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 fruit 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 fruit industry, its strategies are indicative of the overall strategies of the Chinese Government.

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

For the past thirteen years, from 1986 to 1999, China has strived hard to become a member of General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). Now that the reopening negotiation between China and the United States about China's access into the WTO has come to an important stage, Chinese people wonder what opportunities are ahead of them and the impact of joining the WTO on the Chinese Agricultural industry and the adjustment they have to make. The following is an analysis of the impact of China's access into the WTO on the fruit industry of Guangdong Province.

1. An Analysis on the Fruit Industry of Guangdong Province

Guangdong Province is one of the most important subtropical fruit producing areas in China. In the past 20 years, its fruit industry has made many progresses. With the increased living standard and higher demand for better quality fruits, many subtropical fruits have become more popular and this makes the fruits industry one of the most important industries in Guangdong Province. In the past 20 years, Guangdong has developed several large scale subtropical fruit planting fields, such as early-maturing lychee, longan and banana fields in western Guangdong, superior pineapple and mango fields in the Leizhou Peninsula, superior lychee and longan fields in central Guangdong and Shatin pomelo field in Meizhou city. This not only creates some brand name products but also signifies a change from the traditional pattern to modern pattern in the fruit industry of Guangdong Province.

The total fruit planting area for Guangdong in 1998 was 13.84 million mu, with a total production of 4.53 million tonnes, which represents 6.6 times increase over the planting area of 2.08 million mu and 14 times increase over the total production of 314,000 tonnes for 1978 respectively. Some of the statistics are as follows:

Currently, the fruit industry in Guangdong Province is facing new challenges. It has changed its direction from solely expanding the planting area to adjusting the variety infrastructure and paying more attention to the quality of the products and improving the productivity.

For the past ten years or so, China has implemented many policies to support the agricultural industry, such as pricing support and more direct investment. With the support from the Central Government, the agricultural industry has achieved many successes including the balance between demand and supply and more surplus every year. This means that the overall production level for agricultural industry has advanced to a new stage. Meanwhile, there have been some obvious changes to the infrastructure for agricultural products. However, some problems remained unsolved in the agricultural industry of Guangdong Province.

During the past 10 years, under the slogan "(If you) want to be rich, plant fruit trees", many people made mistakes, such as being unrealistic about the productivity and ignoring the risk involved in the industry. This has put some of the fruit fields in an awkward situation and caused lots of waste. In some less developed rural area, these problems were especially serious. In recent years, with the agricultural products keeping increasing, the market function was playing a more and more important role.

The problems involved in the industry are listed below:

(a). The supply of superior quality fruits could not meet the market demand; while some of the unsalable goods were still under production.
(b). Post-harvest treatment was behind the production growth.
(c). It lacked of an adequate information system to share the necessary market information.

The problems in the industry were caused by the following:

(1). The unbalanced infrastructure caused some of the fruits unmarketable.

Without an effective management control over fruit production, lots of people were planting the same products at the same time, for example: grapes craze, citrus craze, banana craze, mango craze, lychee craze and longan craze. This eventually caused certain products a large surplus over the market demand. Meanwhile, the supply for other products could not meet the market demand.

(2). Guangdong lacked of a system to connect planting, harvesting and marketing.

Generally, the problems in Guangdong's agricultural industry were low productivity, low attention to marketing, too many traditional brands and few superior quality products. It showed as the "four low" phenomena, namely, low average production, low quality, low efficiency and low level production team. In the countryside, advanced technology and its implementation were lagging.

Guangdong needs good quality brand and new technology, and an efficient market system. Much of agricultural production is still on a self-sufficient basis. It does not have an advanced and complete market network. Some people did not even have a good plan before the planting, did not take adequate care during the growing period, and did not have the proper method to keep the fruits fresh. This formed a poor processing system. Although there had been improvement in keeping fruits fresh (Lychee can now be kept fresh for 30-40 days), many of the issues remained unsolved.

(3). Fruit storage method, fruit processing and packaging facilities need to be improved.

Post harvest research and applications were behind production growth in Guangdong Province. For most of the summer fruits, post harvest treatment was still very traditional and simple. The cold storage and processing facilities were outdated and packaging was of low quality. All these had impact on the quality and market competitiveness of the fruits. Countries like South Africa, Australia, Israel, and Thailand do not have a long history of planting lychee and longan. However, they paid more attention to cultivation improvement and post harvest research and applications. They took into consideration of local consumption pattern and seasonal adjustment, combined scientific research result with market information and achieved a very good result. Meanwhile, Guangdong, as a large subtropical fruit province, is behind in this field.

(4). Guangdong lacks of some key enterprises leading the fruit industry.

Most of the fruit producers in Guangdong are individual peasants with little investment. The industry needs some key enterprises to provide a series of services. It also needs more large scale fruit wholesale centers.

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

According to the U.S.-China Agricultural Cooperation Agreement, China will reduce the import tariff for fruits by 37% after its accession into the WTO. This will have some impact on the infrastructure of the fruit industry of Guangdong presenting it a new challenge and a good opportunity.

In 1997, the total citrus production for China surpassed 10 million tonnes for the first time. This led to an abrupt price drop for Wenzhou oranges and other citrus. In 1998, the total production was reduced to 8.59 million tonnes and the citrus price returned to its previous level. From this event, it is estimated that the ideal production for citrus is around 9 million tonnes for China.

