Voluntary Report - public distribution

**Date:** 6/9/2006

**GAIN Report Number:** CH6608

CH

**China, Peoples Republic of**

**Organic Products**

**South China Organic Food** **Market Brief**

**2006**

**Approved by:**

![](media/image1.wmf)Keith Schneller

U.S. Consulate General

**Prepared by:**

Ursula Chen

**Report Highlights:**

In over two decades of stellar economic development, China has bolstered
not only an ever-increasing middle class, but also an increased
awareness of a seriously contaminated environment. Many local
entrepreneurs have successfully grown and distributed "green" produce in
South China while sales of organic food are quickly gaining ground in
many mid- to high-end supermarket chains. However, worrying about
whether the Chinese organic food would live up to what the label claims
to be, many Chinese consumers hesitate to buy products that are
generally three to five times more expensive than regular items. So far,
there are very limited organic food categories in the South China
market, which also indicates opportunities for US organic exporters.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Guangzhou \[CH3\]

\[CH\]

[1. EXECUTIVE SUMMARY 4](#executive-summary)

[2. CURRENT SITUATION 5](#current-situation)

[3. EXTERNAL ENVIRONMENT -- OPPORTUNITIES AND THREATS
6](#external-environment-opportunities-and-threats)

> [3.1 Political 6](#political)
>
> [3.2 Social 6](#social)
>
> [3.3 Technological 7](#technological)
>
> [3.4 Economic 7](#economic)
>
> [3.5 Competitive 8](#competitive)
>
> [3.6 Legal 8](#legal)

[4. INDUSTRY ANALYSIS 8](#industry-analysis)

> [4.1 Industry Description and Analysis
> 8](#industry-description-and-analysis)
>
> [4.2 Overview of Guangdong Organic Food
> 12](#overview-of-guangdong-organic-food)
>
> [4.3 Overview of Fujian Organic Food
> 14](#overview-of-fujian-organic-food)
>
> [4.4 Overview of Hainan Organic Food
> 14](#overview-of-hainan-organic-food)
>
> [4.5 Overview of Guangxi Organic Food
> 15](#overview-of-guangxi-organic-food)
>
> [4.6 Overview of Hunan Organic Food
> 16](#overview-of-hunan-organic-food)
>
> [4.7 Overview of Guizhou Organic Food
> 16](#overview-of-guizhou-organic-food)
>
> [4.8 Industry Trends 17](#industry-trends)

[5. CERTIFICATION AND REGULATIONS 19](#certification-and-regulations)

> [5.1 OFDC 20](#ofdc)
>
> [5.2 OFCC 20](#ofcc)
>
> [5.3 HCAQCC 21](#hcaqcc)
>
> [5.4 International Certifiers 21](#international-certifiers)
>
> [5.5 San Pin (three kinds of foods) 22](#san-pin-three-kinds-of-foods)
>
> [5.5.1 No-public-harm Food 22](#no-public-harm-food)
>
> [5.5.2 Green Food (A grade green food)
> 22](#green-food-a-grade-green-food)
>
> [5.5.3 Organic Food (AA grade green food)
> 22](#organic-food-aa-grade-green-food)
>
> [5.6 The New National Regulations on Organic Products
> 23](#the-new-national-regulations-on-organic-products)

[6. PACKAGING AND LABELING 25](#packaging-and-labeling)

> [6.1 Packaging 25](#packaging)
>
> [6.2 Labeling 26](#labeling)

[7. ENTRY BARRIERS 27](#entry-barriers)

[8. COMPETITOR ANALYSIS 28](#competitor-analysis)

> [8.1 Guangdong 28](#guangdong)
>
> [8.1.1 Guangzhou Dong Sheng Organic Vegetables Farm
> 28](#guangzhou-dong-sheng-organic-vegetables-farm)
>
> [8.1.2 Zhuhai Nong Feng Import and Export Company Limited
> 28](#zhuhai-nong-feng-import-and-export-company-limited)
>
> [8.1.3 Zengcheng Organic Farm 28](#zengcheng-organic-farm)
>
> [8.1.4 Shenzhen Yu Nong Ju Industrial Company Limited
> 29](#shenzhen-yu-nong-ju-industrial-company-limited)
>
> [8.2 Guangxi 29](#guangxi)
>
> [8.2.1 Guangxi Sha Lian Na Food Company
> 29](#guangxi-sha-lian-na-food-company)
>
> [8.3 Hunan 29](#hunan)
>
> [8.3.1 Hunan Tea Company 29](#hunan-tea-company)
>
> [8.4 Beijing 30](#beijing)
>
> [8.4.1 Beijing Tian Di Sheng Organic Food Products Company Limited
> 30](#beijing-tian-di-sheng-organic-food-products-company-limited)
>
> [8.4.2 Beijing Hua Bang Food Company Limited
> 30](#beijing-hua-bang-food-company-limited)
>
> [8.5 New Zealand 31](#new-zealand)
>
> [8.6 Competitors' Strengths 31](#competitors-strengths)
>
> [8.7 Competitors' Weaknesses 31](#competitors-weaknesses)

