Voluntary Report - Public distribution

**Date:** 10/10/2007

**GAIN Report Number:** CH7073

CH7073

**China, Peoples Republic of**

**Frozen Potato Products**

**Potato and Frozen Potato Products Annual**

**2007**

**Approved by:**

![](media/image1.wmf)William Westman

AgBeijing

**Prepared by:**

Jorge Sanchez, Jiang Junyang and Angie Han

**Report Highlights:**

China fresh potato production in MY07/08 is forecast at 75.6 million
tons, up 5 percent from the previous year as a result of growing
consumer demand. Average fresh potato prices have risen 15 percent
annually over the previous three years. Processed potato products are
forecast to rise up to 10 percent in the coming years due to western
style and fast food outlet expansion. MY06/07 frozen French fry (FFF)
consumption is estimated to rise by 10 percent over the previous year
and is forecast to rise another 15 percent in MY07/08. Imported FFF in
MY06/07 is estimated at 55,000 tons, unchanged from the previous year.
FFF production is estimated to represent 53 percent of domestic
consumption in MY06/07, while only accounting for 46 percent in MY05/06.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Production 3](#production)

[Fresh Potato Production Grows by 5 Percent in MY07/08
3](#fresh-potato-production-grows-by-5-percent-in-my0708)

[China Quarterly Wholesale Table Potato Price
5](#china-quarterly-wholesale-table-potato-price)

[Six Percent of Domestically Produced Fresh Potatoes Go Into Processing
5](#six-percent-of-domestically-produced-fresh-potatoes-go-into-processing)

[Potato Chip Production Reliant on Local Chipping Potato Production
6](#potato-chip-production-reliant-on-local-chipping-potato-production)

[High-Quality Potato Production Rises
7](#high-quality-potato-production-rises)

[Expanding Food Service Sector is Driving French Fry and Dehy Potato
Consumption
7](#expanding-food-service-sector-is-driving-french-fry-and-dehy-potato-consumption)

[Trade 8](#trade)

[Numerous Phytosanitary Issues Limit U.S. Fresh Potato Opportunities
8](#numerous-phytosanitary-issues-limit-u.s.-fresh-potato-opportunities)

[China's Fresh Potato Exports On The Rise
8](#chinas-fresh-potato-exports-on-the-rise)

[Starch Imports Decline Sharply due to Chinese Anti-Dumpling Ruling
9](#starch-imports-decline-sharply-due-to-chinese-anti-dumpling-ruling)

[Short Crop Leaves FFF Exporters Unable to Meet Demand in MY06/07
10](#short-crop-leaves-fff-exporters-unable-to-meet-demand-in-my0607)

[Potato Marketing 10](#potato-marketing)

[The Hot Frozen Potato 10](#the-hot-frozen-potato)

[Fresh Chipping Potatoes 11](#fresh-chipping-potatoes)

[Potato Chips Distribution Channels
11](#potato-chips-distribution-channels)

[The Rising Demand for Potato Starch and Dehydrated Potatoes
11](#the-rising-demand-for-potato-starch-and-dehydrated-potatoes)

[Fresh Table Stock Potatoes 12](#fresh-table-stock-potatoes)

[The Down-To-Earth Potato Marketing
12](#the-down-to-earth-potato-marketing)

[Statistics Tables 12](#statistics-tables)

[Table1. Fresh Potatoes PS&D Table
12](#table1.-fresh-potatoes-psd-table)

[Table2. Frozen Potato Products PS&D Table
13](#table2.-frozen-potato-products-psd-table)

[Table 3. Frozen Potato Products Imports (Volume)
14](#table-3.-frozen-potato-products-imports-volume)

# Executive Summary

China's fresh potato production in MY07/08 is forecast at 75.6 million
tons, a five-percent increase over the previous year mostly driven by
growing table potato consumption and the processing sector. Over the
previous three years, average potato prices have risen by 15 percent
annually as a result of strong market demand and tight domestic
supplies. Compared with grain crops, potato production currently
receives much less government support. In MY06/07, imported FFF is
estimated at 55,000 tons, unchanged from the previous year. FFF
production is estimated to account for 53 percent of total domestic FFF
consumption in MY06/07 while accounting for 46 percent in MY05/06. In
the near future, shortages of quality potatoes will continue to limit
domestic FFF production.

