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Exotic fruits yet to reap WTO benefits
2002-12-17
Business Weekly
China's entry to the World Trade Organization (WTO) has brought cheaper foreign fruit to Chinese consumers, but not the big profits many foreign fruit producers and exporters expected.
In Beijing's Sidaokou, the largest fruit wholesale market in North China, the prices of most imported fruit were down by more than 30 percent in early December over the same period last year.
The reduced tariff is thought to be the main reason behind the foreign-fruit price slide.
Before China's accession into the WTO last December, the average import tariff rate for fruits was 40 percent. In the past year, the average tariff has dropped by 30 percent.
However, sales of foreign fruits, especially those from the developed countries like the United States and New Zealand, increased only slightly.
National statistics are not available. But in the wealthy coastal province of Guangdong, fruit imports decreased by 13.6 percent year-on-year to 20.38 tons in the first 10 months of this year. The value of the imports was US$107 million, a 20 percent decline from last year, according to Guangdong Customs.
Guangdong's fruit imports commonly account for 20 percent of the nation's total.
Compared with many foreign exporters who might be disappointed in the Chinese market, Louis Ng, China representative of the Florida Department of Citrus, is lucky.
The citrus organization is in charge of promoting the state's oranges, tangerines, pomelos and especially grapefruit, a variety rarely seen in China. Florida produces more than 50 percent of the global output of grapefruit.
During 2002, some 80,000 cartons of Florida grapefruit were exported to the Chinese mainland and Hong Kong, about 50 percent higher than in 2001.
However, the figure is still less than the citrus department's expectation of 100,000 cartons.
Ng admitted that for foreign fruit exporters, the reduced tariff brought by China's WTO entry is only the first step.
"Foreign fruit dealers have to increase their efforts to build market acceptance of their fruits in China," Ng told Business Weekly.
In late November and early December, the Florida Department of Citrus launched a series of campaigns to promote its products. Besides spreading scientific knowledge of grapefruit, the citrus department also featured several Chinese dishes which used grapefruit as a flavouring.
Florida's citrus department is not the only fruit industry association talking up their produce in China. Reports indicate that seven US fruit industry associations have opened Chinese representative offices in Beijing or Shanghai to promote their produce.
But experts say it is not easy for them to promote their fruit in China, the world largest fruit producer.
"Facing foreign competition, Chinese fruit producers have improved the quality of their products and tried to develop their own brands," said Tang Yanli, a senior analyst with the Information Centre of the Ministry of Agriculture.
Tang says that when imported fruits are sold cheaper, the price of most domestic fruit also decreases, curbing the sales increase of imported fruits.
"Domestic fruits might be inferior to their foreign counterparts in terms of fertilizer or pesticide content, but most Chinese consumers do not take these indicators seriously," Tang told Business Weekly.
Most foreign fruits are sold in big supermarkets while average Chinese consumers are accustomed to buying fruit in street stalls.
The lack of plugged-in dealers and limited storage capacity also dampen the sales of foreign fruit exporters.
Ng said that although China's tariff on fruit began to decrease after its WTO accession, the major importers of foreign fruit are inefficient State-owned companies.
"Some pirated fruit is still impacting the Chinese market, leaving many potential dealers reluctant to be involved in the business," Ng said.
In the Japanese market, chain stores and supermarkets are major importers of grapefruit, but in China, most supermarkets do not directly import goods, even though they are allowed to do so.
Relief from piracy is expected by 2005, when the tariff for imported fruit will be reduced to 12 to 15 percent, making pirating barely profitable. By then, many powerful Chinese operators would have entered the market to help lower the distribution costs of foreign fruit, Ng said.
The insufficient storage capability should be solved at the same time, due to the involvement of the big players, he added.
"On the whole, our grapefruit will be more expensive than domestic fruit, but will offer higher values to consumers," Ng concluded.
Although Chinese fruit producers are fending off foreign fruit importers for now, they are also experiencing a hard time in foreign markets.
Since 1998, annual fruit output in China has been about 75 million tons, but only 160,000 tons of Chinese fruit were exported last year, a mere 2.14 percent share of the total production.
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