[9. PRODUCT MIX 33](#product-mix)

[10. PLACEMENT MIX 34](#placement-mix)

> [10.1 Importers 34](#importers)
>
> [10.2 Distributors and Wholesalers
> 34](#in-china-not-every-company-or-business-entity-can-bring-foreign-products-into-the-chinese-market.-only-a-company-that-has-import-licenses-can-import-food-products-from-other-countries.-these-companies-can-be-big-or-small.-some-importers-help-buyers-to-handle-only-the-paper-work-while-some-have-their-own-distribution-channels-and-engage-in-selling-the-products-as-well.-it-is-recommended-that-any-potential-us-exporter-take-the-time-to-study-the-market-very-carefully-before-entering-into-a-business-relationship-with-a-chinese-importerdistributor.-the-business-culture-is-dramatically-different-in-china-than-in-the-us-and-personal-relationships-guanxi-is-most-important.-finding-the-right-partner-is-extremely-important-for-the-us-company-to-develop-a-long-term-position-in-the-market-place.-the-ato-in-guangzhou-has-developed-strong-relationships-with-major-importers-in-south-china-and-can-provide-all-sorts-of-assistance-to-us-food-exporters-such-as-setting-up-meetings-recommending-contacts-and-providing-opportunities-for-menu-promotions-and-in-store-promotions.-these-marketing-activities-are-most-useful-in-assisting-local-importersdistributors-get-into-the-hri-and-retail-sectors.)
>
> [10.3 Retail Outlets 34](#retail-outlets)

[11. PRICE MIX 35](#price-mix)

[12. CONCLUSION 37](#conclusion)

# 1. EXECUTIVE SUMMARY

The following report was prepared by a former ATO marketing specialist
as an MBA project at the Royal Roads University in Canada. In over two
decades of stellar economic development with at least 9% annual growth,
China has bolstered not only an ever increasing middle class, but also
an increased awareness of a seriously contaminated environment. US
organic food exporters will find growing demand in the South China
market for high-quality organic food products.

Food poisoning incidents along with SARS, bird flu and the over-use of
fertilizers and chemicals have driven the organic industry to grow and
expand rapidly in South China.

Many entrepreneurs have successfully grown and distributed "green"
produce in South China while sales of organic food are quickly gaining
ground in many mid- to high-end supermarket chains. The Green Food
Development Center, set up by the Ministry of Agricultural, is in charge
of the management and development of green and organic foods. Along with
the Organic Food Development Center, the Green Food Development Center
enacted the national organic food regulations, which came into effective
on April 1, 2005. These organizations not only designed the Chinese
organic standards, but also inspect and audit the actual implementations
of the standards in the marketplace.

Worrying about whether the Chinese organic food would live up to what
the label claims to be, many Chinese consumers hesitate to buy products
that are generally three to five times more expensive than regular
items. So far, there are very limited organic food categories in the
South China market, which also indicates a large gap for US organic
exporters to close.

The organic food sector in the US has been well developed with a wide
variety of products, some of which are seeing saturation in certain
product lines. On the other hand, consumers in China are suffering from
limited organic choices, serious food safety issues and non-credible
organic foods. The demand for safe food in the Chinese market is strong
and the organic food concept will become more popular with proper and
adequate market education.

# 2. CURRENT SITUATION

China joined the WTO in 2001 and has experienced tremendous economic
growth in the past twenty years with a per-capita GDP of over USD1,
200.[^1] Living standards continue to improve and people are spending
more and more on expensive items such as houses and cars. In the next
five years, the Chinese government expects its economy to grow at a rate
of eight percent each year. As Chinese consumers become more affluent,
they are also becoming more concerned about food safety issues and have
more confidence in imported food products compared to locally produced
products.

