Several options are available ranging from sales representatives to joint ventures to a wholly owned foreign enterprise. For this reason a company has to consider its level of commitment, risk control, and the profit potential attached to each alternative carefully. A number of challenges need to be overcome such as unknown culture, legislation, tax system, and possible imitation of brands/goods/technology. In this sense cooperation with a Chinese company might be a good option, as local companies possess more knowledge on conducting business in China. For more information, please visit the website of the Embassy of the Kingdom of the Netherlands in the People's Republic of China, and the website of LNVdepartment 36

38 References Bin, L., Jiang, S. (2004), "China Fruit market report", Victorian Government Department of Primary Industries Melbourne, June Branson, A. (2005), "China, Peoples Republic of, New plant variety protection list", USDA FAS gain report nr CH5048, June Branson, A., Casey Bean, E., Cohen, M. (2005), "Protecting U.S. Food and Ag. IPR in China", USDA FAS gain report nr CH5035, May Beckman, C., Bugang, W., Vassilos, R., Tong, W. (2008), "China, Peoples Republic of, strawberries annual", USDA FAS gain report nr CH8048, June Beckman, B., Bugang, W., Xu, F. (2008), "China, Peoples Republic of, stone fruit annual", USDA FAS gain report nr CH8028, April Bugang, W., Evid, L., Trachtenberg, E., Beckman C. (2007), "China, Peoples Republic of, Fresh Deciduous Fruit annual", USDA FAS gain report nr CH7085, November Butterworth, J. (2005), "China, Peoples Republic of, Planting seeds annual 2005", USDA FAS gain report nr CH5085, November Calvin, L., Gale, F., Dinghuan, H., Lohmar, B. (2006), "Food safety Improvements Underway in China", Amber Waves, November Carter, C.A., Chalfant, J.A., Goodhue, R.E. (2004), "China's Strawberry industry: An emerging Competitor for California?" Giannini Foundation of Agricultural Economics Champignon ons werk, nieuwsbiref van Cooperative Nederlandse champignonkwekersvereniging, nl/cnc/contribute/documents/cnc0075_nw_champwerk 1_Web.pdf, derde jaargang, issue 1, March 2007 European commission (2007), "Agricultural commodity markets past developments fruits and vegetbales", July Fengmei, B. "Fruit and vegetable processing in china: technology, quality assurance, and labeling", Powerpoint presentation, FruitandVegetableProcessinginChina.pdf, accessed on June 21, 2008 Fruittimes, (2008), issue number one, Gale, F. (2002), "China at a Glance: A Statistical Overview of China's Food and Agriculture", ERS USDA, April Gale, F. (2006), "Food Expenditures by China's High Income Households," Journal of the Food Distribution Research Society, vol. 37, no.1, March, pp Gale, F., Francis, T., Lohmar,B., et. al. (2002), "China's Food and Agriculture: Issues for the 21st Century", ERS USDA, April Gale, F., Kuo, H. (2007), "Demand for food quantity and quality in china", ERS USDA, January Gifford, R., Zhang, L. (2002), "China, Peoples Republic of, Strawberries Annual", USDA FAS gain report nr CH2616 Groot, M.J., Jager, A. de, Peppelman, G., Gao, S. (2004), "Concurrentiekracht chinese fruitsector, appel en peer", Randwijk: PPO Fruit, Rapport PPO Hu, D. (2004) "Mushroom Industry in China, Small Mushroom & Big Business", d50cde8fcbc78dc42a68700b96b10ee0.pdf, accessed on April 30, 2008 Huang, S., Gale F. (2006), "China's rising Fruit and Vegetable exports challenge U.S Industries", ERS USDA, February Kiefner, D., Wegmuelle, S. (2002), "China, Peoples Republic of, Retail food sector", USDA FAS gain report nr CH7821, November Lei, Z., Liu, E., Franke, T., Trachtenberg, E., Beckman, B. (2007), "China, Peoples Republic of, dried fruit annual", USDA FAS gain report nr CH7081, October Liu,Y.M., Chen,X.Y., Kamphuis, B.M. (2004) "The vegetable industry in china: Developments in policies, production, marketing and international trade" Agricultural Economics Research Institute, The Hague Mckay, A. (2007), "Carrots in Australia", Department of agriculture and food western Australia, April Ministry of Agriculture ( ), "China agricultural yearbooks (versions )", China Agricultural Press, Beijing, China Naughtons, B. (2005), "The New Common Economic Program: China's Eleventh Five Year Plan and What It Means", China Leadership Monitor, Fall 2005, issue 16 Paul, J. (2007), "China's organic revolution", Journal of organic systems, June Poon, C., (2006), "An overview of China's beef industry", Ministry of agriculture, nature and food quality, Ambassy of the Kingdom of the Netherlands Rabobank, China as an exporter of fruit and vegetables, March