Menu promotions and educational campaigns marketing potatoes as a
healthy food and part of a balanced diet mainly contributed to the rapid
growth in processed potato product consumption including FFF, potato
chips and dehydrated potato flakes. As a result, MY06/07 FFF consumption
is estimated to grow by 10 percent over the previous year despite a
20-percent price hike caused by the shortage of imports. FFF, potato
chips and dehydrated potato flake consumption is forecast to rise by
more than 10 percent in MY07/08 driven greatly by western-style and fast
food outlet expansion and increased consumption of snacks and other
processed foods.

# 

The fast growing processing sector is the main driver behind potato
acreage expansion. Post forecasts domestic potato acreage to expand at
the rate of 5 percent annually for the next five years.

# Production 

## Fresh Potato Production Grows by 5 Percent in MY07/08

China's MY07/08 fresh potato production is forecast to reach 75.6
million tons, up 5 percent from 72 million tons in MY06/07 as a result
of a 5 percent rise in acreage. China's potato acreage is forecast to
grow by 5 percent annually in the coming years, in response to domestic
price escalation in recent years in great part due to the rising demand
by the processing sector. Industry sources estimate that most of the
acreage expansion in the coming years will be from winter fallow field
in southern China provinces including Hunan, Guangxi, Yunnan, and
Guizhou. Attracted by the recent price increase, rice farmers in the
region have been planting more potato in the winter fallow field. The
winter potato will be harvested before the April rice planting season.

Potatoes are the fourth largest and most important staple crop in China
after wheat, rice and corn. Inner Mongolia, Gansu, Yunnan, Guizhou,
Sichuan, and Heilongjiang are the top potato producing provinces,
collectively accounting for more than 60 percent of China's total potato
production. In such provinces, marginal land with poor irrigation
facilities is designated for potato production. The Chinese government
does not consider potatoes a staple food crop in regards to food
security as compared to rice, wheat, and corn and potato farmers receive
much less production support from the central government. High market
price is a compelling incentive to produce potatoes.

On marginal land with poor irrigation facilities, potato has been more
adaptable to cold weather patterns and short growth periods in western
and northeastern provinces. As a result, in recent years the returns
from potato production have been higher than grain crops like corn and
wheat.

In Northern China, potato expansion is projected to occur primarily in
Inner Mongolia and Gansu provinces, due to better profitability compared
to other competing crops. This trend is likely to continue as research
institutes in Mongolia, Gansu, and other provinces continue to develop
and introduce higher yielding virus-free seed potatoes that are more
resistant to plant diseases.

In addition to the natural confinement, the following two factors also
limit the improvement in quality for domestic potato production:

1)  Lack of virus free seeds: Industry sources estimate that virus free
    seed use accounts for only about 20 percent of China's total planted
    potato acreage; and,

2)  Lack of adequate harvest handling and storage management and
    facilities: Industry sources estimate that losses account for about
    14 percent of total potato production annually.

![](media/image2.wmf)

Source: China Agricultural Statistical Report

# 

# China Quarterly Wholesale Table Potato Price 

![](media/image3.wmf)

Source: Ministry of Agriculture

## 

## Six Percent of Domestically Produced Fresh Potatoes Go Into Processing

Processed potatoes account for about six percent of total potato
production, with potato starch, potato chips, FFF, and dehydrated
potatoes being the most prominent users. Starch milling accounts for
five percent of total potato production while potato chips, dehydrated
potatoes, and FFF collectively account for about one percent of the
total potato production.

Industry sources estimate that about 50 percent of fresh potatoes are
consumed as a staple food. This is especially true in Northern and
Western China where comparatively cold climates are less suitable for
grain production and potatoes are widely produced. Chinese potato
dishes, generally steamed, boiled or baked, are an affordable and
popular part of regional cuisine.

