China's dominance in fisheries
by Uwe Hoering, November 2013
Once upon a time, China had the mightiest and most modern fleet in the world. Under Admiral Zheng He, expeditions in the early 15th Century reached East Africa. But then the emperor decided to withdraw from seafaring. The ships were mothballed and scrapped, leaving the oceans to others like the European colonial powers. Today, China has again built the biggest fleet in the world, this time for fishing and looking for hunting grounds all around the world.
At the China Fisheries & Seafood Expo, which took place in early November in Qingdao, there was a new visitor’s record. Business with fish, shrimp, lobster and other seafood is booming. „Selling seafood in China is not the biggest challenge for Chinese seafood buyers", one exhibitor summed up the situation, "finding enough seafood to sell is!“.
China is the world's largest fish producer and global leader in fish exports. In the past decade, the domestic per capita consumption has doubled. "Understanding the development of Chinese fish production, consumption and trade is thus of global relevance for understanding the future of wild fish stocks, marine ecosystems and consequent food security challenges," says a report for the European Parliament.
In the People's Republic of China annually more than 60 million tonnes of fish are produced and landed according to official figures, about 40 per cent of the world's registered catch of 154 million tons (2011). About two- thirds of this comes from aquaculture. According to FAO data, last year more than seven million hectares in China were fish farms, nearly a million hectares more than in 1999. Their production in the same period increased by 30 per cent.
Chinese fishermen catch about 16 per cent of wild fish, some 15 million tons a year, thus contributing strongly to the overfishing of the oceans. Less than ten per cent of this - about 1.2 million tons - were from areas outside their own territorial waters, according to the Ministry of Agriculture, which is responsible for fisheries. In 2007, the government reported 289,000 motorized fishing boats to the FAO, the deep-sea fleet was estimated at about 1,900 trawlers. After the privatization of fishing, the Chinese state enterprise National Fisheries Corporation and its subsidiaries still account for about one-third. A study by the University of British Columbia counted the presence of Chinese vessels, „probably the largest border fishing fleet in the world“, in the Exclusive Economic Zones of 93 maritime countries and in Antarctica.
In addition, China's fisheries sector is subsidized with billions. According to the Ministry of Agriculture in Beijing in 2012, the state provided the equivalent of about three billion Euro for fuel costs for the fleet, an increase of more than 60 per cent over the previous year. In this case, the support for the fishing industry would be significantly higher than direct subsidies to grain farmers.
The numbers game
However, there is reason to suspect that the information reported by the Chinese authorities to the FAO does not reflect the true picture – with China not being the only country with ‘creative accounting': While the data on catches in the Yellow Sea, the East and the South China Sea and the Gulf of Bohai, claimed by the government in Beijing to a large extent as their territories, are considered excessive, figures about the catches in the other regions of the world are considered to be too low. A recently released study by the University of British Columbia estimates, based on the capacity of the deep-sea fleet for example, that the value of catches in reality is more than ten times higher: Looking at mainland China only, excluding Hong Kong with its own fishing fleet, between 2000 and 2010 Chinese trawlers caught outside of their territorial waters around 4.6 million tonnes of fish valued at 11.6 billion U.S. Dollar, of which about 3.1 million tons were fished in waters off West Africa - four times as much as officially announced.
Richard Grainger, chief statistician at the FAO, disputes these figures as far too high, citing a study by the University of California from 2009, which estimates the volume of unreported fish taken from West African waters as only 560,000 tons.  It is undisputed however, that Chinese authorities are "extremely secretive about their fisheries," as Dirk Zeller, one of the authors of the study from the University of BC, says. The European Commission too, which is proud of its own reform of European fisheries policy and the fight against illegal, unreported and unregulated fishing (IUU), complains in its report to the European Parliament about "frequent opposition to any change of IUU rules" and " lack of transparency" with regard to agreements concluded by China with other countries.
On these foundations, China has now become the largest exporter of fish products, followed by Norway and the EU. With exports amounting to 13.3 billion U.S. Dollar (3.2 million tons) in 2010, it had a share in the world trade of twelve per cent, ten per cent of which went to the European Union. 2011, exports had risen to 17.1 billion U.S. Dollar.
