Table of Contents

I. INTRODUCTION

II. SUPPLY AND DEMAND TRENDS

III. FACTORS AFFECTING DEMAND

IV. MARKET ACCESS, ISSUES AND CONSTRAINTS

V. PROSPECTS AND CONCLUSIONS

I. INTRODUCTION

1. At its First Session in Pattaya, Thailand in May 1998, the Sub-Group, in recognizing the importance of identifying new markets to expand trade in tropical fruits, particularly the less traded fruits such as lychees and longans, requested the Secretariat to extend its market research to China. This document reports the salient features of a market survey undertaken in conjunction with the College of Economics and Management of the China Agricultural University¹ on the market for fruits in China with a special emphasis on tropical fruits other than bananas. Secondary data from national and provincial statistical yearbooks, working reports, newsletters, articles, and newspapers were also used in this report.

II. SUPPLY AND DEMAND TRENDS

a) Production

2. Production of fruit in China grew dramatically at an average annual growth rate of 11.3 percent between 1978 and 1997. Between 1985 and 1997 the annual growth rate actually reached 13.1 percent, when areas under orchards expanded by 10 percent annually from 2.8 million hectares in 1985 to 8.6 million hectares in 1997. In 1997 fruit production reached 50.9 million tonnes, making China the largest fruit-producing country in the world. The main reasons for this surge in output were: the termination of the government's purchase quota system in 1984, and the motivation by growers to achieve higher profits as the policy on collective farming was changed to reward individual enterprise. The major tropical fruits produced in China include bananas, lychees, longans, pineapples, pomelos and mangoes. However, collectively they account for less than 10 percent of production. Apples, citrus (mainly mandarins), pears, grapes, and persimmons dominate fruit production in China (Table 1). Production of major tropical fruits by region is shown in Table 2. Other tropical fruits including carambola, papayas, and guavas are also produced, mainly in the southern provinces, but in smaller quantities.

b) Trade

3. China is a net fruit exporting country. In 1997, it imported 691 421 tonnes of fruit worth US$ 210 million and exported 910 356 tonnes valued at US$ 542 million (Table 3). Both exports and imports have increased rapidly in recent years. Generally, China exports temperate fruits and imports tropical fruits. However, a significant quantity of tropical fruit (38 percent of the total fruit shipped) is also exported. Mandarins, apples, pears and apricots were the dominant exports, while bananas, longans and longan pulp, mangoes and mangosteens were the major imports.

4. In 1997, tropical and subtropical fruit imports by China were valued at US$ 192.5 million, almost exclusively fresh and dried fruit (Table 4). Processed products made up just 1 percent, by value. Most of the imports were bananas (85 percent), mainly from Ecuador (53 percent) and the Philippines (21 percent). Larger purchases of bananas were mostly responsible for the surge in imports in recent years. Other imported tropical fruits included longans and longan pulp (6 percent), mangoes and mangosteen (4 percent) and pineapples (3 percent) imported mainly from the Philippines, Thailand and Indonesia as well as small quantities from 25 other countries. As for processed products, the bulk of these were juices from the United States, Brazil and Australia, as well as small consignments from 24 other countries (Table 5). Hebei, Liaoning, Guangdong and Shandong Provinces, followed by Shanghai and Beijing dominated market shares of imported fruit.

c) Apparent consumption

5. Tropical fruit consumption in China is concentrated in the southern regions where these fruits are cultivated or originate from cross-border trade with Viet Nam and China, Hong Kong Special Administrative Region². Pineapple is the only tropical fruit, apart from bananas, which is consumed nationally. There are many reasons for this consumption pattern, the main ones being:

• first and foremost, the price factor: domestically produced fruits are usually cheaper than imports. Hence, consumption is predominately of temperate fruits in the north and of tropical fruits in the south;
• availability: domestic production of tropical fruit is restricted by climate, while imports are limited by foreign exchange restrictions as well as relatively high tariffs;
• consumer preference: consumers in the south are accustomed to eating tropical fruits, while in the north they are used to consuming temperate fruit; and
• infrastructure: until the early 1990s, a severe lack of post-harvest and transportation infrastructure resulted in substantial post harvest losses and restricted distribution.

6. A household survey conducted by the State Statistical Bureau between 1995-1997 in urban areas showed annual per caput consumption of pineapples was 0.3 kg yearly, longans 0.3 kg and lychees was 0.5 kg, compared to mandarins 4.3 kg, oranges 1.4 kg and bananas 2.2 kg. As for processed products, canned fruit is the most popular item followed by juices, then jam.

