China syndrome? It's fish and seafood! Cause for applause from buyers, sellers: aquaculture booming in the Middle Kingdom, with everything from carp to shrimp finding increased markets among more affluent Chinese. But there's also more to export, while imports are also increasing to give consumers more variety in fish and seafood items.

China's seafood production is believed to have reached an astonishing 47 million tons, with nearly 60% of the output coming from aquaculture, according to a report by the US Foreign Agricultural Service (FAS).

Seafood processors' demand for both direct and bonded aquatic product imports continues to rise, and reached nearly $1.9 billion in 2003. But exports were far higher, surpassing $5 billion. China's regulations on product certification and hygiene, the FAS advised, could increase the cost of imported products and impact trade.

The FAS report came out this summer, before the United States imposed punitive, tariffs on shrimp from China and other Asian and Latin American countries. How serious an impact this will have on Chinese exports remains to be seen; but with worldwide demand for shrimp increasing, chances are that the country can find alternative markets.

Although debate continues over China's reported seafood production, current statistics show production increased three percent to 47 million tons in 2003. The domestic market consumed most of the increase, as consumer preference for seafood products remains strong, while some of the production increase was processed and exported. Seafood product trade continues expanding rapidly with 2003 imports of roughly 1.4 million tons and exports of 1.8 million.

Production Increasing, But ...

Expectations for seafood product growth over the next several years are bright as aquaculture production is a priority for the government under the Ministry of Agriculture (MOA) five-year plan for "advantageous commodities." Production increases could slow, however, with greater emphasis on marine environment improvement resulting from fishery and aquatic sector pollution.

Seawater prawn, crab and shellfish production has increased over the past five years, while that for fish has remained relatively stable. Mollusc and crustacean production gains are largely due to increased area and improvements in yield, whereas stable fish production is largely due to government restrictions on catch size and harvest periods, plus efforts to scrap vessels. Over the next several years, increased seawater production is likely for crustaceans and molluscs, but as the seafood industry faces greater food safety scrutiny from trading partners and environmental concerns for water quality rise, growth in seawater prawn, shrimp, crab and other shellfish may slow.

The freshwater seafood product outlook is especially strong. Production has increased for all edible aquatic products over the last several years as rural farmers began raising freshwater fish and other seafood products in ponds and reservoirs for sale to larger, nearby cities. There are also business concerns marketing freshwater fish and other aquaculture products to processors for export, but indications are that some larger scale producers face difficulties due to environmental regulations that some small farmers avoid.

China's freshwater catch has increased slightly, thanks to catching season restrictions along some rivers that have 'allowed fish to reach full maturity and larger weights. Freshwater and seawater aquaculture combined encompassed 6.8 million hectares (68,000 square kilometers) as of 2002, an area nearly the size of West Virginia or Ireland. Most of this area consists of man-made ponds, reservoirs and coastal tidal basins. Carp are still one of the most common freshwater fish cultured, but there has been significant production of other freshwater varieties including tilapia, shrimp and prawn along with other shellfish. Catfish farming exists, but remains small and is growing slowly in comparison to other varieties.

Consumption Still Growing

Urban and rural per capita consumption of seafood products continues to grow. MOA officials cite a recent UN Food and Agriculture Organization (FAO) study that forecasts consumption will increase 80% in the next five years. Concerns over avian influenza turned consumers toward fish tanks at restaurants and seafood sections in markets during the first few months of 2004.

China's National Statistics Bureau (NSB) indicates urban aquatic product consumption increased 25.5% from 1998 to 2002, while rural consumption increased 13.7%. Further increases are probable as urban and rural residents gain greater access to fresher and higher quality products through improved distribution and greater purchasing power.

The highest seafood consumption is in coastal provinces, suggesting that much of the increase is from seawater (and brackish water) caught and cultured products. Many of these are from domestic production increases as there are few processed seafood imports in many of these relatively affluent coastal areas. However, as consumption increases in coastal urban centers, it is likely that more people there will be willing to try imported seafood products.

Nationwide urban seafood product expenditures averaged slightly over two percent of total income and nearly 7.5% of total food purchases. Although Shanghai residents spend the highest amount per capita, they rank fourth behind folks in Fujian, Zhejiang and Hainan in percentage of total food expenditures for fish and seafood. Consumption of aquatic products is greatest among the upwardly mobile and wealthy urban populations. The difference between the wealthiest urban segments of the population and the lowest-income groups is a factor of 2.5 for fish and 6.8 for shrimp. "Poultry is the only other food category where consumption from the lowest to wealthiest urban groups is of a factor greater than two and one-half.

China's 2003 seafood product exports surpassed $5 billion, with a trade surplus of more than $3 billion. Frozen shipments last year included 411,648 tons of whole fish, valued at $453.8 million; and 502,158 tons of fillets, valued at $1.163 billion. Much of the rest--especially shrimp and other crustaceans (156,735 tons, $614.7 million) was probably frozen.

A large portion of exports is from bonded trade, which can enter China tariff- and VAT-free for processing and re-export under the 1994 Interim Provisions on Export Tax Refund. However, as seafood consumption patterns continue developing, imports of processed products and higher value prepared and prepackaged products may enter China for domestic consumption.

Hong Kong re-exports of seafood products to China have remained stable at roughly $213 million for the past three years. Hong Kong re-exports of aquatic products to the United States have also remained stable at around $51 million (mostly chilled, frozen and packaged shrimp and prawns).

Year to date imports for January to April 2004 were 14% higher owing to a large increase in frozen fish and fish products (cod, plaice, roe and livers) and mollusc products from the United States. Russia, North Korea, the United States, Japan and Canada were the top five suppliers of fishery and aquatic products to China in 2003--each with over $100 million in landed value and a combined 65% of total import value.

As consumer income has grown over the last five years and processors have ramped up capacity, imports have increased from nearly $700 million to over $1.8 billion. These include 1,077,870 tons of frozen fish, valued at $1.195 billion--much of which may have been made into fillets and re-exported.

The primary import locations are Qingdao and Dalian (major seafood and aquatic producing and processing centers). Frozen cod imports remain one of the most important varieties for Chinas processing sector. Other imports of significance include frozen Pacific Salmon, plaice, yellow croaker, scabber, hairtail/ribbonfish and tilapia. Mollusc imports like cuttlefish and octopus are important, as well, for the processing sector and domestic consumers.

China reported $133 million in seafood imports from the United States in 2003; including plaice ($43 million), cod ($25 million), fish livers and roe ($14 million), Pacific salmon ($12 million), and loligo squid (about $8 million). US trade statistics, however, list total exports at $176 million for the 2003 calendar year, indicating most product was "other" seafood ($113 million), crab and meat ($25 million) and salmon ($17 million).

Year to date exports for January to April 2004 are 27% higher than a year earlier. China's aquatic product exports to Japan averaged approximately $2 billion a year for the past four years. Although Japan is by far the largest export destination, volume there is relatively stable. Exports in the past five years to the US, South Korea, Hong Kong, and Germany have risen to nearly $1 billion, hitting $665 million, $316 million, and $185 million, respectively, in 2003.

Processed fillets and other value-added seafood product exports leave China from the northern ports of Qingdao and Dalian, while most other products (frozen, chilled, etc.) leave from central and southern China ports including Ningbo (primarily shrimp and prawn), Fuzhou (processed freshwater eel) and Shenzhen and Zhanjiang (processed and frozen prawn and shrimp).

China's Ninth Fisheries and Seafood Expo, along with the Aquaculture China Expo, are scheduled for November 2-4, 2004, in Qingdao.