China’s aquaculture modernization effort hampered by corruption

Published on
February 10, 2020

A colorful corruption case in China’s seafood region, involving speed boats and cash bribes, has shone a light on the scale of China’s fisheries subsidy regime and how it’s open to abuse by Communist Party officials who administer it.

Wang Ji Shan, former head of the Ocean and Fisheries Bureau in Li Jin County near Dongying on the east coast, has been charged with funneling millions of yuan in licenses and subsidies to the Luxin Ocean Development Co.

Wang has been charged with lending speed boats belonging to the regional Ocean and Fisheries Bureau to Luxin free of charge while also allowing the company build piers and ports in the coastal province of Shandong without going through the normal approval process. The case, which is being heard in Zhuhai, alleges CNY 6.5 million (USD 970,000, EUR 848,000) in subsidies were paid into the Luxin bank account. Another official, Kuang Bo Lin, is charged with funneling CNY 1.34 million (USD 201,000, EUR 175,000) to Luxin from the subsidy fund to promote innovation, using false paperwork.

Also in court, Zhang Da Wei, the boss of Lu Xin Hai Yang, has been accused of illegally collecting management fees from water users, including fishermen. “Blackmail and extortion” by Zhang was made possible due to the “protective umbrella,” offered by Wang, according to court documents. The three men have been found guilty and are scheduled to be sentenced in coming weeks.

China’s network of ocean and fishery bureaus, which ultimately fall under the supervision of the Ministry of Agriculture, are tasked with disbursing funds, implementing aquaculture and fishery regulations locally, disbursing between CNY 60 billion and CNY 75 billion (USD 8.6 billion and USD 10.7 billion, EUR 7.8 billion and EUR 9.8 billion) worth of subsidies, and encouraging innovation in the sector, with a focus on aquaculture.

Despite the corruption scandal, some regional ocean and fishery bureaus are making positive contributions to Chinese fisheries. A monitoring system designed and promoted by the Ningbo bureau won a prestigious national award for creating significant savings in mariculture through the use of artificial intelligence and sensors. Ningbo Ocean and Fisheries Bureau won the Fan Li Science & Technology award for its claims to have cut CNY 372 million (USD 53.2 million, EUR 48.6 million) and cut drug use by CNY 189 million (USD 27 million, EUR 24.7 million) in Ningbo fisheries. The “early-warning system” used sensors to monitor health should be wheeled out nationally, according to Deputy Minister for Agriculture Yu Kangzhen, who presented the award. 

But the potential for graft is ever-present in China, the result of the country’s one-party system and a lack of involvement by foreign players in industries like aquaculture, according to a U.S. corporate lawyer with a 20-year record advising Western clients in China.

“If foreign companies could easily participate in grant-funding, there would be a lot more transparency,” the lawyer, who requested anonymity, told SeafoodSource. “But of course it’s chicken-and-egg, because you won’t get foreign investment unless you have full transparency.”

Under a plan to modernize its aquaculture sector, China is offering investments of significant public money to qualifying projects. One of China’s leading seafood producing regions, Guangxi, is pouring CNY 8 billion (USD 1.14 billion, EUR 1.04 billion) over five years to modernize its seafood sector, a further sign of the state’s vital role in China’s seafood industry.

Local governments in southern China, especially those in poorer regions, see the modernization of aquaculture as a big opportunity. The province of Guangxi is the country’s second-most important shrimp producer, totaling 297,000 metric tons in 2018, and third-largest tilapia farmer, producing 247,000 metric tons. Yet Guangxi is only eighth in processing volume and eleventh in value, and the government hopes its investment will help the region create added value in its seafood production through improved genetics, improved vessels, and a roll-out of recirculating aquaculture systems (RAS) to replace earthen ponds. Some of the funding will go into hiring two teams of aquaculture scientists, and the Ocean and Fisheries Bureau will have a key role in managing the funds.

Even with China’s potential need for help with its effort to modernize China’s aquaculture sector, it remains to be seen whether foreign companies will get easier access to state-funded development programs. The “Phase One” trade deal signed between China and the U.S. last month has started a thaw in relations between the two superpowers, but the agreement didn’t resolve the thorny issue of the U.S. disapproval of China’s generous use of state subsidies to support sectors that are more privatized in the United States. Discussions regarding the outsized role of state-owned enterprises in China’s economy is apparently being left to phase two of the talks. 

Whether companies from the U.S. are able to get involved or not, China’s reinvestment in its marine economy will provide more than enough money to interest foreign suppliers of equipment and systems. Who ends up getting involved, and to what extent, will largely be decided in the next year.

Photo courtesy of Pan Xunbin/Shutterstock

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