In 2002，the number of "middle class" households in China was estimated
at 50 million by the French bank BNP, translated into an average annual
income of RMB75,000 (USD9,068) with assets of RMB310,000 (USD37,485).
The "middle class" stratum is expected to double in 2010, two years
after the Beijing Summer Olympic games, with an average household income
of RMB150,000 (USD18,137) and assets of RMB620,000 (USD74,969)[^2]

On the contrary, the food safety situation continues to be a problem in
China Problems arise throughout the entire food sector: from small
processing plants to large state-owned enterprises, from Chinese brands
to internationals brands, from snacks to meat and vegetables. Numerous
regulations and laws have not been able to prevent food poisoning from
happening, although the Chinese government has stepped up its control of
food inspection.

The Green Food Guangdong magazine reported that although China owns less
than 1/10 of the world's arable land, it also utilizes 30% of the
world's nitrogen fertilizer. China is not only the biggest user of
chemical fertilizer, but also the biggest user of pesticides. In the
past 20 years, less than 15% of farming families received training in
how to use fertilizer properly.

The year of 2004 witnessed many serious food poisoning incidents in
China, ranging from domestically made milk powder killing many infants,
to poisonous glass noodles, preserved vegetables, liquor and
spoiledrice. In 2005, even some international brands were reported
having problems in food safety. KFC was hit by unsafe coloring
ingredients. Nestle milk powder and Haagen-dazs ice cream were both
under the media spotlights due to product safety accidents. People are
becoming more and more concerned on what to take home and what to feed
their children The official statistics from the National Information
Center revealed that between 1998 and 2004, there were 1,896 cases of
food poisoning, with 73,534 people affected and 1,254 deaths.

With China's "one child policy", more and more consumers are searching
for safer food to bring home. According to interviews with purchasing
managers at some high-end retail stores in South China, many consumers
are buying more expensive, but safer green or organic labeled foods.
Although China itself produces and supplies some organic products, its
certification standards and labeling management are not consistent.
Therefore, many health sensitive consumers are looking for more
reputable imported products as a solution.

# 3. EXTERNAL ENVIRONMENT -- OPPORTUNITIES AND THREATS

## 3.1 Political

  ----------------------------------- -----------------------------------
  Opportunities                       Threats

  US and China have a positive        The Chinese government is putting
  political relationship.             more efforts into developing its
                                      own organic food sector.

  The Agricultural Departments of     
  various provinces in China are      
  attaching great importance to the   
  organic farming through drafting    
  plans and providing guidance.       

  China enacted its National Organic  
  Standards and Laws in 2005.         
  ----------------------------------- -----------------------------------

## 3.2 Social

  ----------------------------------- -----------------------------------
  Opportunities                       Threats

  SARS, bird flu, and many other food It takes a long time to learn the
  poisoning incidents are major       business practices in China and
  concerns in China.                  build necessary relationships.

  Chinese agricultural products are   Organic is still a relative new
  reported to be heavily polluted     concept to many consumers.
  from long-term, irrational, and     
  over-usage of chemicals in addition 
  to improper disposal of animal      
  excrement and waste.                

  The State Administration of         Definitions and benefits of organic
  Environmental Protection of China   food are not well communicated to
  reported that "seven million        consumers.
  hectares of farm land were          
  irrigated with water containing     
  industrial and domestic             
  sewage."[^3]                        

  Chinese consumers do not have faith Some cultural and language barriers
  in their government's certification may hinder exporters from setting
  and labeling systems.               up business in China.

  US food safety standards enjoy a    
  credible reputation in the Chinese  
  market.                             

  Guangdong province shares borders   
  with Hong Kong and Macau, where     
  organic food is more commonly       
  recognized and accepted.            

  Chinese consumers are worried about 
  food safety and want to provide     
  their families with safe and        
  healthy foods.                      

  More and more people are accepting  
  western style of food and living.   

  Some people are already buying      
  organic food.                       
  ----------------------------------- -----------------------------------

## 3.3 Technological

  ----------------------------------- -----------------------------------
  Opportunities                       Threats

  The internet is becoming more and   
  more common in people's work and    
  family life.                        

  Web sites are one of the major      
  media that people will look for     
  information.                        

  Many high-income consumers are      
  computer savvy.                     

  Organic processing technologies in  
  the US are far more advanced than   
  the South China players.            

  Organic disease and pest control    
  techniques are more sophisticated   
  in the States.                      
  ----------------------------------- -----------------------------------

## 3.4 Economic

  ----------------------------------- -----------------------------------
  Opportunities                       Threats

  China's economy continues to grow   The exchange rate of US dollar and
  at a high rate.                     RMB is around 8 yuan per dollar.

  The income of educated workforce is Little if any economic analysis of
  increasing steadily each year.      the Chinese organic sector.

  The size of middle class is         
  expanding in China.                 

  South China is open to foreign      
  trade and has traditionally been    
  the gateway to the rest of China.   