The remainder of fresh potato production is used as animal feed, as
seed, or lost to waste. Loss due to spoiling during storage and
transportation is high, and according to industry sources, amounts to 14
percent of total yearly potato production.

![](media/image4.wmf)

Sources: Post survey on industry sources

For the processing sector, industry sources estimate that there are
about 4,500 processing plants for starch or noodle production. Among
these, about 30 processing plants have an annual capacity exceeding
10,000 tons of starch. The annual production capacity is estimated at 1
million tons. Total potato starch production is estimated at 300,000
tons in 2006, and this sector will continue to rise in tandem with
household income growth.

Traditionally, potato variety research has focused on developing high
yield and disease resistance. In recent years, Chinese researchers
shifted their priority to developing variety for specific processing
uses. For FFF and potato chip processing, the Atlantic and Shepody are
the two main varieties used by processors. Chinese Academy of
Agriculture Science is the leading researcher that introduces and
cultivates potato varieties for either fresh consumption or processing
including starch milling, FFF or chip potato production. Other seed
potato research agencies could be run by universities, or sponsored by
private companies.

To meet the processing sector's growing demand, seed researchers and
farmers are experimenting with different potato varieties. The two most
highly valued qualities of processing potatoes are high starch content
(for starch milling) and low sugar content (for FFF and chip
production).

## 

## Potato Chip Production Reliant on Local Chipping Potato Production 

China's 2006/07 fried potato chip production is estimated at 50,000
tons, requiring an equivalent of 200,000 tons of potatoes for chipping.
Industry sources estimate that there are approximately 25 potato chip
producers in operation. Several of these also produce pressed
(fabricated) potato chip products. To ensure chipping potatoes meet
quality standards, most processors usually contract with individual
farms and offer seeds and technical assistance to producers. In order to
guarantee year-round potato supply, some large potato chip (and FFF)
producers have set up regional production bases in both Northern and
Southern China. These producers have also invested in storage
facilities. In recent years, major chip processors have increasingly
funded seed research programs in production regions to improve crop
quality. Minor potato chip producers, in contrast, are generally
incapable of providing technical assistance or investing in storage
facilities, satisfying their needs through supply contracts and direct
purchasing at local markets.

Currently, there is no national grading standard on potatoes for the
processing sector. Potato quality varies greatly by suppliers and
varieties produced. The quality of potato chips also fluctuates as do
the prices. Generally speaking, brand name varieties developed and
produced by joint ventures are of better or more consistent in quality
than local brand names.

**Starch and Dehydrated Used in Both Traditional and Western Foods**

**China's Dietary Structure Diversifies as Income Rises**

Potato starch is increasingly used in food processing sectors, including
instant noodle, bakery, and snack food manufacturing. As stated earlier
in this report, China's food-processing sector is a major consumer of
potato starch. An example of this is for vermicelli noodle production,
whose popularity as an ingredient in Chinese "hot pot" dishes has led to
increased starch demand.

Dehydrated potato production in MY06/07 is estimated at 30,000 tons.
Mostly used for the manufacturing of compressed chips. A smaller portion
is used in Western-style mashed potatoes. Due to increasing consumer
acceptance of potato-based snack foods and Western fast food, dehydrated
potato production is projected to expand by at least 15-20 percent
annually.

Potato starch production in MY06/07 is estimated at 500,000 tons,
requiring the equivalent of 4 million tons of fresh potato. Post concurs
with one industry estimate by the China Starch Industry Association that
potato starch production will grow by 20 percent annually in the 11^th^
five year plan (2006-2010) period driven by rapid growth in the food
processing and industrial sectors like textiles, paper milling,
chemical, and pharmaceutical sectors.