With imports of 4.5 billion U.S. Dollar (2.5 million tons), mainly from Russia and the United States, the trade surplus rose in 2010 to 8.7 billion U.S. Dollar or 6.6 billion Euro. Although China imports only about one fifth of the quantities imported by the EU, it is the fourth largest importer - with the highest growth rates.
In addition, China is expanding its own logistics and processing industry, for example in Shandong Province with the city of Qingdao, and in Liaoning province east of Beijing. Several large logistics projects offer improved port handling and cold chain logistics for seafood distributors. One of them is the Qingdao Aquatic Trade and Logistics Centre Project, which will be the most important international trade centre for fishery products in Northeast Asia with an estimated cost of 1.25 billion Euro set up on an area of 400 hectares. Already, Qingdao is China's leading trade and processing site in the "ocean economy", as city officials proudly claim.
Demand and supply
The per capita consumption of fish in China in 2009 was just under 32 kg or about twice as high as the world average - and it will grow further by 26 per cent till 2022, according to a forecast by the FAO, created together with the Ministry of Agriculture. However, price increases are already a signal that it is increasingly difficult to meet this demand. At the same time the expanding processing industry with its strong export orientation requires constant supplies.
The aquaculture industry is increasingly faced with problems. Fish farmers complain that they cannot keep up with rising land prices. In regions such as Fujian, Guangdong and Zhejiang, focal points of the aquaculture industry, there is a constantly growing demand for land by industries and cities. The consequences are higher lease rates and early termination of leases. Too, wages and other production costs have risen significantly. Fish farmers, like agricultural farms, face difficulties to get credit. China's largest commercial banks have continued to shrink their overall rural branch networks. While supposedly the countries top agricultural lender, der Agricultural Bank of China takes 40 per cent of its deposits in rural areas but hands out only 30 per cent of its loans in rural districts. Additionally, there seem to be significant production losses this year, caused by storms and the Early Mortality Syndrome (EMS), a bacterial infection.
In response to this development, the government supports modernization and efficiency improvements. One example is the Qianlong Aquatic Breeding Cooperative in Shishi, a small town near the seafood processing hub of Xiamen in Fujian province: Pooling the land of twenty local shrimp farmers, the privately managed cooperative breeds and processes prawns on contract for two larger firms - both with export licences. The benefits of increased scale and professional management allow producers to secure stable prices and contracts with customers, including retail chains. Also, the quality of Chinese products seems to be improving: While there have been numerous complaints about imports from China earlier, the EU admits that significant progress in food safety has been achieved.
Protection at home
Another problem apparently is over-fishing in the territorial waters of the China Sea, promoted by modern methods for locating schools of fish and by small-meshed nets. Fishermen complain of rising costs and declining catches. Pollution and coastal development destroyed spawning grounds slowing down renewal of stocks.
Officially, the decline in catches in the late 1990s led to a rethinking: The policy declared “zero growth” and even “negative growth” as an objective. An action program for the protection of resources (Program of Action on the Conservation of Living Aquatic Resources of China, 2006) was developed. Fishermen were retrained and relocated, fishing boats reduced. However, reports suggest that still far more funds are provided for the expansion and modernisation of the fleet and ports, compared to the protection of fish stocks.
Buyers with a thick wallet
The appetite of consumers and the processing industry is driving Chinese buyers now to all corners of the world - given the purchasing power in the domestic market with pockets full of money.
In Ecuador, for example, a local industry representative complained that the "insatiable" demand from Asia “takes shrimps out of suppliers hands before it can even make it into the freezer." Despite high and rising prices for shrimp, Ecuador's exports to China have skyrocketed. Local processing plants would therefore have supply problems, decreasing the value added in the country itself. According to Undercurrent News, the production of Promarisco, one of the biggest shrimp exporters in Ecuador, has been steadily dropping over the past few months. In March it exported only 2.17 million pounds – barely a fifth of its processing capacity.
There is Chinese dominance in Mexico's fishing industry too: Cash-rich Chinese buyers offer cash up front to Mexican fishing fleets, often via grants of millions of dollar to the local fishermen's unions, according to Raul Cortes, export sales executive at the Cortez Group. Lobster is particularly sought after. Similar reports come from Venezuela.
In India, where in some regions storms have also affected the shrimp production, traders enjoy significantly higher prices too paid by Chinese buyers. In Vietnam, where in recent months the Chinese purchases "considerably" increased, there are considerations to introduce a 10 per cent tax on shrimp exports to protect domestic processing plants.