                                      
  ----------------------------------- -----------------------------------

## 3.5 Competitive

  ----------------------------------- -----------------------------------
  Opportunities                       Threats

  US organic food is of high quality  Organic food production is in its
  and producers have many years of    infancy in China. China has the
  experience managing a credible      potential to become a major
  industry.                           producer and exporter of organic
                                      produce.

  US exporters can provide more       Organic food is included under the
  selections of products that are     green food category and promoted as
  credible to Chinese consumers.      green food which is confusing to
                                      consumers.

  The farm size and production scale  The labor costs in China are lower
  in US are much larger and capable   than the US.
  of satisfying large demand.         

  Processed organic food is scarce in 
  the China market.                   
  ----------------------------------- -----------------------------------

## 3.6 Legal

  ----------------------------------- -----------------------------------
  Opportunities                       Threats

  Measures were put in place to crack There are no specific
  down on counterfeit organic or      laws/regulations that are designed
  green label products by the Chinese for imported organic foods.
  government.                         

  Fraudulent products can be found    Unclear labeling and tax
  everywhere in China, which weaken   requirements for imported organic
  consumer confidence in the          foods
  implementation of laws and the      
  reliability of the Chinese labeling 
  system, giving greater credibility  
  to US labels.                       

  The US food sector is highly        Organic foods are categorized under
  regulated and enjoys a good         green food in China. Government
  reputation among Chinese customers. regulators and officials don't
                                      distinguish organic food from green
                                      food. This diminishes the
                                      uniqueness of organic food and
                                      makes it harder for average
                                      consumers to buy into the idea of
                                      organic food.
  ----------------------------------- -----------------------------------

# 4. INDUSTRY ANALYSIS

## 4.1 Industry Description and Analysis

In China, the organic food sector is being cultivated and managed by the
Green Food Development Center of the Agricultural Ministry at the
national level and the Green Food Office at the Provincial level. There
are some municipal regulating and certification offices, but most of
them remain at the provincial level. Different provinces are at
different stages of development of organic farming and manufacturing.
Among numerous provinces that are switching emphasis from industrialized
farming to organic farming, Helongjiang province in the north is one of
the most experienced pioneers followed by Jiangxi, Zhejiang, Shandong,
Jiangsu and Guangdong. The first certified organic product in China was
tea from Zhejiang province back in 1990. As China is now facing more
technical barriers in international trade, the Chinese government has
realized that going organic can be the answer to some of the trading
conflicts it has with Europe, Japan, and the US. Thus, various levels of
Green Food Offices and certification centers were set up by the
Agricultural Ministry to regulate and promote organic agriculture in
China.

As a matter of fact, other than regular food items in the market, there
are three "green" food categories being pushed by the government at all
levels: San Pin, i.e. no-public-harm food, green food and organic food.
The "no-public-harm" food category almost implies that all other,
conventional foods are harmful. This category basically meets
conventional food standards in most Western countries. Green food does
not mean food that is green in color, but a symbol that suggests the
food is wholesome and safe for consumption. However, much confusion
remains in the market because the government didn't spend much effort in
communicating these various classifications or labels to consumers. As a
result, consumers have not realized the full value carried in these
products and labels. For organic food, only some people within the food
industry have heard about or are knowledgeable about organic food.
However, even retailers, purchasing managers or sales staff of organic
food items unfamiliar with these "green food" definitions. Consequently,
many consumers do not buy any of these three food categories, not to
mention buying specifically organic.

The production of green food and organic food are managed by the Green
Food Office of the respective provinces. The same office is also
responsible for the certification process, although it has a different
name for that purpose: China Organic Food Certification Center (OFCC).
Therefore, the policy maker sets standards and audits the implementation
of them.

Currently, there is no direct state or provincial subsidies from the
government, however, some cities or counties may have their own
incentive programs to recognize products that claimed to be A grade or
AA grade green food (equals organic food, according to OFCC)
certification. Some educational materials and training courses are
offered to the local farmers in cities of Guangdong province.

Although China became a member of the International Federation of
Organic Agriculture Movement (IFOAM) in 1993, the concept of organic has
not been clearly communicated to its consumers. Many government
officials, businessmen, and farmers understand organic agriculture as
things that have been done in the past. Namely, that everything was done
naturally. Most organic farming is being carried out in remote or
undeveloped mountainous areas. To protect its international market
shares, the Chinese government has been working on improving its
regulation and certification systems to meet European, US and Japanese
organic standards. Meanwhile, bilateral certification negotiations are
also underway with some countries.