39 Rabobank, China as an importer of fruit and vegetables, March 2006 Rutledge, J., Lu, F. (2005), "China, Peoples Republic of, canned deciduous fruit annual", USDA FAS gain report nr CH5023, March Sanchez, J., Bugang, W. (2006), "China, Peoples Republic of, Fresh Deciduous Fruit annual", USDA FAS gain report nr CH6078, September Sanchez, J., Zheang, L. (2006), "China, Peoples Republic of, asparagus annual", USDA FAS gain report nr CH6059, August Scoones, S. (2008), "Organic agriculture in China current situation and challenges", EU-China trade project, European Union, May State Council of the People's Republic of China (2007), "The Quality and Safety of Food in China", Foreign Language Press, Beijing, China Steentjes, A. (2007), "Programmatisch aanpak Food & Nutrition: Chinees-Nederlandse ontmoeting van vraag en aanbod", Ministerie van Landbouw, Natuur en Voedselkwaliteit, August Taylor, D., Osdol M. van. (2006), "China, Peoples Republic of, Food Processing Ingredients Sector Food Processing", USDA FAS gain report nr 6602, April USDA, World markets and trade report (2008), Global apples 2007/2008, march USDA, World markets and trade report (2008), Global pears 2007/2008, march Wei, F., Sanchez, J., Bugang, W (2007), "China, Peoples Republic of, canned deciduous fruit annual", USDA FAS gain report nr CH7026, April Wijnands et al. (2006), "Competitive position of the EU Food Industry sectors in the global and EU Market", European commission, November 28 Woods, M., Thornsbury, S. (2007), "Background information on the the Chinese Fruit sector" Michigan State University, Department of Agricultural Economics, Staff Paper Series, World Bank, (2006), "China's compliance with food safety requirements for fruits and vegetables: promoting food safety, competitiveness and poverty reduction", World Bank, Beijing/Washington, ISBN Worldgrower (2006), "Chinese asparagus production to soar", ehtml?o=298, accessed on May 8, 2008 Xieqing, L. (2007), "China, Peoples Republic of, Market development report Shandong snapshot", USDA FAS gain report nr CH8403, May Xinping, W., Sanchez, J. (2006), "China, Peoples Republic of, planting seeds annual", USDA FAS gain report nr CH6104, December Xinping, W., Sanchez, J. (2007), "China, Peoples Republic of, planting seeds annual", USDA FAS gain report nr CH7092, November Yadong, H. (2008), "Chinese exports hit new record", Mushroom business, april 2008 Zhu, J., Chandwani, S. (2004), "China, Peoples Republic of, Food Processing Ingredients Sector Food Processing", USDA FAS gain report nr 4606, June "20% Agricultural Products Are Green or Organic" (2007) html, accessed on April 28, 2008 "A market analysis 2004 Fruit & Vegetables China", accessed on May 23, 2008 "Anthurium en Guzmania zijn nu ook in China te beschermen met kwekersrecht" (2008), Plantum NL, nl/nieuws.htm 15mei2008, accessed on June 12, 2008 "Strawberry Situation and Outlook in Selected Countries- February 2005" FAS USDA, horticulture/strawberry.html, accessed on June 15, 2008 "China and Hong Kong: Market Opportunities and Challenges for U.S. Horticultural Products", FAS/USDA (2007), %20China%20and%20HK.pdf, accessed on June 9, 2008 "China's Fruit and Vegetable Market Combined is the Largest Sector in the Country's Retail Food Market", (2005), www. industrialnewsupdate.com/news/food-processing/archives /2005/09/chinas_fruit_an.php, accessed on May 9, 2008 "Draft version 20 April 2008 of The PRC Food Safety Law", EU-China trade Project, European Union, "Multinationals back drive to create cold-chain network for China", accessed on 15 June, 2008 "Reinforce IP advantage to promote agricultural plant variety innovation", (2007), Article.jsp?a_no=64948&col_no=925&dir=200703, accessed on May 8, 2008 "Tomato and Tomato Products Situation" (2004), World Horticultural Trade U.S. Export Opportunities FAS USDA, 20tomato%20article.pd, accessed on May 7,

