General Summary

South China's vegetable market has gone through many changes in the past years. With its location in the tropical and subtropical regions in the Northern Hemisphere, South China's ecological conditions make possible the production of a large varieties of vegetable crops. Vegetable industry has always been one of the main industries in South China. During the past years, with the encouragement and under the organization of the local governments, there had been a great development in cultivation and production in the industry. Gradually, South China has become a production area for many varieties of vegetables to satisfy not only the large home population but also the export markets.

The vegetable industry in South China is facing several obstacles. It needs improvements on pesticide and waste control, storage for retaining the freshness of the vegetables, and technological development. Post-harvest research and applications are still behind production growth in this region.

Generally, U.S. products are priced higher than other imported products; this difference is evident among vegetable products as well. Imported vegetables in South China come from many countries, such as the U.S., the Netherlands, Australia and Canada. Among them, prices for U.S. vegetables rank at the top.

For U.S. traders, export of vegetable seeds is a promising business in the South China market. Imported fresh vegetables are usually consumed by the more affluent Chinese families. As more joint-venture investments come to South China, upscale supermarkets keep increasing and living standard of Chinese people keep improving, the market for imported fresh vegetables and vegetable seeds look optimistic for the U.S. exporters.
South China Vegetable Production

South China is a large producer of vegetables with various cultivars and very good quality. This makes the vegetable industry one of the main industries in South China. Local governments, industries and local people are paying more attention to the vegetable industry. During the past years, there had been a great development in cultivation and production encouraged and organized by the local governments. Gradually, South China has become one of the main suppliers of vegetables to satisfy not only the large home population but also the export markets.

Production statistics for vegetables in South China are not accurate; assessments are approximates. In 1998, the total area of vegetable planting for Guangdong Province is 900,000 hectares, with a total production of 2,000 metric tons. (Data for 1999 are still not available.) There are around 300 varieties of vegetables planted in Guangdong and they are classified as following:
1. Melon type of vegetables: pumpkin, sponge gourd, balsam pear, wax gourd, cucumber;
2. Leguminous vegetables: kidney beans, peas, beans;
3. Leaf vegetables: Chinese cabbage, leaf mustard, spinach, peduncle, swamp cabbage;
4. Tomato type of vegetables: tomatoes, egg-plant, pepper;
5. Edible roots: turnips, carrots, radishes;
6. Spicy vegetables: onions, garlic, celery, Chinese chives;
7. Vegetables planted in water: lotus, arrowhead, common calla;
8. Western vegetables: cauliflowers, lettuce, celery, green pepper, asparagus.

Various vegetables have been imported into South China through different channels. Lots of the imported fresh vegetables are coming into China via Hong Kong. Meanwhile, South China is a primary supplier of fresh vegetables to Hong Kong. The vegetable exports extend to countries like Japan, Singapore, and the Netherlands; while the imports are mainly from Israel, Australia and the European countries. For the year of 1999, the total vegetable export for Guangdong Province is 480,026 metric tons, with a value of US$114 million; while the total import of vegetables is 56,034 metric tons, with a value of US$22 million.

Consumption (and Its Trends)

Vegetable used to be thought of as a simple food need for the human body. However, different varieties of food made of vegetables are nowadays enriching people's life styles. Canned and frozen vegetable products can be purchased at most supermarkets in South China. They make cooking much easier and save lots of time for the working people.

Some of the vegetable processing companies even make dried vegetables available on the market. Dried vegetables are produced to retain its original taste and color, sanitary condition and convenience.

Chinese people tend to eat cooked vegetables. Nevertheless, raw vegetables served as salad are now available in lots of upscale restaurants and hotels. Imported vegetables have been accepted as better quality products but mainly consumed at restaurants and hotels because of their relatively high prices.

As people are paying more and more attention to health, organic vegetables grown in a non-polluting environment are becoming very popular and available at most of the vegetable wholesale markets. These vegetables have a cleaner appearance and a better taste.