## High-Quality Potato Production Rises 

Potatoes dedicated to the production of frozen French fries in MY06/07
are estimated at 90,000 tons, up 30 percent from the previous year.
Processing requirements reduce this to 45,000 tons of FFF. Currently,
four production lines are in operation and are located in the Beijing
municipality and Heilongjiang, Shanxi, and Yunnan Provinces. Industry
estimates indicate FFF production capacity exceeding 100,000 tons
annually. Aggregate production is about 45 percent of capacity due to an
inadequate supply of high quality processing potatoes. None of the four
primary production lines, the newest of which opened in 2005 in
Heilongjiang, are running at capacity. Industry sources report that the
lack of quality potatoes limits production during the processing season
at some plants to just three or four months.

Large international producers of processed potato products have
established potato plantations in both Northern and Southern China which
include storage facilities to ensure a reliable and high-quality potato
supply. Minor chip producers generally lack storage facilities and
expertise to properly store crops.

Potatoes used for potato chip production and FFF processing have
specific requirements that include variety, starch/sugar content, size,
and shape. Such quality-specific potatoes require tailored growing
conditions and regimented irrigation and fertilizer. Most of the higher
quality potatoes in China are supplied by contract farming. Post
estimates that the supply of quality potato for both FFF and chipping
purposes will expand and narrow the shortage gap as farmers develop an
expertise and the sizes of contract farms increase in scale. However, in
the near future, shortages of quality potatoes will continue to limit
domestic FFF production.

## Expanding Food Service Sector is Driving French Fry and Dehy Potato Consumption

China's food service sector has enjoyed double-digit growth for 15
years, a trend expected to hold as average household incomes continue to
rise. Fast food, especially Western-style fast food, is one of the
fastest growing sectors, led by Kentucky Fried Chicken (KFC) and
McDonalds. By mid 2007, KFC has already opened over 1,800 restaurants in
China compared to the 1,200 restaurants it had in 2004 and plans are
underway to open 300-400 more in 2008. McDonald's currently has
approximately 600 restaurants in China.

While FFF are available at certain retail outlets, at-home consumption
of FFF is still negligible.

Depending on the marketing efforts, at-home dehy potato consumption
could increase significantly but from a very small base. Industry
marketing campaigns should target middle class groups and the younger
generation that prefer convenient foods and are more likely to
incorporate western style food into their diet.

China's domestic FFF consumption is estimated at 84,500 tons in MY06/07.
Western style food outlets are the largest FFF consumers in China,
accounting for 75 percent of total consumption. The remainder is
marketed through HRI outlets and retail stores (20 percent and 5
percent, respectively). Despite the fact that domestic FFF prices rose
by 20 percent from the previous year, MY06/07 FFF consumption is
estimated to rise by 10 percent over MY05/06.

MY07/08 FFF consumption is forecast to rise by 15 percent to 97,000
tons. In addition to the quick expansion of the leading foreign fast
food suppliers like KFC and McDonalds, local chained fast food service
outlets have grown at rapid pace. According to trade sources, in MY06/07
the overall FFF consumption is hindered greatly by shortage in import
supply. In MY07/08, the forecast 20 percent increase in domestic FFF
production accounts for the rapid growth in consumption. Rising
household incomes and the increased availability of processed and snack
potato products will continue to bolster long-term growth in demand.

# 

# Trade

## Numerous Phytosanitary Issues Limit U.S. Fresh Potato Opportunities

U.S. potatoes face numerous phytosanitary import barriers. In 2006, the
United States requested China perform a pest risk assessment on U.S.
fresh potatoes. While technical discussions continue between the United
States and Chinese regulators, numerous obstacles remain in place making
it difficult to determine a target date for developing an import
protocol that would grant market access to U.S. fresh potatoes.

## China's Fresh Potato Exports On The Rise 

China's fresh potato exports for table consumption have been growing
rapidly in recent years as the Chinese government works to establish
closer trade ties with its neighbors. In MY05/06, China's fresh potato
exports rose by 60 percent from the previous year to 329,000 tons. The
strong export growth is attributed to the following factors: a
comparatively low production cost, seed improvement, and freight rate
advantages to nearby markets. Trade sources report that Chinese fresh
potato exports to neighboring Asian countries is forecast to expand
rapidly, albeit from a small base.