40 Appendix 1 Applications for registration for variety protection 1. The total application and registration status in MoA and SFA Ministry MoA SFA Total Application Total Sub-total from foreign countries Sub total from the Netherlands Registration Application Registration Application Registration The breakdown for the Netherlands (MoA and SFA) Country The Netherlands Total Plant varieties Lily Chrysanthemum African daisy Carnation Eggplant Potato Tomato Pear Pepper Rose Application Registration Total application and registration by varieties in China (1) MoA (from , update on ) Agricultural Crops Application: 4479 Registration: 1438 Varieties Maize Rice Common wheat Gossypium Soybean Cabbage type rape (Brassica napus L.) Peanut Broomcorn Hurdeum Millet Sweet potato Broad bean Mung bean Castor Flax Mustard type rape (Brassica juncea Czern. et Coss.) Application Total Registration

41 Vegetable Application: 196 Registration: 59 Flower Application: 156 Registration: 28 Fruit Application: 126 Registration: 32 Fodder grass Application: 4 Total Varieties Water melon Chinese cabbage Capsicum Tomato Potato Cucumber Stray berry Sweet melon Eggplant Cabbage Radish Oyster mushroom Carrot Bean Cauliflower Chrysanthemum Lily African daisy Carnation Orchid Gladiolus Buttercup Pear Apple Grape Peach Kiwi Citrus Plum Litchi Morus Rumex Alfalfa Application Total Registration (2) SFA ( the end of 2007) Total Sub total from the Netherlands Application (all rose) Registration (all rose) 40

42 Appendix 2 Contact details of leading companies Planting Seeds Companies : Syngenta (China) Investment Co. Ltd : 999 Pudong South Road, Shanghai : +86 (21) : +86 (21) : : Seeds producer, Crop protection : DengHai Seed (Xiyou) Co. Ltd : Xiyou Town Laizhou City : +86 (535) : +86 (535) : : Vegetable seeds : Rijk Zwaan Qingdao Co. Ltd. : Building JianFei Garden No. 87, Hongkong Dong Rd, , Qingdao : +86 (532) : +86 (532) : : Breeding and seed production : Liaoning Dongya Agri.Development Co., Ltd : North Changjiang Street, Shenyang, Liaoning : +86 (24) : +86 (24) : : Fruit and vegetable seeds : Nunhems Beijing Seeds Co. Ltd : No.90 Beimafang Dongwei Road, Beijing : +86 (10) : +86 (10) : : Vegetable seeds : XiYu Seeds Co. Ltd : Eastern Ningbian Road, Changji, Xinjiang : +86 (994) : +86 (994) : : Fruit and vegetable seeds : Tianjin Derit Seed Co. Ltd : Baidi road 200 Nankai district Tianjin : +86 (22) : +86 (10) : : Vegetable seeds : Longda Seeds Corporation : Beijing South Road, Urumqi, Xinjiang : +86 (991) : +86 (991) : : Vegetable seeds and flower seeds : Bejo Seeds Shanghai : Huai Hai China Tower, 885 Renmin Rd, Shanghai : +86 (21) : +86 (21) : : Vegetable seeds : Vimorin : Dongxiaokou, Changping District, Beijing : +86 (10) : +86 (10) : : Vegetable seeds 41

43 : Seminis : Dongyi, Xibahe Xili Beisanhuan Dong Rd, Beijing : +86 (10) : +86 (10) : : Fruit and vegetable seeds : Evergreen Zhonghong fruit, vegetable Co. : Landi commercial building, south street, Beijing : +86 (10) : +86 (10) : -- : Pears, apples, sweet melon, peaches, ginger, garlic and Chinese vegetable : Monsanto : 2A Gong Ti Bei Lu, Chaoyang District : +86 (10) : +86 (10) : : Fruit and vegetable seeds Fruit and vegetable (producing/processing/trading) companies : Tianjin Native Produce I/E Group Corp. Ltd : Huiyuan Road,Beixiaoying,Shunyi District,Beijing : +86 (22) : +86 (22) : : dried nuts and related products, salted vegetables, honey, dehydrated vegetables, chili and related products, seeds : Beijing SeeDo Foods Co. Ltd : Shu Guang Xi Li, Chaoyang, Beijing : +86 (10) : +86 (10) : : Pumpkin kernel, snow white pumpkinseed in shell, pinenut kernels, apricot kernels, beans, organic kidney beans, and other organic products : Haitong Food Group Co. Ltd : Haitong Rd., Cixi City, Zhejiang Province : +86 (0574) : +86 (0574) : : Strawberry, Quick-frozen vegetable, dehydrated vegetable, canned fruit and vegetable, concentrated juice, conditioned fruit and vegetable, fresh vegetable and preserved fruit and vegetable : Juye Jianong Fruits and Vegetables Co. Ltd : West jinshan Road Juye Shandong : +86 (0530) : +86 (0530) : : Garlic, Carrot, ginger, apple, pear, pomelo : Shijiazhuang Fortune Foods Co. Ltd : North Pingan Street, Shijiazhuang : +86 (311) : +86 (311) : : Quick frozen fruit, vegetables, mushrooms, dried products : Shaanxi Huasheng Corp. Fruit Co. Ltd : Weiyang Lake District Development Zone, Xi'an : +86 (29) : +86 (29) : : Fresh apple (mainly fuji) producer and exporter : Beijing Andros Fruit Co. Ltd : Nankou Farm, Changping District, Beijing : +86 (10) : +86 (10) : : Fruit puree, Quick frozen fruit, fresh juice, jam : Xuzhou LiMing Food Co. Ltd : Suyangshan Town,PiZhou City, JiangSu : +86 (516) : +86 (516) : : Garlic, dehydrated, fresh, frozen and pickled fruits and vegetable 42