Distribution of Sale

According to Post research, some of the vegetable growers in South China sell at least part of their produce through direct marketing channels like farmers' market and roadside stands. However, the majority of the vegetables are sold directly to local groceries or other retail sellers.

Diversification of market channels allows large volume producers to take advantage of opportunities in local markets while still producing for wholesale distribution. The importance of direct marketing, however, does not diminish the importance of wholesale markets or their potential for growth. Wholesale markets are important to the balance and viability of a total marketing system, and most sales through cooperatives go through wholesale distribution channels.

As for the imported vegetables, the Chinese importers usually purchase the vegetables from foreign exporters, ship them to a China port and transport them to a wholesale market, and sell them to wholesalers and distributors from various cities. Because of the relatively high prices of the U.S. vegetables, only the more affluent families could afford to consume them. Most of the imported vegetables usually end up in the upscale hotels and restaurants.

Obstacles Facing the Vegetable Industry in South China

1. Pesticide and Waste Control

Current method of vegetable production in some part of South China uses large amounts of agricultural chemicals (fertilizers and pesticides). Inappropriate application of these chemicals not only contaminate the vegetables and the environment but also affect the vegetable's quality.

Some vegetables are harvested from the fields without any post-harvest treatments. The bulk of the vegetables, including roots and withered leaves, is transported to the cities for sale to the consumers. The consumers discard the roots and withered leaves as refuse. This traditional way of vegetable production and consumption not only wastes energy and labor but also produces large amounts of refuse. This kind of kitchen garbage accounts for a big portion of the urban rubbish and becomes one of the most serious city environment problems in South China.

2. Storage for Retaining Freshness

Vegetable crops are highly perishable, and vegetable marketing is often a free market adventure. Prices are volatile and growers' returns tend to fluctuate. Most products cannot be stored and sold later. Some progress had been made in recent years to improve the capability of keeping vegetables fresh. However, more improvements are needed to enable the vegetable growers to get better returns.

3. Technological Development

Lack of financial supports for institutions to explore and study intensively some particular and high-valued vegetables and to develop new technology are other challenges for the vegetable industry in South China. Most of the companies in China are reluctant to invest in research programs. They rely on government efforts and the new products tend to be limited in variety and over produced, making them less competitive.

Advantages for U.S. Exporters

1. Comparing with the domestic ones, the imported U.S. vegetables are considered to be of better quality and enjoy a preference by the more affluent Chinese families and most of the upscale hotels and restaurants. Those imported products usually come into South China with clean plastic wrapping, no roots, no dirt, no withered leaves. The frozen vegetables can be cooked right out of the packages, saving the trouble of washing and cutting.

2. The western world is a fascination for Chinese people. They are attracted to things of the West and seem eager to try different things and different styles, and they are acquiring a taste for western food. Salad and sweet corn (on the cob) are more acceptable in South China as complement to western fast food.

3. According to Post research, there is no quota requirement for importing vegetables from the U.S. As long as the imported vegetables are not banned for phytosanitary reasons, Chinese importers could import them from other countries.

Challenges for U.S. Exporters

1. Overall, U.S. products are priced higher than other imported products; this difference is evident among vegetable products as well. Imported vegetables in South China come from many countries, such as the U.S., the Netherlands, Australia and Canada. Among them, prices for U.S. vegetables rank at the top. As a majority of Chinese are price-conscious, U.S. vegetables are less competitive.

2. Some of the U.S. vegetables are new to the consumers and to the distributors. Their lack of knowledge of U.S. vegetables would keep them from buying or using the new products or from introducing the products to China. Lack of knowledge of U.S. vegetables also keeps China's C.I.Q. from ready approval of a new product from the U.S.

3. High tariffs charged by the China's Customs for vegetable imports make the retail price of the imported vegetables well above that of local products. Currently, most of the imported vegetables are charged 13 percent for the preferential rate, 70 percent for the general tariff rate. The value added tax for most of the fresh vegetables is 13 percent, and for most of the frozen ones is 17 percent.