  ------------- --------------- ----------- ----------- ----------- ----------- -------------
  China Fresh                                                                   
  Potato                                                                        
  Exports by                                                                    
  Destination                                                                   
  2001-2006 (in                                                                 
  1,000 metric                                                                  
  tons)                                                                         

                **HS (0701)**   **Sept      **Sept      **Sept      **Sept      **Sept 06-Jun
                                02-Aug 03** 03-Aug 04** 04-Aug 05** 05-Aug 06** 07 \***

                **World**       140         180         206         329         303

  1             **Malaysia**    53          73          77          102         102

  2             **Russia**      10          17          39          72          39

  3             **Vietnam**     26          37          39          69          55

  4             **Mongolia**    28          27          29          44          46

  5             **Singapore**   14          10          10          13          13

  6             **Hong Kong**   2           2           2           12          2

  7             **Thailand**    2           8           4           6           6

                **Others**      5           6           6           11          40

  **\* MY To                                                                    
  Date**                                                                        
  ------------- --------------- ----------- ----------- ----------- ----------- -------------

## Starch Imports Decline Sharply due to Chinese Anti-Dumpling Ruling 

Potato starch and modified starch products' wide range of applications
in food processing, pharmaceutical, textile and paper milling industries
helped China's potato starch imports double in MY05/06. This trend ended
in MY06/07 when Chinese government imposed anti-dumping duties on the
imported starch from EU countries went into effect beginning February
2007.

Responding to surging European starch imports in 2006 and the declining
profit margins for domestic starch manufacturers, the industry requested
government investigate damages caused by the imported starch. After
concluding the investigation, the Chinese government imposed an
anti-dumping duty ranging from 17 to 35 percent on starch products from
most European companies. The ruling will be effective for five years.

China's imports of dehydrated potato also declined in MY06/07. As a
substitute to high priced imported dehydrated potato, potato chip
manufacturers (fabricated, extruded, or puffed type) shifted to use
cheap domestically produced potatoes. Trade sources report that quality
of the domestic dehydrated potato is not as good as the imported
dehydrated potatoes because of the low level of dry matter content in
domestic potatoes.

  --------- ------------- -------------- ------------- ------------- ----------------
  China                                                              
  Potato                                                             
  Starch                                                             
  Imports                                                            
  in metic                                                           
  tons (HS                                                           
  code                                                               
  110803)                                                            

            **Country**   **Sep 03-Aug   **Sep 04-Aug  **Sep 05-Aug  []{.mark}**Sep
                          04**           05**          06**          06-Jun 0[7
                                                                     \*]{.mark}**

  0         \--World\--   21,874         43,126        95,839        18,002

  1         Netherlands   4,267          16,790        37,862        8,014

  2         Germany       2,787          10,637        29,395        4,684

  3         Denmark       7,908          6,551         10,762        1,562

  4         France        4,692          2,938         8,538         406

  5         Poland        1,318          3,504         7,064         55

  6         Sweden        0              1,777         1,187         100

  7         Korea, North  308            651           676           2,224

  8         Japan         341            251           285           475

  9         Thailand      39             16            44            146

  10        United States 25             0             19            1

            Others        189            12            6             336

            \*MY To Date                                             
  --------- ------------- -------------- ------------- ------------- ----------------

  ---------------- ----------------- -------------- ------------- ------------- --------------
  **China                                                                       
  Dehydrated                                                                    
  Potato Imports                                                                
  in metric tons**                                                              
  (HS Code                                                                      
  110510.110520)                                                                

                   **Country**       **Sep 03-Aug   **Sep 04-Aug  **Sep 05-Aug  **Sep 06-Jun
                                     04**           05**          06**          07\***

  0                **\--World\--**   1,830          2,121         3,813         1,166

  1                **Germany**       1,449          1,594         1,282         380

  2                **United States** 240            185           951           519

  3                **France**        0              0             600           0

  4                **Poland**        0              0             270           176