For Canada, the Chinese market has become more important than Europe. In January 2013 alone, the Canadian province of Nova Scotia exported around one million kilos of lobster to China due to the Chinese New Year in mid-February. The Company Kingdom International, based in Germany, plans to ship 100,000 kilos of lobster every month from Morocco, Somalia , Senegal , Madagascar and other African countries to China. "The demand is amazing," says CEO Eidris Kitao, buyers are willing to pay a multiple of the normal price. To satisfy the demand, 500 divers in twelve countries shall be trained.
The illegal trade flourishes too: In Mozambique's Inhambane province traders buy shark fin and manta ray, according to a report in the Guardian, for export to Asia. Chinese companies are providing better nets and boats. Inhambane is a diver's paradise, but since the stock is declining, there is growing concern about negative impact on tourism. And Mozambique has only two patrol boats to control the long coastline.
At the same time, China pursues a strategy to compensate for declining catches in their own waters by a further expansion of deep-sea fishing and agreements with other countries. According to the Ministry of Agriculture, China enlarged its fleet in the first quarter of 2013 by 1,395 new boats. Ninsheng Yang, a researcher at the China Academy of Fisheries, which reports to the Ministry of Agriculture, says that several contracts have been already signed, and more are sought. For this, governments are lured by cheap loans and development projects, particularly in West Africa with its rich resources.
This in turn worries the EU because negotiations of fisheries agreements become tougher. Already, China holds the top position in Africa, ahead of the U.S., the EU and Japan, as the information service Agritrade reports. The volume of Sino-African cooperation in the fisheries sector is estimated at around six billion US Dollars a year. Half the catch of officially about 500,000 tons a year goes to Europe, one-third to China.
Chinese companies are also interested in the development of aquaculture abroad, as well as in further investment in cooling equipment, processing plants and shipyards, said Wei Jianguo, chairman of the China Center for International Economic Exchange. However, "restrictions on foreign companies " such as restricted profit repatriation and preferred fishing rights for domestic firms should be relaxed, urges the Vice President of China Overseas Fisheries Association, Huang Baoshan.
Furthermore, Chinese investors buy themselves into local fisheries and processing plants: With the take-over of the Norwegian company Copeinca, one of the largest, most modern and most profitable fishing and fish-oil companies in Peru, the China Fishery Group is entering South America’s fishing industry and strengthening its operations in the Pacific. The company is a subsidiary of Pacific Andes Corporation, based in Hong Kong, which is partly owned by the Chinese government. Together, the two companies have the highest share of Peru's fishing quotas and are one of the largest fishmeal producer in the world.
Since the late 1980s, the reported exploitation of natural fish stocks in the world 's oceans is more or less stagnating, although the fishing fleets are getting bigger and more modern. In 2011, there was an increase over the previous year of two per cent to 90 million tonnes, after the catch slightly decreased in the four years before. Over 11 million metric tons come from inland waters, whose share has increased steadily in recent years.
Not only China is increasing its efforts to counter supply constraints with the development of aquaculture in their own country - and with farms in other countries. Development institutions and UN organizations such as the FAO have long favoured aquaculture hoping to conserve wild stocks. Whether that will be sufficient remains to be seen.
In spite of the expansion of aquaculture, the pressure from the existing fleets is strong. Total engine power and number of fishing days of the global fishing fleets have been increasing steadily from the 1970s to the present. Experts are sceptical that as a result of regulatory action by a number of industrialized countries the stocks would recover. "Severe overfishing are the rule, the management is poor and the cost is rising worldwide," said a report showing that 70 per cent of all stocks are overexploited. “Worldwide, there is cause for great concern, given the extent of illegal and unreported catches, which is estimated at least 35 per cent of the global catch”. Countermeasures such as the reform of EU fisheries policy have little impact because they reach only a part of the industry and most of the fishing worldwide does not abide to existing voluntary agreements. These threats are exacerbated by climate change and environmental pollution of the oceans.
Against the background of overfishing, rising demand, immense investments and inadequate global or national controls and collusion it can be expected that the competition for the remaining resources will increase - a very unequal struggle, as the report "Fisheries : Hope or despair?” observes, with ever larger vessels and more modern fishing methods. And China apparently has the intention and is in a good position to reach a top position in this competition.
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