Trade Regulations

Chinese Government has implemented many regulations regarding the importation of agricultural products into China. The State Administration of Entry-Exit Inspection and Quarantine is the only entity with the power to ban imports because of health problems.

As far as regulations are concerned, the more common U.S. fresh vegetables are allowed entry into China. Some are prohibited from entering China due to phytosanitary reasons. Despite the ban, a few of the prohibited U.S. vegetables are still available in China through grey market channels. The current government crack down on smuggling is having some impact on the import of fresh vegetables through those grey channels.

China's labeling law regarding the importation of agricultural and cosmetic products is currently not applicable to fresh vegetables (For details, check C.I.Q. web page www.ciq.com.cn ). Importers usually do not require any special labeling or packaging from their overseas suppliers.

In the next few years, high tariff will remain as a barrier to the importation of U.S. fresh vegetables to China. Currently, China's effective tariffs for most of the imported vegetables are approximately the same, ranging from 28 percent to 36 percent.

Market Opportunities:

Shipping frozen or chilled vegetable and vegetable seeds is the primary market opportunity for U.S. vegetable producers/exporters. Meanwhile, they need to educate the local importers and end users on how to use and how to grow the products.

As local people started to grow the imported varieties, the demand for imported vegetables had decreased over the past years. Nowadays, Chinese importers are looking for importing seeds rather than vegetables. U.S. vegetable seed companies can add value to their products by providing technical guidance on the adaptability of their products to local climate and soil condition. They might come to South China to instruct their customers on how to plant and how to improve the productivity of their U.S. vegetable seeds, and build up continuing cooperation with the Chinese importers/growers.

The Wholesale Vegetable Market in Guangzhou

There are two well-known vegetable wholesale centers in Guangzhou: the Huadu Fresh Vegetable Market and the Jiangnan Vegetable Market.

1. The Huadu Fresh Vegetable Market

Huadu District played a leading role in applying the "HDV" trade mark for its fresh vegetables. In 1997, Huadu got the permission from the National Administrative Bureau for Industry and Commerce, and the Developing Center of China Green Foodstuff to use "HDV" as its vegetable trade mark. Since then, the local government has implemented many procedures to ensure that the vegetables planted in Huadu would be pesticide-free, called as "Vegetables not harmful to the public"(wu gong hai).

Huadu has some trained personnel periodically checking the vegetable planting fields. Those on-spot quality control inspection personnel will evaluate the pesticide residue on the vegetables. If the amount surpassed the tolerance standard, those vegetables would be destroyed by the inspection personnel for the safety of the consumers.

The Vegetable Department of Huadu is seeking to introduce new varieties of vegetable for cultivation in the Guangzhou area.

Contacts:
Mr. Zhu Tian Ru
Director, The Vegetable Office of Huadu
53, Jianshe Road, Xinhua Town, Huadu,
Guangzhou 510800, P.R. China
Tel: (86-20) 86834320
Fax: (86-20) 86838817

2. The Jiangnan Vegetable Market

Guangzhou Shijing Jiangnan Vegetable Wholesale Market claims to be the largest vegetable wholesale center in Guangdong Province. Its daily sales of vegetables are around 5,000 MT, with a value of 4,500,000 RMB (approximately US$ 544,400).

Jiangnan Vegetable Market went into operation in 1994. It has its own management team, security team, accounting team, and logistic team. With the support from the Guangdong provincial and municipal government, the Market provides many services including commercial and financial.

The market is privately owned and is looking for opportunities to import seeds from other countries.

For further information about the above market, please contact them directly or ATO Guangzhou office at

Fresh and Chilled Vegetable Exports of Guangdong (1999)

Fresh and Chilled Vegetable Imports of Guangdong (1999)

Tariff Rates
Chinese Customs Tariff Rates for Fresh and Chilled Vegetables, as of Dec. 31, 1999.

Source: Customs Import and Export Tariff of the People's Republic of China