III. FACTORS AFFECTING DEMAND

a) Population

7. The population growth in China is currently 1 percent per year, and differs from province to province (e.g. negative in Shanghai). Provinces with high per caput fruit consumption were usually those with lower population growth rates (except Guangdong and Fujian), while provinces with lower per caput fruit consumption were those with high population growth rates. These provinces have the greatest potential for expansion, but much will depend on their economic development.

b) Incomes and prices

8. In the last twenty years, the Chinese economy has developed rapidly with real annual GDP growth rates averaging 9.8 percent. Chinese foreign trade has also grown rapidly and the country now ranks among the top 10 trading countries in the world. Per caput income has also grown rapidly over the last decade, 4.1 percent for rural and 5.7 percent for urban households yearly between 1985 and 1997. During the same period average annual total consumption of fruit increased from 11 kg per head to 41 kg, of which tropical and subtropical fruit accounted for 14 kg.

9. There is a positive relationship between income and fruit consumption. The 1998 Statistical Yearbook shows per caput consumption of the highest income group in China was more than twice that of the lowest income group. However, the higher the income the less responsive was fruit consumption to changes in income. In other words, the per caput fruit consumption levels of the higher income groups were approaching saturation. Other surveys suggest that as incomes of these groups continued to increase, their demand shifted to non-food items such as electronic goods while some of their consumption of temperate fruits was substituted by generally higher-priced tropical fruits perceived as superior goods. The income elasticity of fruit demand for the highest income group was found to be 0.3202 compared to 0.8985 for the lowest income group (Table 6). Therefore, the greatest potential for significant expansion in consumption would rest with the lower income groups, while substitution effects could lead to some increase in consumption of tropical fruits among the higher income groups.

10. As for prices, the dynamic growth of fruit output has dampened prices considerably. Taking 1978 as a base year (1978=100), the general price index in 1997 was 38.3 percent more than the fruit price index (Table 7).

c) Consumption habits and preferences

11. Consumer preferences have changed over time with rising income levels and improvements in living standards. With greater availability (domestically produced as well as imported), the popularity of tropical fruits has grown and consumption trends are upward. This development has been enhanced by better distribution systems. The most successful example is the banana distribution system. Bananas can now be found in markets throughout the country. Similarly, the outlets for pineapples are growing and occasionally other fruits like durians, mangosteens, and avocados may be found in markets throughout the country. Chinese consumers are also known to purchase high priced imported fruit out of curiosity. However, repeat purchases tend to be rare, unless prices are significantly reduced.

d) Promotional activities

12. As incomes have grown, consumers have become more discerning, particularly in urban areas and are demanding better quality and a greater variety of fruits. This has triggered activities to establish market positions, including through the use of brands, to convey the perception of quality. A great number of fruit producers and distributors have recently established commercial brands, and this has led to greater use of television and newspaper advertising, in-store promotion, etc.

e) Seasonality

13. Although considerable progress has been made in dealing with seasonal surpluses of fruit, this problem in China continues to command attention because of the rapid growth of output, short peak harvesting periods and an inadequate post-harvest and transport infrastructure. Efforts are therefore continuing to develop fruit-processing and improve cool storage facilities. A market survey of the Beijing fruit market, conducted in January 1999, provided some indications regarding price levels and seasonal availability of fruits (Table 8).

IV. MARKET ACCESS, ISSUES AND CONSTRAINTS

14. Formerly, the market for domestic commodities in China was not fully integrated. Items produced in one region were not necessarily sold in another. The movement of fruits in the domestic market is now much freer, but import tariffs are relatively high (Table 9). Tariffs on imports are levied on general or Most Favoured Nation (MFN) bases, while the export taxes on fruit have been removed. Sanitary and phytosanitary regulations are minimal.

V. PROSPECTS AND CONCLUSIONS

15. On the demand side, fruit consumption is expected to continue to rise with population and income growth. However, in the short run the current global economic slowdown could dampen growth particularly for imported fruits and those perceived as luxury items. Moreover, with growing supplies of domestically produced fruits and declining prices, market competition is likely to intensify. However, over the longer run, there is considerable potential for growth in consumption, particularly in provinces where current per caput consumption levels are low. As regards tropical fruits specifically, greater marketing efforts will be required to target lower income groups as their income levels begin to rise. In the higher income groups there is scope for some substitution of temperate fruits by tropical fruits, but the full realization of this potential will depend on the success of promotional activities and heightened perception of quality. Rapid expansion is expected in the consumption of processed fruit products, particularly juices, as income growth resumes after the current economic difficulties, and consumers are attracted to the convenience factor of such products. All in all, the market for tropical fruits in China looks promising. There are opportunities also for imported tropical fruits but it is advisable that exporters create strategic alliances with Chinese importers before embarking on major exporting efforts.

