The Guangdong's People's Government has published a series of articles in Chinese on "Guangdong's Agriculture and the WTO". This report is a translation of an article on the impact of China's entry to the WTO on the vegetable industry of Guangdong Province and what the Province needs to do to face the increased competition from imports. As Guangdong is one of the biggest provinces in China's vegetable industry, its strategies are indicative of the overall strategies of the Chinese Government.

The Impact Of China's Entry into the WTO on the Vegetable Industry
of Guangdong and Its Strategies

The bilateral negotiations between China and the United States on China's entry into the WTO made people wonder about its impact on the vegetable industry of Guangdong. They want to know if products from other countries would erode the vegetable market and hinder the development of the vegetable industry, and what strategies and arrangement the government would take to help the vegetable industry.

1. An Introduction on the Vegetable Industry of Guangdong

Current condition and characteristics of Guangdong's vegetable industry:

(1). Rapid development

After the open door policy, the vegetable industry of Guangdong has been developed very fast. The total vegetable planting area of Guangdong was 183,000 hectares in 1979 while that for 1998 was 990,000 hectares. This represents an increase of 807,000 hectares between the two years and an average increase of 27% yearly. The total vegetable production for 1998 was 21.43 million tonnes, an increase of 18.69 million tonnes over 1979.

(2). Large scale planting fields

The vegetable industry plays an important role in the agricultural sector. In terms of total planting area, total production and total value of vegetables, it is only second to grains.

(3). Even distribution of vegetable planting fields

The vegetable planting fields are mainly located in western Guangdong, eastern Guangdong and the Pearl River Delta area. In recent years, some of the vegetable planting fields were developed in the northern Guangdong mountain area. This made the distribution of vegetable planting more even.

(4). High productivity and marketability

The marketable volume for 1998 reached 16 million tonnes, which represents 75% of the total production. There are four main types of planting fields: for consumers in big and medium cities; for winter sales to northern China; for exports; and for contra-seasonal consumption.

(5). Rational brand combination and large selection of varieties

More than 90 varieties are available throughout the whole year, with more than 50 available in high seasons and around 30 varieties in slow seasons.

Vegetables produced in Guangdong has satisfied not only its own large population but also the demands of northern China and other countries. The total volume of vegetable exports is usually around 400,000 to 500,000 tonnes a year, mainly to Hong Kong, Macau, Singapore, Japan, European countries and the United States. Every year, Guangdong transports 1.9 million tonnes of vegetables to northern part of China. Since the open door policy was implemented, the vegetable supply had kept improving every year in major cities of Guangdong, with lots of fresh and superior quality vegetables available year around. Meanwhile, the prices had remained stable. These have greatly enhanced the life style of people in Guangdong.

2. An Analysis of the Impact of China's Access into the WTO on the Vegetable Industry

After China's entry into the WTO, Guangdong's vegetable industry might face tougher competition from other countries as large quantity imported vegetables, especially those of superior quality and highly demanded, together with their processing facilities, are expected to come into the Guangdong's market. However, the increase in import would not have much impact on the demand and supply of vegetable industry in Guangdong.

(1). With a large production, Guangdong is able to provide enough vegetables to its residents. Besides local consumption, the vegetables are also sold to northern China and to other countries.

(2). With the limited income, a majority of the consumers could not afford to buy imported vegetables due to the relatively higher price.

(3). The imported vegetables would also face other challenges, such as price and different consumption pattern of Chinese people.

(a). Prices
In recent years, the retail prices for vegetables remain stable, with a minimum of increase or even reduction for certain years in some major cities. For example, the average vegetable price is RMB 2.4 per kg (US$1= RMB 8.265) during January to June 1999 in Guangdong, which represents a decrease of 18.1% from the same period last year. Such a price is lower than the production cost for imported vegetables.

(b). Consumption pattern
Consumers in Guangdong are used to eating melons, beans and leaf vegetables, which account for 90% of total vegetable consumption. The imported vegetables are still not fully accepted by the consumers.

(4). With the open door policy, some of the "potential imports" have already entered the Guangdong market. They are mainly consumed at upscale hotels and restaurants, and are hardly found in the wet markets.

Even if more imported vegetables could come into China's market after China's access into the WTO, the vegetable industry of Guangdong Province still has lots of advantages over its competitors.

(1). Superior climate and geographic conditions for vegetable growing

Guangdong's ecological conditions make possible the production of a large varieties of vegetable crops. With its location in the subtropical region in the Northern Hemisphere, most of the vegetables can grow year around. After the open door policy, the vegetable industry has gone through reforms in the supply system; more and more vegetable varieties are available in the market, with much improved quality.

(2). Potential production capability

Guangdong is one of the largest vegetable production provinces in China. Last year, the total vegetable planting area was 14.89 million mu, with a total production of 20.2 million tonnes. Guangdong provides around 3 million tonnes of vegetables to either northern part of China or exported to other countries every year.

(3). Rational infrastructure and a large selection of varieties

There are around 300 varieties of vegetables in Guangdong and more than 100 are available on the market. Even in the slow season, there would be about 30 varieties on the market. Among those varieties, some are traditional ones, while others were introduced from foreign countries, like European countries, the United States, Southeast Asian countries, Japan, Taiwan and Israel. Those introduced around the 80s and 90s occupied a relatively larger portion in Guangdong's vegetable supple. While some of the vegetable varieties in Guangdong are not available in foreign countries, most of the vegetables from foreign countries have been successfully introduced into Guangdong.

(4). Lower labor cost

Labor cost accounts for a large portion of the vegetable price. Comparing with the developed countries, labor cost in Guangdong is cheaper thus reducing the production cost for vegetables. Furthermore, other costs, such as raw materials and water/electric cost, are much lower and only account for about 20% of the vegetable price in Guangdong. This low cost is hard for Southeast Asian countries to compete, not mentioning the developed countries.

(5). Consumption mainly within Guangdong Province

Short distance transportation not only saves the transportation cost but also reduces damage to the produce. This will in return lower the production cost and increase the product competitiveness.

3. Strategies

China's entry into the WTO would offer many opportunities for the vegetable industry of Guangdong without negative impact. Guangdong will take advantage of those opportunities for exports and improve the competitiveness on the international market.

(1). Set up a system control

Guangdong should build up a system management team to control the vegetable industry, provide more services and speed up the production development. It should reform the vegetable circulation system, reduce the unnecessary steps and make necessary arrangement to sell the vegetables on time.

(2). Improve the quality and productivity and increase the competitiveness

Currently, the superior quality varieties account for a relatively small portion of the total production. The majority is of lower quality and its profitability needs to be improved. Guangdong needs to adjust its infrastructure and import more higher quality vegetables to improve the productivity and economic condition, and increase its market competitiveness.

(3). Improve the post-harvest processing and packaging method, as well as the quality and freshness of vegetables during transportation and storage

Comparing with some developed countries, the vegetable post-harvest processing method and packaging are still far behind in Guangdong, the same is true for the techniques to keep vegetables fresh. It would be hard for such low quality vegetables to enter the supermarket in foreign countries. Therefore, what Guangdong needs to do the most is to improve the packaging and storage techniques as well as the quality of the vegetables.

(4). Utilize scientific technology to improve the productivity

Guangdong should expand the planting area for those superior quality vegetables, produce more high quality greenhouse vegetables and promote the early-spring plastic tent as well as summer-autumn high temperature prevention techniques. Meanwhile, it should also invent more new varieties, experiment and introduce them to the farmers; and speed up the innovation to meet the market demand.