  5                **Denmark**       0              18            252           0

  6                **Netherlands**   51             270           210           40

  7                **Belgium**       0              0             170           1

  8                **Spain**         20             29            29            48

  9                **Canada**        0              0             22            0

                   **Others**        70             25            29            3

                   **\*MY To Date**                                             
  ---------------- ----------------- -------------- ------------- ------------- --------------

## Short Crop Leaves FFF Exporters Unable to Meet Demand in MY06/07 

FFF imports accounted for about 65 percent of total frozen potato
product consumption in MY 06/07 (H.S. Code: 20041000), estimated at
55,000 tons. While FFF consumption is estimated to increase 10 percent
in MY06/07, China's MY06/07 FFF imports are estimated to remain
unchanged from the previous year. This is due to tight world supplies.
There was a short 2006 potato crop in major FFF exporting countries,
including Australia and Canada.

According to China Customs data, the United States is China\'s dominant
FFF supplier, accounting for 61 percent of China's total MY05/06 frozen
potato imports. In MY06/07, U.S. market share was estimated at 68
percent of China's total FFF imports.

If new Chinese plants supply sufficient quantities of quality raw
potatoes to meet their designed output capacity, some companies hope to
expand their market share in China or export to other Asian markets,
like Japan and South Korea. While expanded production will depend on the
limited ability to expand processed potato production, China's MY06/07
FFF exports are estimated to rise by 10 percent from MY05/06 to 15,500
tons, of which 84 percent or 13,000 tons were exported to Japan.

# Potato Marketing

## The Hot Frozen Potato

Frozen potato use in the Quick Service Restaurant (QSR) segment
continues to expand, while the HRI (Hotel, Restaurant, and
Institutional) sector continues to serve as the most direct and
effective channel for introducing potato products to consumers.
Traditional shapes, like shoestring and other cuts, are no longer
adequate to satisfy increasingly sophisticated consumer demand. A major
international processed potato manufacturer with facilities in China
stated that since 2006 demand often outpaced supply. Increasingly, new
shapes and varieties are being introduced to the market, thus creating
more diverse and varied dining choices for consumers. Shapes such as
twister, cross-cut, and wedges are currently selling well, while the
classic shoestring cut is often out of stock.

Competition for the suppliers of U.S. frozen potato persists from both
foreign and domestic producers. Locally produced potatoes are not ideal
for processing and freezing due to higher water and low starch content.
For example, during the processing of shoestring cut potatoes a
significant amount of mass is lost, which raises the product cost.
Further, when fried in oil they lose shape and crispiness faster than
imported U.S. products. Consistent quality is the major advantage for
imported U.S. frozen potato products. Although local potato products are
price-competitive, major QSRs still prefer to use imported potato
products, even at higher prices. Locally produced products are often
supplied to lower-end HRI food service operations.

While retail sales are rising, the market is confined to a rather small
segment since traditional Chinese kitchens do not lend themselves to
preparing French fries at home. With increased availability of QSR
French fries, more consumers can enjoy French fries in an inexpensive,
quick, and convenient manner.

## Fresh Chipping Potatoes

Chipping potato usage is evolving quickly as Chinese consumers generally
prefer fried foods. Crispy texture and diverse flavorings make potato
chips a good fit for the snack food niche. Major international potato
product companies are still the leading manufacturers, while local
producers enjoy limited market share and product varieties.

With greater disposable incomes, increasingly longer working hours and
less free time, snack foods that are portable such as potato chips, have
become increasingly popular especially among young consumers
approximately below the age of 35. One drawback to potato chip
consumption is the usual deep fried preparation followed by treatment of
MSGs and preservatives to prolong shelf life. Crunch chips with highly
delicious flavors continue to attract consumers contributing to the 30
percent annual growth in projected sales. Future market opportunities
may also lie in developing less fatty, baked potato chips.

## Potato Chips Distribution Channels

### 

# 

# 

# 

# 

# 

# 

# 

# 

# 

## 

## 

## The Rising Demand for Potato Starch and Dehydrated Potatoes

Mashed potatoes are one of the most traditional ways of preparing
potatoes in China; however, fresh potatoes are usually used.
Western-style dehydrated potato products are more convenient and quick
to serve, and Chinese consumers increasingly welcome the convenience.