ANNEX

TABLE-1

Table 1. Production of fruit in China 1978-1997
Year	Total Fruits	Apple	Citrus	Pear	Grape	Banana	Pineapple	Jujube	Persimmon	Other
(1,000 tonnes)
1978	6 570	2 275	383	1 517	104	85		349	716	1 141
1979	7 015	2 869	555	1 438	126	74				1 953
1980	6 793	2 363	713	1 466	110	61	75	372	560	1 073
1981	7 801	3 006	798	1 593	148	126		398	506	1 226
1982	7 713	2 430	939	1 755	186	201		426	482	1 294
1983	9 487	3 541	1 296	1 795	247	207		387	553	1 461
1984	9 845	2 941	1 499	2 100	294	300		439	608	1 664
1985	11 639	3 614	1 808	2 137	361	631		432	680	1 976
1986	13 477	3 337	2 548	2 348	442	1 251		545	656	2 350
1987	16 679	4 264	3 224	2 489	641	2 029		572	761	2 699
1988	16 661	4 344	2 560	2 721	792	1 830		520	733	3 161
1989	18 319	4 499	4 561	2 565	874	1 404		454	650	3 312
1990	18 744	4 319	4 855	2 353	859	1 456	463	423	625	3 391
1991	21 761	4 540	6 333	2 498	916	1 981	429	449	642	3 973
1992	24 401	6 556	5 160	2 846	1 125	2 451	442	488	724	4 609
1993	30 112	9 031	6 561	3 217	1 355	2 701	455	523	789	5 480
1994	34 998	11 129	6 805	4 043	1 522	2 898	485	650	827	6 639
1995	42 146	14 008	8 225	4 942	1 742	3 125	539	782	969	7 814
1996	46 528	17 047	8 457	5 807	1 883	2 536	493	779	1 025	8 501
1997	50 893	17 219	10 102	6 415	2 033	2 892	527	936	1 075	9 694
Source:

1. Economic Statistical Data of Chinese Countryside 1949-1986 (Zhongguo Nongcun Jingji Tonnegji Daquan 1949-1986), Edited Plan Division, MOA

2. China Statistical Yearbook, various issues

3. China Agricultural Yearbook, various issues

4. China Agri. Statistical Yearbook, various issues

TABLE-2

	Table 2: Total fruit production and tropical fruit production by province (1997)
		TOTAL	of
	Region	FRUITS	which:	Bananas	Pineapple	Longan	Lychee	Pomelo	Mango
						'000 tonnes
	Total Production	50 893.2		2 892.3	527.3	565.5	695.6	319.1	36.9
	of which:
	Chongqin	607.2		1.4	...	na	na	-	-
	Fujian	3 343.4		571.1	49.7	100.3	118.0	150.7
	Guangdong	4 144.8		1 334.2	251.8	326.7	409.5	-	-
	Guangxi	3 155.2		685.5	79.5	137.6	162.0	152.0
	Guizhou	251.4		10.4	-	na	na	-	na
	Hainan	398.9		188.5	113.5	.9	6.1	-	36.9
	Hunan	1 532.1		-	-	-	-	16.4	-
	Sichuan	1 851.3		7.1	...	na	na	-	na
	Yunnan	660.2		94.0	32.6	na	na	-	na

Source: author's collection

Note: "na" = not available; "..." = the figure less than 0.1 statistical unit.

TABLE-3

Table 3. Fruit trade of China (1995-1997)
	UNIT	EXPORT			IMPORT
		1995	1996	1997	1995	1996	1997
Fruit (total)		636 320	716 002	910 356	224 486	624 871	691 421
Fresh and dried	Tonnes	435 613	506 321	649 433	216 798	611 126	676 590
Processed		200 707	209 681	260 923	7 688	13 745	14 831
Fruit (total)		471.56	473.52	542.06	74.59	187.72	210.64
Fresh and dried	Million US$	270.51	253.20	294.25	67.46	179.05	200.46
Processed		201.05	220.32	247.81	7.13	8.67	10.18

Source: Agri. Information Analysis and Research edited by Information Centre of MOA 1998No.20

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^{1 A report on the tropical and sub-tropical fruit market in China by Mr. He Xiurong of the College of Economics and Management, China Agricultural University has been tabled as document CCP: BA/TF CRS 7.}