Even as inflation remains persistent in Western economies, China may be entering a period of deflation due to weak consumer spending and dwindling demand for imports and exports both globally and locally.
China’s overall imports fell by 6.8 percent year-over-year in June, following a 4.5 percent decline in May. Exports dropped by an even more drastic 12.4 percent in value, according to data from China’s customs administration, but exports in H1 2023 rose 3.7 percent by value. Chinese factory gate prices for exports showed the fastest rate of deceleration since 2016.
While data signaling deflation and weak consumer demand is potentially bad news for seafood exporters, there are some pockets of demand in the country. Shanghai customs authorities reported a 41.9 percent rise in the value of seafood imported into the city’s ports in the first five months of 2023 compared to the same period of 2022. Imports in the period totaled CNY 10.9 billion (USD 1.52 billion, EUR 1.30 billion), with imports of king and snow crab totaling 1,500 metric tons (MT), a historical high.
The surge in Shanghai’s king crab imports appears to sync up with a broader jump in Sino-Russian seafood trading in 2023. China’s trade with its northern neighbor rose 41 percent year-over-year in the first five months of 2023, according to Chinese customs authorities. Russia had a USD 8 billion (EUR 7.1 billion) trade surplus with China, with total trade between the two amounting to USD 93.8 billion (EUR 83.4 billion) in the period.
Overall food prices in China rose 2.3 percent year-over-year in June, largely driven by higher vegetable and poultry meat prices, while non-food prices fell by 0.1 percent, according to data published by the National Bureau of Statistics. Seafood prices, meanwhile, fell by 2.8 percent year-over-year in June.
The seafood-consumption hub of Guangzhou reported prices for a composite basket of five fish species, including tilapia, carp, and ribbonfish, was up 0.19 percent year-over-year and down 0.03 percent month-on-month.
Seafood prices tend to fluctuate in summer months as the country’s annual domestic fishing ban goes into effect. However, shrimp and crayfish grown in the country’s aquaculture facilities start to arrive at marketplaces during this time.
Consumer demand for seafood is solid for cheaper products, according to Olivier Nikolovski, the head of Ocean Treasure, a Nantong, Jiangsu-based company that sources seafood from Chinese factories. Nikolovski said exports are “quite stable.” The local market is tepid, though, due to worries among Chinese consumers about a recession.
“People feel there’s a recession coming, that there’s still not a full recovery; thus, more people are saving than are spending,” he told SeafoodSource.
International investors have issued their own warnings on the state of the Chinese economy, with a Goldman Sachs report cutting ratings on some Chinese bank shares, angering Chinese policymakers.
In response to the growing concern, Nikolovski said there has been increased emphasis on value-added products in the Chinese consumer marketplace. The rise of processed, ready-to-go meals compared to dining out in China will continue due to economic uncertainty.
This rush for value will also buoy demand for Russian fish in Chinese factories, both for export purposes and domestic consumption, Nikolovski said.
“It’s very difficult to avoid Russian raw materials as it remains the cheapest product,” Nikolovski said.
While it still remains overwhelmingly reliant on Western markets to meet its seafood demand, China continues to widen access to alternate suppliers for its food imports, with a recent emphasis on African imports. Changsha, China-based Jinzai Foods Group recently shipped what it said were the first imports of Kenyan anchovies into China from a plant the company built in Kenya last year.
In early July, the third annual China-Africa Trade Expo and Economic Cooperation summit and trade fair reported that China imported CNY 16.1 billion (USD 2.3 billion, EUR 2 billion) worth of African agrifood and seafood products in the first five months of 2023, a 26.5 percent year-over-year increase. The figure remains modest in the context of the shipments from China’s major suppliers of agricultural commodities; Brazil exported CNY 78 billion (USD 10.9 billion, EUR 9.3 billion) worth of grain, oilseeds, and meat products to China in 2022.
In an effort to stimulate economic activity, the Chinese government is hoping to boost investor confidence in its troubled e-commerce sector, which it hopes will play a bigger role in the economic and social development of the country.
China has also aimed to welcome some foreign investment, but there remains a reluctance to travel there amongst many in the international business community. The U.S. Department of State recently issued a fresh travel advisory telling American citizens to “Reconsider travel[ing] to Mainland China due to the arbitrary enforcement of local laws, including in relation to exit bans, and the risk of wrongful detentions.”
Photo courtesy of Ocean Treasure