According to Dr. Huang Jian Hong of Guizhou Province People's Congress
Office, major barriers of further development of China's green (organic)
food are:

-   Obsolete production equipment

-   Serious environmental contamination

-   Poor inspection techniques

-   Weak branding protection

-   Ineffective inspection, approval, and tracking systems

For the processed food sector, although some products were certified as
green (organic) food, the production ingredients do not meet the
requirements of green food. In some cases, residue rate of fertilizer,
feed additives, animal medication and other toxic materials are very
high. Some green (organic) food producers do not follow instructions to
make sure the green (organic) food standards are maintained through out
all stages of production, transportation, warehousing and sales.

It is very difficult to locate statistics for organic food, as most of
the information available combines conventional, green food, and organic
food data together. Organic food constitutes less than 0.1% of the whole
China food market, far lower than the average rate of 2% in the world.
The Chinese government has expressed its strong desire to expand organic
farming and requested each province to increase organic production 5 to
10 times more than the current level in the next 5 to 10 years with
focuses on vegetables, grains, poultry, livestock and tea.

OFCC started its certification work from 2002 and there are now 288
companies and 843 products that were certified as organic with a total
annual production of 450,000 tons. In 2004, \$230 million of organic
food products were exported,[^4] but it is not easy to meet the quality
needs of the international market.

With increasing demand from the international market, the domestic
market also saw growth and is expected to gain more significant market
share in the years to come. The government is discussing subsidies for
certified products, farmers, and manufacturers and may also fund the
promoters of certification, inspection and training institutes

Since Chinese farmers own small pieces of land individually and know
very little about the concept of organic farming, the organic operation
is more like carrying a contract. Some entrepreneurs saw opportunities
in exporting organic products so they placed orders to farmers on what
they wanted. Farmers would follow requirements of the contract and
produce the products, then turn over to the buyers for a pre-set price.
The buyers are responsible for packaging, storing, shipping and selling
the contracted organic products.

All of the organic food is sold in mid- to high-end supermarkets. There
are few if any specialty stores or farmers' markets for organic products
in South China. All but one retail chain in South China is currently
selling their own organic products namely, the Beijing Tian Di Sheng
Company under the trade mark of Organic Farm. The products are mainly
fresh vegetables, while some stores carry some organic grains and beans
from the same supplier. The prices are normally three to five times
higher than the conventional products. Buyers are mainly women between
30 to 45 of age with high incomes.

All of them reported that the reason for buying organic foods was for
health considerations and because they were a safer choice. They would
buy organic products whenever possible and the prices are not of too
much concern to these regular users.

Many of the customers of JUSCO, a Japanese retailer, are expatriates
living and working in South China. They were much more concerned about
the food safety records of China and have the extra income to afford
organic products. Worrying about counterfeit organic products, organic
customers will only shop from international chain stores, relying on
their internal controlling system on the authenticity of the organic
products. Therefore, the retailers of organic products have strict
requirements on their suppliers and would arrange lab test for sample
products regularly. JUSCO recently signed a contract with a lab in the
city of Qingdao in Northern China. Some samples of the organic labeled
products sold in JUSCO will be flown to the lab for residue testing. The
"trust contract" between JUSCO and the supplier, Beijing Tian Di Sheng
Company, would forfeit the failed products from selling in any of their
chained stores in China. JUSCO has experienced great potential in
selling organic products and expects to expand the line into more
stores.

The other supplier of organic vegetables was found in Shenzhen, a
special economic zone of South China. Shenzhen Yu Nong Ju Industrial
Company Limited sells only in one chain store in the city, the Sui Bao
Department Stores, to test the market.

## 4.2 Overview of Guangdong Organic Food

  -------------------------------------- --------------------------------
  Certified Products                     Tons

  Vegetables                             1,000

  Fruits                                 710

  Rice                                   360

  Tea                                    143
  -------------------------------------- --------------------------------

(Source: Guangdong Green Food Office, Sept. 2005)

In South China, Guangdong is the trend leader in pursuing organic
farming/production on a large scale. According to the Director of the
Guangdong Green Food Office, there are currently 9 companies and 74
kinds of products that have been certified as organic by the OFCC, with
a total production of 8,411mu[^5] (560.73 hectare) and 2,213 tons. Four
more are applying for organic certifications in 2005. The majority of
the products are for export to US, EU, Japan, Russia, Hong Kong and
Macau. Because it is possible to receive certification from a variety of
agencies the number of other organic producers/manufacturers is unclear.
Other certifiers are from Nanjiang province, Hong Kong, Japan, US,
German and Switzerland.