44 : Hongchang Fruit & Vegtable products Co. Ltd : Minxi market of Jinxinang, Jining, Shandong : +86 (537) : +86 (537) : : Garlic, ginger, onion, potato, carrot, apple, pear and other fruit and vegetable products, salted and dehydrated products : Shandong xingda foodstuff group Co. Ltd : East Xingda Street,Linshu,Shangdong : +86 (539) : +86 (539) : : Garlic, garlic bolt, ginger, onion, dried vegetables, Horse radish, Chinese onion, radish, burdock, carrot, chestnut, canned garlic clove (garlic sauce), canned fruit, peanut : COFCO Xinjiang Tunhe Co. Ltd : Huanghe Road, Urumqi, Xinjiang : +86 (0991) : +86 (0991) : : Processed tomato, aseptic tomato paste, canned tomato, tomato powder, fresh apricot, apricot puree, canned vegetable : Xinjiang Chalkis Tomato Products Co. Ltd : Qingnian Road Sunshine Plaza, Urumqi, Xinjiang : +86 (0991) : +86 (0991) : : Tomato paste : Shandong Long Tai Fruit & Vegetable Co. Ltd : Taomiao Eco. Zone, Juye Heze, Shangdong : +86 (530) : +86 (530) : : Garlic, peeled garlic, onions, gingers, peanut, carrots, apples and pears, vegetable & fruit juices : Shanghai Gaorong Food Co.,Ltd. : Kerry Everbright City, Tianmu Road, Shanghai : +86 (21) : +86 (21) : : Onion, Carrot, other fresh vegetables and fruits : Jining Shengtai Fruits & Vegetables Co. Ltd : No. 89 Int. garlic capital, Jining, Shandong : +86 (537) : +86 (537) : -- : Carrot, onion, garlic : Fujian Cereals, Oils & Foodstuffs I/E Co. : World trade plaze, no71 Wushi road, Fuzho : +86 (591) : +86 (591) : : canned vegetables (mushroom, asparagus), canned fruits, dry lychee, longan, mushroom, boiled bamboo shoots, garlic, vegetables : Xiamen Xindeco Import & Export : 2/f Xindeco blg, Huli, Xiamen : +86 (592) : +86 (592) : -- : Canned asparagus, canned mushroom : Jining Golden Longyuan Int. trading Co. Ltd : Zhicheng Int Center, Jinyu Rd, Jining, Shandong : +86 (537) : +86 ( : : Apple, pear, pomelo, kiwi, potato, carrots, ginger, garlic : Shandong Yipin Agro (Group) Co. Ltd : Dikou Road, Jinan , Shandong : +86 (531) : +86 (531) : : Garlic : Xinjiang Agricultural Products Co. Ltd : Xinjiang : +86 (531) : +86 (531) : : Korla fragrant pear, Ya pear, Tribute pear, apple, orange, hami-melon, grape 43

