How China’s aquaculture industry is being rocked by a rising player

Published on
June 28, 2016

The great and good of China’s seafood sector filed into the enormous Tongwei International Center conference hall earlier this month for the ‘2016 China Intelligent Facility Fishery Innovation and Development Forum’ - a day of speeches and pitches for a bright new world of “intelligent fish farming” which was hosted by the Tongwei Group, one of China’s biggest firms.

With officials and researchers from the China Academy of Fishery Sciences present, the Tongwei conglomerate explained how it can dramatically improve the efficiency of Chinese fish farms through computer systems. This is the brainchild of a company subsidiary, Tongwei Automation Co which, according to the company general manager Jing Yan Xia, aims to revolutionise China’s fish farming sector. It will do this through systems for precision feeding and real-time monitoring of water quality, temperature and other factors in aquaculture ponds.

“The modernisation of China’s aquaculture sector relies on the internet of things, cloud computing and big data,” Jing told a conference panel which also featured speakers from the China Fisheries Association and the China Fisheries Academy.

Few firms are as large and influential in China’s agriculture or aquaculture business as Tongwei Co. The conglomerate has businesses right across the field, from feed companies to a tilapia and catfish fry company. Tongwei –which has a separate subsidiary focused on solar energy – is one of China’s top 100 enterprises by revenue, according to the company.

The company has ambitions to compete with Thai agri conglomerate Charoen Pokphand (CP) but it’s a way off CP’s presence in value-added and higher-margin businesses like packaged food and retailing. Many Chinese firms –including Tongwei – look enviously at CP and seek to replicate its presence in the higher margin end of the business.

For now Tongwei’s advantage and its priority is scale. The company’s solar energy ambitions and a long-term strategy of building its aquafeed sales, in China but also overseas, are all driven in tandem with its ambitions to enlarge and modernise the aquaculture sector.

Beyond China, the firm is active in Southeast Asia with an aquafeed mill in Vietnam while Tongwei last year marked its first shipment of aquafeed to Ghana and has marked the African continent out as a future source of sales and aquaculture production given the increasing environmental challenges faced by production at home.

In 2014 Tongwei produced over 2.5 million tons of aquaculture feeds, making Tongwei the world's largest aquafeed manufacturer - having been the top player in the Chinese aquafeed industry for the last consecutive 22 years. Tongwei has sales of over RMB 10 billion with RMB1 billion of that coming from aquafeed and fry in 2014.

It’s clear that the firm’s ability to produce its own feed, fry and antibiotics makes it a formidable player in terms of being able to reduce input costs for its farms. Fish farming income is boosted by solar power: taking advantage of government incentives for solar power, Tongwei has been nothing if not innovative in rolling out vast quantities of solar panels in the vast agricultural and aquaculture concerns which it operates and contracts.

Tongwei’s army of salesmen who go around rural China dispatching advice to local fish farmers (and driving sales for its antibiotics, feed, fry) give the company unrivalled market intelligence. The company’s prospects were confirmed by a US$100 million investment from US private equity firm KKR, which is discriminating about its investments but bullish on China’s agri and food sectors.

The big question, however, is can Tongwei also compete with CP in research and development of key needs of the Chinese aquaculture industry; better brood stock and seedlings for both tilapia and shrimp come to mind and both are areas where Tongwei is much less prepared than CP, which has been able to acquire some key international players in the space. One of its US subsidiaries is a key supplier of shrimp brood stock to China.

By introducing more research-driven production Tongwei is giving China’s aquaculture sector a badly needed productivity boost. Tongwei’s overall boss Hui Yi Gang has said ecological sustainability is Tongwei’s priority for its aquaculture operations. He believes sustainability is key to profitability and proper use of feed and antibiotics will ensure Tongwei’s long-term profitability.

A Tongwei operation, the God Bless Tilapia Bao Fang Farm in the Wenchang region of Hainan last year became the first in Asia to enroll in the Global Aquaculture Alliance (GAA)’s new iBAP programme which provides an improvement plan to prepare an aquaculture farm to apply for the GAA’s Best Aquaculture Practices (BAP) certification. Perhaps it will ultimately match CP across the spectrum of industry activities for which it has ambitions. But for now the commitment to “intelligent fish farming” will be a valuable contribution to China’s aquaculture industry which has for too long prioritised quantity over quality.

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