Guangdong is known for its OEM manufacturing, so a large volume of
arable land has been converted into industrial property in the past
twenty years. To expand the organic food sector, the government and
investors chose remote and underdeveloped areas in the mountainous
region, where manufacturing, pollution or contamination is relatively
low. This strategy makes it easier to control and manage production
activities.

Liu Hong Sheng, a researcher at Guangdong Agricultural Office, pointed
out that the trend of Guangdong agriculture is to develop A grade green
products as the technical requirements are moderate, fit the current
level of farming labor quality and the returns are easier to obtain. It
is much more difficult to convert to organic farming as the requirements
are very high and the labor force in Guangdong does not have the
necessary skills to bring organic farming to such a high level. Some
larger enterprises may attempt this in the future, but for general
farmers, organic farming is not an option that they can technically
pursue at the present time.

In Guangdong, the provincial government does not provide monetary
support or subsidies for organic production activities. However, some
municipal governments may offer incentives for farmers to convert to
organic. Currently, there are no organic meat products in South China.
The Director of Guangdong Green Food Office explained that the food
chain for organic livestock is long and difficult to monitor and inspect
for certification purposes. As the auditor will have to trace back to
the animal feed and animals tend to get sick through out their life
time, it is very hard for farmers to make sure that their products are
organic.

For fresh produce, the certification fee is around 10,000 yuan (USD1,
242.24)[^6] per year per product. The Guangdong Green Food Office has
seven auditors working on the certification of green and organic food
products in the province. The provincial government would like to expand
organic production in Guangdong and encourage organic specialty stores
to be opened in some high income neighborhoods. If the proper amount of
marketing work is done for organic food, the Guangdong Green Food Office
believes there is great potential for consumers to buy organic products.

  ---------------------------------------------------- ----------------------------------------------------
  ![](media/image2.jpeg){width="3.004166666666667in"   ![](media/image3.jpeg){width="3.004166666666667in"
  height="2.2527777777777778in"}                       height="2.2527777777777778in"}

  ---------------------------------------------------- ----------------------------------------------------

(According to the manager of the Fresh Produce Department of JUSCO, this
small display unit was able to generate over 40,000 yuan (USD 5,000) of
sales in its first month of the debut.)

Guangdong is the only province in South China that has organic products
in stores. Shenzhen, Guangzhou and Zhuhai are leading the trend in
consumption of organic products.

## 4.3 Overview of Fujian Organic Food

  ------------------------------------------ ----------------------------
  Certified Products                         Tons

  Dried and fresh fungus                     1,530

  Spring Bamboo Shoots                       N/A

  Camellia Seed Oil                          N/A

  Tea                                        N/A
  ------------------------------------------ ----------------------------

Source: Fujiang Green Food Office, October 2005

In Fujian, there is one provincial Green Food Office and nine municipal
branches in charge of the regulation and administration of organic
agriculture. In 2003, there were seven kinds of food products that
received OFCC certifications as AA grade green food (namely organic,
according to OFCC). Organic tea is the main product in the province.
Fujian has long history for growing high quality tea in China, so it is
a natural move for the growers to switch to organic in order to keep up
with the demand of the international market. In addition to tea, some
wild fungus and bamboo shoots also received certifications as being
organic. The data on total organic production are not available as the
existing information combined "San Pin" together for reporting.

The emphasis of organic food in Fujian is entirely for export. All of
the products are sold outside of China and can enjoy favorable
governmental subsidies and incentives. Some of the cities will provide
subsidies or bonuses for enterprises that successfully produce organic
products. Zhangzhou city is the key player in organic food production in
Fujian, thanks to its natural environment and the government's emphasis
on earning hard currencies.

It should be noted that some of the Fujian certification agencies did
not abide by the standards set up by the State administrative authority
and lost their status as a certifier of organic food.

## 4.4 Overview of Hainan Organic Food

Unlike the rapid growth in other provinces, the green food sector in
Hainan did not see a surge in the past years; instead, the sector is
shrinking despite growing consumer demand. Hainan is an island away from
the mainland and is the only province that has a tropical climate in
China. It has potential to develop specialty organic products but due to
various reasons the sector was not able to grow from the green food
base. There were 23 companies and 45 products that were certified as
green food, and now only 13 companies are left with 25 products.
Commodities are mainly tropical fruits, tea, poultry and bottled water.
There are no certified organic products in the province.

The Hainan Green Food Office is staffed by only one person with a very
small operating budget. The certification expenses are high and there
are no favorable government policies and programs to support the sector.
However, remaining players in the market see great potential for the
future of their green labeled fruit. The President of Hainan Bao Feng
Agricultural Development Company, Luo Zhao Zhen，said that their
products enjoyed prices two or three times higher than regular fruit
items on the market and sales keep climbing steadily, although he also
commented that they have come a long way in surviving in the relatively
new "green food" market.