45 : Jining Sanlong vegetable & fruit Co. Ltd : no147 Guanghe Road, Jining, Shandong : +86 (537) : +86 (537) : : Ya Pear, golden pear, Fuji apple, pomelo, mandarin, orange, kiwifruit, grape, garlic, ginger, onion, carrot : Hunan Premium Foods Corp. Ltd : No.7 Zhuyuan Road, Changsha, Hunan : +86 (0731) : +86 (0731) : : Canned fruit : Jiangsu Cereals, Oils & Foodstuffs I/E Corp : 528. S. Taiping Rd, Nanjing,Jiangsu : +86 (25) : +86 (25) : : Strawberry : AHCOF International Development Co. Ltd : Sunan plaze No 389 Jinzhai Road, Heifei : +86 (551) : +86 (551) : : Canned fruit : Asia Foods (Longhai) Co. Ltd : Dankeng, Haicheng Town, Longhai City, Fujian : +86 (596) : +86 (596) : : Frozen vegetable, mixed vegetable : Huangyan Import & Export Corporation : 49 Youth Rd. Western Huangyan, Zhejiang : +86 (576) : +86 (576) : : Canned fruit : Ajinomoto : Songjiang Industrial dlpm Zone, Shangha : +86 (592) : +86 (592) : : Frozen products : Zhengfeng Dried fruit foodstuff I/E Co. Ltd : Xieyu Rd., Keji Ave., Zhongshan, Guangdong : +86 (760) : +86 (760) : : Dried fruit Juicing Companies : Zhejiang Cereal, Oil & Foodstuff I/E Co. Ltd : No 229 Tiyuchang Rd., Hangzhou : +86 (571) : +86 (571) : : Dried vegetables, frozen vegetables, dydrated products, fresh vegetables : SDIC Zhonglu Fruit Juice Co. Ltd : Fuwai Street, Xicehng District, Beijing : +86 (10) : +86 (10) : : Fruit & vegetable juice production, apple juice leading product : Taian FooK Hut Tong Kee Foodstuffs Co. Ltd : Fanzhen Daiyue District, Taian city, Shandong : +86 (0538) : +86 (0538) : -- : Dried vegetables : Shaanxi Haisheng Fresh Fruit Juice Co. Ltd : Yucai Building, Yucai Road, Xi'an : +86 (29) : +86 (29) : : Fruit juice production, apple juice leading product 44

46 Retail companies : Yantai North Andre Juice Co. Ltd : Andre Road, Yantai : +86 (535) : +86 (535) : : Apple juice and pear juice production : Shaanxi Hengxing Fruit Juice Co. Ltd : Keji Road, Xi'an : +86 (29) : +86 (29) : : Fruit production and (granny smith apples, strawberries, blackberries, apple seeds) Juice production, apple juice, pear juice and kiwi juice : Lianhua Supermarket Holdings Co. Ltd (subsidiary of the Shanghai Brilliance group) : 7th Floor,No 1258,Zhen Guang Rd,Shanghai : +86 (21) : +86 (21) : : Supermarket, hypermarket, distribution : Dalian Dashang Group : No. 1 Qing San Street, Dalian : +86 (411) : +86 (411) : : Department stores, supermarket : Tongda Fruit Juice & Beverage Co. Ltd : Taibai Road, Xi'an : +86 (29) : +86 (29) : : Fruit juice production, apple juice, pineapple, juice, pear Juice. Canned fruit, canned Pineapple : Carrefour (China) Hypermarket Co. Ltd : Shanghai Stock Exchange Building, 528 Pudong Nan Road, Pudong, Shanghai : +86 (21) : +86 (21) : : Hypermarket, discounters : Beijing Hui Yuan Beverage & Food Group Co. : Huiyuan Road,Beixiaoying,Shunyi District,Beijing : +86 (10) : +86 (10) : : Fruit juice production, 100% juices, nectars, juice rinks, mixed fruit and vegetable juices : Beijing Hualian Group : Xicheng District, Beijing : +86 (10) : +86 (10) : : Supermarket : Master Kong Ting Hsin International Group : Economic-Technological development area,tainjin : +86 (852) : +86 (852) : : Production and distribution of noodles, beverages and baked goods. Master Kong brand fruit and vegetable juice : Dalian Dashang Group : 39/F China Resources Building, 26 Harbour Road, Wanchai, Hong Kong : +86 (852) : +86 (852) : : Supermarket, logistics, food processing anddistribution : Hangzhou Wahaha Group Co. Ltd : North Qiutao Road, Hangzhou : +86 (571) : +86 (571) : : Food and beverage producer. Broad range of beverage products : China Resource Suguo : Jiefang Rd 55th, Nanjing : +86 (25) : +86 (25) : : Supermarket 45

47 : Wumart stores, Inc : Yuquan Building Shijingshan Rd. Beijing : +86 (10) : +86 (10) : : Hypermarkets, mini-marts : Trustmart : CangWu Rd, XuHui District, Shanghai : +86 (21) : +86 (21) : : Hypermarkets : China Resource Vanguard Co. Ltd : 39/F China Resources Building, 26 Harbour Road, Wanchai, Hong Kong : +86 (852) : +86 (852) : : Supermakets 46

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