Currently, the total fruit production for Guangdong is 4 million tonnes yearly. It also transports 1 million tonnes of fruits from other provinces and imports about 0.3 million tonnes from other countries every year. There is not much fruit export from Guangdong Province. According to the 1998 Statistical Yearbook of China and the 1998 Statistical Yearbook of Guangdong, the total exportation of fruits and stone fruits for China was US$4.46 billion while the total importation was US$2.35 billion; however, the total exportation for Guangdong was US$0.72 billion while the importation was US$0.63 billion. Thus, the exportation for Guangdong accounts for 15.5% of the national total while the importation accounts for 26.8% .

Guangdong Province has a big fruit consumption market and can meet the challenges from other countries. During the past years, the fruit industry has gone through great development. It has changed from a sellers' market to a buyers' market, and consumers have become more and more demanding of the quality of the fruits. Importation enhanced the fruit market with more varieties, especially some high quality fruits, making them available for consumers.

With the lower tariff rates, after China's entry to the WTO, more fruits would be imported into China. This will increase the competition in the fruit industry and lower prices for the consumers. Concurrently, member-nations of the WTO will also lower their tariff rates for products from China, probably by 36% to 37%, making it a good opportunity for fruit exports from Guangdong. It would not only be a good time for lychee and longan to enter the world market but also offer a good chance for Guangdong's fruit industry to adjust its variety infrastructure and become more competitive on the world market. However, the quality and quantity of fruit products in Guangdong are still far behind other exporting countries. For instance, citrus would face a big challenge after China's entry into the WTO.

In recent years, the production of citrus kept decreasing and its quality, lower. It had already lost some of the domestic market. With competition from other countries, it would face a tougher challenge. The average price for citrus in the United States is US$0.15/kg, while the same imported citrus would sell for US$1.2-1.5/kg (10-12 RMB/kg) in China. If the import tariff is reduced from 40% to 12%, the citrus from the U.S. (and Brazil) could be sold at as low as US$0.6/kg (5 RMB/kg).

The lower production in recent years in Guangdong would lessen the impact from the imported citrus; nonetheless, Guangdong should improve the competitiveness of its fruit industry on the world market. Citrus actually has a big market in Guangdong Province and it offers many superior-quality varieties. The prices for those superior-quality citrus have kept increasing and some of them can be sold at 4-5 RMB/kg or above (ATO comment: comparable to U.S. citrus after tariff reduction). What is important now is that the provincial government should encourage more research and technique training to improve the competitiveness of the fruit products.

With the upcoming 21st century, the fruit industry is facing many challenges, such as shortage of raw material, fluctuation of market demand, insufficient scientific support and competition from other countries. The provincial government should make necessary policy adjustment to improve the infrastructure of the fruit industry, speed up the replacements and technical innovations, improve the quality of the fruit products and expand to more foreign markets.

Overall, China's entry into the WTO would put the fruit industry in tougher competition from foreign countries. However, it would also create more opportunities for the fruit industry. The benefits would outweigh the losses.

3. Hold the Opportunity and Face the Challenges

In the past few years, the fruit products of Guangdong have gained popularity in some foreign countries. This is especially true for some subtropical fruits like lychee and longan. The fruit industry should utilize its natural resources, take advantage of any opportunities for exports, improve the productivity and the quality of the fruit products.

(1). Readjust the strategies for the development of the fruit industry

At present, the fruit products, like banana, citrus, lychee, longan and pineapple, are still mainly consumed domestically. Based on the international standards, the fruit industry should develop a better strategy for fruits like lychee, longan and banana for more exports. For these tropical fruits, Guangdong should take the necessary efforts to make them acceptable by the world market.

(2). Adjust the infrastructure of the fruit products and keep a better control over the production period

At present, to keep the agricultural industry develop well depends mainly on the government policies, investment and technology. However, all these have their limitations. In order to reach a better result for the fruit industry, the provincial government should make the following necessary adjustments:

(a). Adjust the selection of production fields, concentrate the fruit planting in the best suitable areas.
(b). Adjust the arrangement of different types of trees, keep a better control over the production area for lychee and longan.
(c). Adjust the maturing time for different fruits so that different types of fruit could be available to the market year around.

(3). Utilize the modern method to promote fruit exports

In order to promote the agricultural products to the world market, Guangdong should adopt some modern marketing concepts.

(a). Industries should not be isolated from each other. The production of agricultural products should be adapted to the demands of the trading sector.
(b). Dumping within the same industry should be avoided. Some good product shows should be encouraged to expand the international market share and built up a bridge between the producers and the consumers.
(c). The production should be standardized according to international standards. Post-harvest processing and packaging should be more emphasized.
(d). Government should take necessary measures to help the agricultural producers to expand their share in the international market.

(4). The Central Government should fully support the development of the agricultural industry

(a). The Central Government should invest more in the agricultural industry. It should support the research programs and cultivate more special varieties and provide better equipment.
(b). The government should pay more attention on the scientific development to improve the management and the quality of the fruit products.
(c). It should set up an equivalent quality standard to match the international standards for the products, and establish a quality control system.
(d). It should put the development of subtropical fruit fields as a priority.
(e). It should give special loans to help the development of fruit processing and wholesale market.