Farmers and owners of businesses in Hainan are optimistic about the
green food sector and would like to increase production of organic
products when the government reduces the certification and labeling
fees, as they also see increasing demand for safer and healthier
products. In addition to the higher certification costs, the hot weather
in this province also makes it difficult for farmers to control and
manage diseases affecting plants and animals.

The Green Food Office of Hainan is working on reducing costs for
producers and manufacturers that would like to apply and use the green
label. For example, the usage of the green label for egg products is
expected to be cut from over 10,000 yuan (USD 1,242) to 1,800 yuan (USD
223.6).[^7] It is expected that the organic food sector will grow in
this province in the coming years under this favorable policy.

## 4.5 Overview of Guangxi Organic Food

  ------------------------------------------ ----------------------------
  Certified Products                         Tons

  Vegetables                                 N/A

  Tea                                        N/A
  ------------------------------------------ ----------------------------

(Source: Guangxi Green Food Office, October, 2005)

Organic food is an emerging sector in this province. There are a handful
of producers that are producing organic vegetables and teas. Like other
provinces, all the organic products are being exported with no retail
sales within Mainland China. The Director of Guangxi Green Food Office
sees Guangxi as a great potential supplier of organic products due to
vast uncontaminated land and diverse geographic environment. With long
coastal line and plenty of untouched forestry land, the province's
agricultural officials would like to promote the "San Pin"
(no-public-harm food, green food and organic food) to a larger scale.
Some educational programs and incentive policies are being developed to
help the sector grow. Meanwhile, the province is building a "green"
marketing network that would tie the production, wholesale, retail, and
promotion of "San Ping" together.

## 4.6 Overview of Hunan Organic Food

  ------------------------------------------ ----------------------------
  Certified Products                         Tons

  Tea                                        5,000

  Orange                                     N/A

  Vegetables                                 N/A
  ------------------------------------------ ----------------------------

(Source: Hunan Green Food Office and OFDC, October, 2005)

Since 2000, the export of green products (including organic products)
has maintained an annual growth rate of 50%, with total value exceeding
USD 40 million in 2004. Organic tea is the main item for sale on the
international market, complemented by oranges and vegetables. There are
21 tea producers that received organic certifications, covering over
20,000 mu (1,333 hectares)[^8] of land with annual production of 5,000
tons. To expand the exportation, Hunan province sought close cooperation
with some international certification bodies, so that its organic
products could meet the widely accepted standards.

To facilitate the trading of green products, the National Green Food
Wholesale Market was founded in Changsha, the capital city of Hunan. The
market occupies 70,000 square meters with over 1,500 pavilions for
trading, serving Central and Southern China with safe and healthy food
products.

Despite the ambitious plans of the Hanan agricultural officials,
researchers pointed out that the province's natural resources have been
deteriorating seriously. Over application of pesticides and fertilizers,
industrial pollution and overuse of the land has been gradually reducing
the productivity of the soil. If the government does not take corrective
actions, it will be impossible to develop organic production in Hunan.

## 4.7 Overview of Guizhou Organic Food

  ------------------------------------------ ----------------------------
  Certified Products                         Tons

  Maotai Liquor                              N/A

  Tea                                        N/A

  Chicken                                    N/A
  ------------------------------------------ ----------------------------

(Source: Guizhou Green Food Office and OFDC, October, 2005)

The first certified organic product of Guizhou was granted by OFDC in
December 2003. Although it came into the game a bit later than other
Southern China provinces, Guizhou has obtained some organic
certifications for its tea products in the past two years and was the
first province in Southern China to produce certified organic chicken.
Maotai, one of the most famous Chinese liquors better known as "baijiu",
also received an organic certification. The Green Food Office of Guizhou
published guidelines on how to produce organic fertilizers and animal
feed for its farmers. It is also planning to produce organic beef once
researches on the feeding and production techniques are completed. Even
though the government is discussing how to help farmers build their
brands in organic products and increase auditing, inspection and
marketing activities, farmers in Guizhou are not as organized as their
counterparts in other provinces. They tend to work on their own and
decide what to grow and how to produce by themselves. There is very
little government intervention in the agricultural sector in Guizhou.
Because organic farming and production requires a strong foundation and
necessitates lots of input from both the government and farmers
throughout the whole process, the organic food sector in Guizhou will
take time to develop.

