Accessing China's Markets for Food and Timber
Tuesday, 22 May 2012 08:51 AM
Monday 21 May 2012, Secretariat of the Pacific Community (SPC), Suva, Fiji - SPC trade project looks at challenges and opportunities
How can the Pacific region's agriculture and forestry industries access the booming Chinese economy and its growing need for food and timber? This is something that the European Union-funded Facilitating Agricultural Commodity Trade (FACT) project is taking a serious look at. Dr Lex Thomson, FACT team leader, visited Beijing in March to explore opportunities for Pacific Island enterprises in consultation with Pacific Islands Trade and Invest's Office in Beijing, China.
High-value, niche markets
In Beijing, Dr Thomson had talks with Mr Sam Savou, Trade Commissioner and head of Pacific Islands Trade and Invest (PT&I) in China. According to Savou, there are opportunities for Pacific exporters to enter high-value niche markets for products such as out-of-season tropical fruits, organic coffee, honey, fish and specialty hardwood timbers.
However, along with those opportunities come a number of challenges such as transport logistics, trade protocols, strong competition from Southeast Asia and the need for excellent marketing.
Currently, high volume, relatively low value, round logs from Papua New Guinea (PNG) and Solomon Islands dominate Pacific Island timber exports. For example, in 2010 approximately 3.4 million cubic metres of round logs with a free-on-board value of USD 393 million was exported from PNG and Solomon Islands, mostly bound for China. The outlook for higher value timber products into China is also very good, especially for sought-after red-coloured, heavy, hardwoods, known collectively as hong mu, ebonies and sandalwood (tan mu).
'There is major market potential and unmet demand for these woods, but current opportunity to export from Pacific Island countries is limited by the supply of mature trees,' says Thomson.
Excellent markets also exist for high value plantation timbers like teak and mahogany, as well as heavy hardwoods from native forests.
However, Savou noted that Pacific Island countries (PICs) need to market more effectively, emphasising the high quality of their timbers with Chinese importers and consumers, in order to receive better returns.
There is also a potentially lucrative and rapidly evolving market for various organic products from the Pacific region. Since the mid-2000s, the domestic Chinese market for organic products has evolved rapidly and is now worth well over USD 1 billion. Less perishable food produce such as chilli paste, honey and coffee have potential, says Thomson.
'For example, a New Zealand honey with a rather low UMF (a highly beneficial antibacterial property) rating was selling for 590 yuan (FJD 163) per kilogram in a high-end supermarket in Beijing.'
PT&I is currently facilitating exports into the coffee market, starting with a single PNG supplier who will supply green coffee beans to a Chinese roaster.
Steeped in tradition, China's herbal medicinal markets may also provide opportunities for Pacific products such as kava and coconut oil. Says Thomson: 'It's worth investigating markets for kava in tablet form or as instant kava, possibly a freeze-dried product from a water-soluble extract, as has been experimentally developed in Vanuatu.' Savou added that noni, a traditional Pacific herbal medicine, is making inroads in the Chinese market.
Thomson also contends that virgin coconut oil has potential in the health food market. However, coconut oil may need to be deodorised or produced in soft tablet form to make it more acceptable to the broader Chinese consumer market.
Savou considers that the export of out-of-season tropical fruits such as papaya and mango has commercial potential in markets in Hong Kong, Beijing and Shanghai during the Chinese winter months of November to March. He pointed to Produce Specialities Limited, which successfully exported papaya to Hong Kong prior to the 2012 floods in Fiji. Outside this winter period, though, PICs would face stiff competition from neighbouring Southeast Asian countries.
There might also be potential for yam exports but this will need further market assessment.
Organic meats such as free-range lamb and pork also have market potential. On a side note, there may be a lucrative market for mongoose meat from Fiji in South China but there is a need to see whether this is legal, as the mongoose sub-species native to China is endangered. The small Asian mongoose is popular food for some Chinese in Fiji.
Fish and seafood exports do well in China. Coral trout (known as donu in Fiji) retails for ten times the Fiji price in China, while bêche-de-mer has a long-established high value market. Going back in history, bêche-de-mer and sandalwood were two products that attracted Europeans and others to the Pacific.
Challenges for Pacific exporters
Pacific Island exporters to China face a number of challenges.
'There is a need to develop a coherent and persuasive argument, giving good reasons for Chinese importers and distributors to buy Pacific Island products (as they will usually be more expensive),' says Savou.
'Pacific exporters should aim for niche and top-end markets, such as for organically certified foods,' he adds.
They should also market match for scale, and select the right importer/distributor, one who is willing to undertake joint marketing campaigns.
The branding of products for niche markets is also essential to enable Pacific exporters to command a higher price for their products. 'On the whole, there is a need to brand the Pacific region first and then the products,' says Savou.
To this end, PT&I is collaborating with China Central Television (CCTV) on a documentary series that will introduce the Pacific region to some 900 million viewers in China.
There is also a need for labelling in Mandarin, as required by Chinese labelling regulations This applies particularly to retail packs.
Another challenge concerns tariffs. Currently, goods from several PICs to China are subject to 15-25% duty, compared to zero duty that the Association of Southeast Asian Nations (ASEAN) enjoy.
Some countries, such as Samoa and Vanuatu, have lower tariffs (around 10 to 15 per cent) and zero rating on about 200 items.
'In addition to this,' Savou added, 'countries must complete bilateral quarantine protocols to facilitate the export of agriculture products and produce where applicable.'
Fiji is currently developing a list of specific products for possible preferential arrangements with China.
'It is vital (for Fiji) that this list includes current traded agricultural and forestry products and prospectively commercially viable items,' says Thomson.
Implemented by the Secretariat of the Pacific Community (SPC), the FACT project works to increase exports of agriculture and forestry products from 14 Pacific members of the African, Caribbean and Pacific Group of States (ACP).