Chinese demand changing terms of global competition for seafood

Mark Godfrey warns of pressure on both the price and global supply of seafood as ambitious Chinese fisheries companies scour the seas to secure stocks for consumption and export

PUBLISHED : Friday, 22 August, 2014, 4:30pm
UPDATED : Saturday, 23 August, 2014, 1:38am

Anyone who visits supermarkets and restaurants in Beijing or Shanghai will have noticed the increased internationalisation of China's seafood tastes and supplies. Consumers can now choose from Argentinian red shrimp, cod steaks from the North Atlantic, ribbonfish from the Indian Ocean - all caught, packaged and distributed by companies like China National Fisheries Corp and Shanghai Fisheries General Corp (Group).

Chinese seafood companies like the Beijing Four Seas Flourishing Fish Co, which markets its "organic deep sea" Argentinean shrimp in Beijing supermarkets, are going overseas to replace increasingly scarce local stocks. My visits in recent years to eastern port cities like Yantai , Qingdao and Weihai reveal an alarming shortage of fish in China's territorial waters.

The authorities impose an annual three-month ban on fishing in the Bohai and Yellow seas. As the ban comes to an end this month and fishermen go back to the sparse local seas, China's port cities have set their sights much farther away.

The term "long distance fisheries" has become a favourite of officials in cities like Qingdao and Weihai in Shandong province. A blueprint published by Qingdao's government in 2012 titled "Accelerating the development of long-distance fishing" encourages local fishing fleets to go to waters in Africa, Latin America and, increasingly, the North Atlantic to bring back catches of squid, shrimp and fish for Chinese dining tables and for the country's giant fish processing industry. Qingdao's Ocean and Fisheries Bureau boasts that the city now has 20 long-distance fishing companies with "51 vessels and 24 more under construction".

What China is doing is similar to what was done in the 1960s and 1970s by the Spanish commercial fishing fleet, which sailed a giant fleet around the world to secure fishing stocks for Spanish fish processors and exporters. And, like the Spanish, Chinese firms are buying peers in Latin America and North Africa (Morocco) in order to secure the licences for certain waters as well as bases from which to process and ship onwards.

Cases in point include acquisitions in Argentina and Morocco by the state-run Shanghai Fisheries General Corp (Group). Its subsidiary, Shanghai Jinyou Deep Sea Fisheries Co, this year completed the purchase of Altamare SA, a shrimp and fish catcher and processor in Puerto Madryn, in the Argentine region of Patagonia.

Jinyou paid US$21.5 million for the Argentine firm as part of the company's stated strategy to "go global" and buy fishing companies and resources around the world.

With annual revenues of almost 5 billion yuan (HK$6.3 billion), 30 subsidiaries fishing and processing around the globe, Shanghai Fisheries claims it has been seeking to further expand its fishing operations in Morocco and South America.

Meanwhile, several state and privately owned fishing firms in Fujian province have been seeking to widen their nets in Africa. Ground was broken this summer on the China Africa Fisheries Cooperation Project in the Langqi special economic zone, a suburb of the provincial capital, Fuzhou . Officials from 15 African countries were flown in recently to mark the opening of the project, set to be run by the China Africa Fisheries Union, a body managed by Chinese fisheries companies with fleets in African waters.

The union was founded in December 2012 "to develop African marine fisheries resources, for the development of China-Africa trade of fisheries and to promote China-Africa marine fisheries cooperation and exchange platforms for the purpose of international trade".

China has some unique strengths to compete for international fishing resources. These include government support in negotiating access, as well as access to cash for the likes of Shanghai Fisheries, which did not suffer the credit crunch after the financial crisis that hurt some of its Spanish peers.

Likewise, a glut of shipbuilding capacity in China has made it easier for Chinese fishing companies to secure new vessels on favourable terms.

China's rush to build more vessels and capture more resources will continue as Chinese domestic consumption of seafood resources rises. According to data published by the UN's Food and Agriculture Organisation, China's per capita consumption of seafood is expected to grow from the current average of 36kg to close in on the Japanese and Korean averages of more than 50kg.

China's growing scale in both sourcing and consumption of seafood will mean tighter supply and rising prices for everyone - the same way that rising Chinese demand increasingly moves global prices for other commodities like soya and grain.

But one less predictable factor will limit China's ability to seize global fishing resources. As prices for fish and fishmeal rise, countries with major seafood resources will start to extract better value for those resources. They are likely to do so by clamping down on illegal fishing - something that Chinese fishing companies have been accused of by bodies like the European Commission.

The commission is one of several forces (the OECD, and Canadian and US governments are others) pushing for a more transparent regime of tracing fishing by international fleets. Chinese fishing companies can expect stricter requirements to show documents for the precise amounts and locations of catches in order to access markets like the EU and US.

"It will take a decade but it will happen," said one EU official in Beijing. One wonders how the regulations will be implemented in the context of rising domestic Chinese consumption, where the same stringent requirements may not be necessary.

There is another factor to consider for cities like Qingdao and Fuzhou, which seek overseas fishing resources to supply demand and also drive processing jobs at home: they may have to compromise on their ambitions. That's because island nations like Fiji and Papua New Guinea - which have limited fleets but large presences of tuna and other sought-after fish - are seeking Chinese help to build processing plants and ports to create jobs locally, so these jobs may not go to China.

The rising scale of China's seafood consumption and production puts it in a strong position to dictate terms as it scours the world for fish, shrimp and squid. But there may not be enough fish in the sea to go round, and that means fish in supermarkets everywhere will get dearer.

Mark Godfrey writes about the seafood trade in China for US-based