Demand for starch and dehydrated potatoes is on the rise. Due to high
prices and insufficient domestic supplies, the U.S. Potato Board (USPB)
discontinued market development activities in July 2006 in China.
However, dehydrated potato consumption continues to climb and is widely
used in food processing, baking, mashed potatoes, and snacks. The
price-driven QSR sector still looks for affordable supplies, although
international QSR players such as KFC are not usually willing to
sacrifice product quality, and continue to seek imported products.
Accordingly, price adjustments on the franchise's set menu were forced
to adjust prices for other goods to make up for the higher cost of
ingredients. For example, KFC increased menu entrée prices over this
year without a significant fall in demand. Locally produced dehydrated
products have lower starch levels and cannot compete with imports.

With food safety and health considerations on the rise, dehydrated
potato chips have some advantages over fresh potato chips because they
are not deep-fried. Additionally, health-conscious consumers are not
turned off by high fat content concerns. For baking and food processing,
locally produced potatoes are used, although the percentage of waste is
somewhat higher due to high water content. However, their lower cost,
compared to imports, places them at a clear advantage.

## Fresh Table Stock Potatoes

Local consumers prefer table stock potatoes since these can be prepared
in many ways in Chinese cuisine. Boiled, steamed, stewed, sautéed,
stir-fried, mashed, in soup, and as a stuffing are all traditional
Chinese ways of preparation. Many local dishes use potatoes in
combination with other vegetables and meat products. One of the most
common dishes is 'Disanxian' from North China prepared with green
peppers, eggplant and potatoes. In general, Chinese consumers use a high
volume of fresh table stock potatoes annually as they are high in
starch, nutritious, and give a feeling of satiation that lasts longer
than rice. In North and West China, especially in rural areas where
labor-intensive work is common, consumption tends to be higher than in
the South. U.S. fresh table stock potatoes have more varieties and are
unmatched in taste comparability with local products. Recently, reports
publicizing the health benefits of potatoes, such as lowering the risk
of heart disease, cancer, and diabetes, have bolstered consumer
confidence.

## The Down-To-Earth Potato Marketing

International QSRs have been the driving market force for frozen
potatoes in China. For longer-term development, the addition of
China-based QSRs should provide more opportunities for incorporating
frozen, dehydrated, and chipping potatoes into Chinese menu solutions
and dining.

PR and media activities, together with HRI sector activities like chef
trainings, menu and retail promotions are all effective tools for
reaching consumers end users. Nutrition and health benefits need to be
emphasized, establishing potatoes as safe, nutritious, delicious, and
inexpensive food. Rising disposable urban income, longer working hours
and less free time are all factors influencing consumer choice. In
addition, dietary habits vary regionally, and effective marketing must
take these differences into account, which can be an advantage if
properly managed.

Among 14 Emerging City Markets (ECMs) ATO Beijing has identified as
having extremely favorable conditions for trade, five have been pegged
as great high value, high quality product markets for U.S. potatoes:
Wuhan, Chengdu, Chongqing, Harbin and Shenyang, and all strategically
located in either Central or North China. For exporters from the United
States to succeed in the China market, reliable distribution channels
are one of the essential links to maintaining the integrity of high
value products. Frozen potatoes as well as potato chips require special
care to ensure quality. Depending on location, destinations in Central
and West China are usually far from ports, and take longer to reach,
thus adding to higher product costs. In addition, participating in trade
shows like Food and Hotel China and SIAL (held annually in Shanghai) are
all good ways to establish company and product brand image and in
reaching importers, traders, and distributors.

