China locking up dominance in Southeast Asia

Published on
July 21, 2017

China is winning a scramble among Asian countries to get to the top of the seafood production pyramid.

Three major factors are helping China in its efforts: A subsidized, rapid expansion effort to get into regional markets, allowing the country to gobble up supply and more easily sell value-added products abroad; a surprisingly resilient domestic economy has kept domestic demand for seafood high; and its own frustratingly complex – and often protectionist – market, which discourages foreign entities from competing within China.

Recent trade data reveals China’s success in sales of processed seafood to Southeast Asian nations. Association of South East Asian Nations (ASEAN) bloc was the biggest buyer of Chinese seafood in the first quarter of 2017, with China’s seafood exports to ASEAN rising by 32.6 percent in volume and 7.9 percent in value terms. Shipments to the Philippines rose 53.8 percent and 25.9 percent in volume and value terms, respectively, to 61,000 tons and USD 192 million (EUR 171.9 million). Exports to Malaysia rose by 33 percent to 24,800 tons and shipments to Indonesia rose 476 percent to 35,900 tons worth USD 77 million (EUR 69 million) – up a remarkable 407 percent from the same period last year.

Zhanjiang, in southern China – one of the country’s top shrimp-producing zones – reported a jump in exports in the first half of 2017. Their exports rose a whopping 49.3 percent in volume and 35.3 percent jump in value terms. The data suggests a surge in shipments of processed product to the Philippines (up 82.8 percent in volume and up 103.8 percent in value terms and Singapore (up 63.3 in volume and 48.6 percent in value), though absolute figures were not provided. 

An aggressive move to open regional trading centers in several countries in Southeast Asia has helped China lock down its supply lines. China ASEAN Marine Products Exchange, a large stock market-style trading exchange in the city of Fuzhou, on China’s southeastern coast, announced it recently opened offices in Malaysia and Singapore and will open new offices in Myanmar and Vietnam by early next year. 

The exchange’s vice president, Xue Yong Fu, said it has 358 active member companies and did CNY 5.3 billion (USD 738 million, EUR 672.5 million) in trade over the past two years. In January, 42 Chinese diplomats visited the exchange’s headquarters, meeting with management to strategize about China’s ambitions to soak up more Southeast Asian seafood supply. 

In addition, the Chinese economy is defying expectations with its furious pace of growth. While many economic forecasts for 2017 and beyond had China’s economy slowing in its pace of growth, China logged a 6.9 percent gross domestic product expansion for the first half of 2017. This marks the tenth consecutive GDP report in which China has exceeded growth of 6.8 percent, according to Business Insider. Even more impressive is that a larger percentage of the country’s growth is coming from tertiary and secondary industries, signaling that the country’s industrial sector is robust and consolidated.

The robust economy has resulted in rising consumer spending in China, including growing demand for seafood. Retail sales grew by 11 percent between the first half of 2017 and the first half of 2016, and seafood achieved growth of four percent in 2016, thanks to growing consumer sentiment that seafood is a healthy and affordable food option.

While that’s good news for Chinese seafood firms selling domestically, it’s merely frustrating for companies based outside of China seeking to export into the world’s largest market. Foreign importers report that numerous problems are prohibiting them from tapping into the Chinese market, ranging from protectionist government policies to language barriers.

The story of a recent agreement between 10 Vietnamese seafood firms and commerce officials in Chongqing, China, one of the country’s most populous cities, reveals the difficulties faced by foreign seafood companies attempting to gain access to markets in China.

The Vietnamese firms agreed to work with the Vietnamese Trade Promotion Bureau in Asia and the commerce bureau in Chongqing, China to import pangasius and shrimp directly into the city, which is located in southwestern China. The development came on the heels of talks and a trade fair earlier this summer in Chongqing featuring Vietnamese seafood suppliers, according to a statement from the city’s commerce bureau.

There are obvious attractions for Vietnamese firms in concentrating supply in one regional market, primarily having to do with logistics, an official at the Vietnam Trade Promotion Bureau in Chongqing said. However, the official, who is also promoting imports of Vietnamese rice and coffee into Chongqing, complained that the cost of doing business is high.

 “It is very hard to verify potential Chinese customers,” the official said.

The official said it is nearly impossible to complete corporate due diligence as a result of the relative lack of a national system for checking the credit records of Chinese companies. 

The result is frustration for foreign importers, and an increasing home field advantage for domestic players, the official said.

Contributing Editor reporting from Beijing, China

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