# Statistics Tables 

## 

## Table1. Fresh Potatoes PS&D Table

  -------------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------- ---------- -----------
  **Country**               **China,                                                                                   
                            Peoples                                                                                    
                            Republic                                                                                   
                            of**                                                                                       

  **Fresh                                                                                       (HA)(1000              
  Potatoes**                                                                                    MT)                    

                 2005                  Revised                2006       Estimate               2007        Forecast   

                 USDA\                 Post\      Post\       USDA\      Post\      Post\       USDA\       Post\      Post\
                 Official              Estimate   Estimate\   Official   Estimate   Estimate\   Official    Estimate   Estimate\
                                                  New                               New                                New

  **Market Year                        09-2005    09-2005                09-2006    09-2006                 09-2007    09-2007
  Begin**                                                                                                              

  Area Planted   0                     4880900    0           0          5125000    0           0                      538000

  Area Harvested 0                     4880900    0           0          5125000    0           0           0          538000

  Beginning      0                     0          0           0          0          0           0           0          0
  Stocks                                                                                                               

  Production,    0                     70865      0           0          72000      0           0           0          75600
  Commercial                                                                                                           

  Imports        0                     0          0           0          0          0           0           0          0

  Total Supply   0                     70865      0           0          72000      0           0           0          75600

  Exports, Fresh 0                     329        0           0          400        0           0           0          600

  Processing     0                     4230       0           0          4320       0           0           0          5240

  Domestic Fresh 0                     35300      0           0          35700      0           0           0          37400
  Market                                                                                                               

  Feed Waste     0                     24802      0           0          25200      0           0           0          26200

  Total Dom.     0                     70536      0           0          71600      0           0           0          75000
  Consumption                                                                                                          

  Ending Stocks  0                     0          0           0          0          0           0           0          0

  Total          0                     70865      0           0          72000      0           0           0          75600
  Distribution                                                                                                         
  -------------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------- ---------- -----------

## Table2. Frozen Potato Products PS&D Table

  -------------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- -----------
  **Country**    **China,                                                                                   
                 Peoples                                                                                    
                 Republic                                                                                   
                 of**                                                                                       

                 **Potato                                                             (MT, Net              
                 Products,                                                            Weight)               
                 Frozen**                                                                                   

                 2005        Revised                2006       Estimate               2007       Forecast   

                 USDA\       Post\      Post\       USDA\      Post\      Post\       USDA\      Post\      Post\
                 Official    Estimate   Estimate\   Official   Estimate   Estimate\   Official   Estimate   Estimate\
                                        New                               New                               New

  **Market Year              09-2005    09-2005                09-2006    09-2006                09-2007    09-2007
  Begin**                                                                                                   

  Beginning      0           0          0           0          0          0           0          0          0
  Stocks                                                                                                    

  Production     50000       35000      35000       0          45000      45000       0          0          55000

  Imports        84500       54782      54909       0          54000      55000       0          0          58000

  Total Supply   134500      89782      89909       0          99000      100000      0          0          113000

  Exports        12500       11552      14063       0          13000      15500       0          0          16000

  Domestic       122000      78230      75846       0          86000      84500       0          0          97000
  Consumption                                                                                               

  Ending Stocks  0           0          0           0          0          0           0          0          0

  Total          134500      89782      89909       0          99000      100000      0          0          113000
  Distribution                                                                                              
  -------------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- -----------

# 

# 

## Table 3. Frozen Potato Products Imports (Volume)

# 

  ------------- ---------- ------------- ------------ ----------- -----------
  (Metric Tons)                                                   

  H.S. 200410                                                     

  Country       Apr-Jun 06 Jul-Sep 06    Oct-Dec 06   Jan-Mar 07  Apr-June 07

  World         14,637     19,727        11,128       11,280      16,234

  United States 9,177      13,528        6,858        7,835       11,655

  Canada        4,533      5,094         3,340        2,980       3,797

  Egypt         48         96            48           47          312

  New Zealand   301        661           597          305         300

  Belgium       448        285           151          112         167

  France        1          1             2            2           2

  Germany       0          0             0            0           0

  United        0          0             0            0           0
  Kingdom                                                         

  Italy         0          0             0            0           0

  Netherlands   129        0             21           0           0

  Others        0          62            111          0           0
  ------------- ---------- ------------- ------------ ----------- -----------