## 4.8 Industry Trends

Growing concerns on food safety -- Consumers, government, and
producers/manufacturers are all paying more attention to serious food
safety issues in China. Wholesale markets, distribution centers and
supermarkets are requested to test chemical residues of products before
selling. Many cities have developed tracking systems to trace
"no-public-harm" produce and meat products sold both in traditional wet
markets and modern supermarkets. With these "electronic identification"
bar codes, producers and farmers could be identified for over usage of
chemicals. Meanwhile, well-informed consumers with higher income are
becoming more sensitive to food safety issues. They are seeking ways to
reduce their intake of unsafe food products through buying from more
credible international chain stores or consuming more organic products
whenever possible. With the Beijing Olympic Games coming, many
agricultural practitioners are aiming to become the official suppliers
of the 2008 Games. So they are voluntarily placing more efforts in
improving product quality and safety.

Increasing emphasis from the government -- The government has seen
organic farming and production as an effective way to face the
challenges of international trade barriers. In addition to earning hard
currencies, the exports of organic products can improve the economic
status of low-income farmers. Thus, the government will continue to
expand the scale of organic farming by introducing more favorable
policies and programs. Director Ma of China OFCC claimed that
certification for organic food has increased by more than 40% each year
for several years now and the center will work hard to promote organic
food and its credibility.

Growing initiatives taken by retailers -- More retailers promise to
provide safer food products to customers, especially the foreign
supermarket chains. All of them have developed their own food safety
insurance systems and promote it at the entrance of every fresh produce
section. Some retailers are also setting up inspection and tracking
systems. A large number of supermarkets post explanations of organic
food and its benefits next to the products along with respective organic
certificates.

Aligning organic standards with the international requirements --
Technical barriers such as stricter maximum agricultural chemical
residue limits and environment requirements for farm products press the
Chinese government to bring its organic standards up to international
levels. The Ministry of Commerce has launched training programs for
organic exporters and farmers to prepare for the stricter export rules
set by Europe and Japan.

Cracking down on counterfeit organic labels -- The government has
acknowledged worries about fake organic products hindering the growth of
the sector; hence more inspections and management efforts are being
introduced to protect authentic organic products while heavier
punishments are being enforced on the illegal use of the labels.

Branding organic products -- Some organic producers have branded their
products to differentiate themselves from conventional produce. The
Beijing Tian Di Sheng Company uses "Organic Farm" as their brand for all
of their products, although not many efforts have been put into adding
value to the brand or managing different perceptions of the brand.

Expanding varieties -- At the beginning, tea was the only commodity that
was grown organically. In South China, there are now many kinds of
organic vegetables, fruits, mushrooms, and poultry. Organic seafood and
meat products are being explored in some areas.

Emerging processed products -- Some of the organic fruit growers in
Guangdong are planning to turn their organic produce into organic juice.
Although the processing techniques are simple and the manufacturing
scale is small, there are already some preliminary processed organic
foods available in Beijing, Shanghai, Zhejiang and Jiangsu.

Enlarging consumer base -- Rapid economic development in China has
resulted in an ever increasing middle-class. Incomes of educated
consumers are rising each year and so are their concerns on health
issues. Frequent buyers of organic products do not mind the higher
price, as long as they can bring home safer and healthier food.

Increasing market presence -- More and more retailers are selling
organic products, and some cities are planning to have specialty stores
and designated outlets for organic products. In Zhuhai city of Guangdong
province, the Golden Garden Green Food store carries only green foods
and organic food items. Although consumer knowledge of organic products
is still relatively low, sales are steadily increasing. In July 2005,
the first organic food supermarket, OStore, was opened in Shanghai. The
store also includes an organic bakery section and a small cafeteria. The
sales floor is around 100 square meters and 98% of the store customers
are expatriates living or working in Shanghai. The Store carries over a
hundred kinds of food items such as beans, noodles, flour, vegetables,
rice, aquatic products, beverages, breakfast, and snacks. Many of the
products are from the US, Japan and Germany, while some are made by
local joint-venture companies.

Increasing governmental subsidies to develop the sector -- Many growers
and producers have complained about the high certification and auditing
costs associated with organic production. To help the sector grow, the
government is working on reducing various fees, taxes, and loan programs
while developing more support programs for certified products and
enterprises in addition to putting more incentive programs in place for
organic certification which would include promotions, training, and
extension services for farmers and producers. Government officials claim
that according to WTO policies, the Chinese government can subsidize
their farmers up to 8.5% of the total production value. At present, the
Chinese government provides only 3.3% of allowances to agriculture.
Therefore, it has flexibility in providing increased support to the
production of green and organic food.

According to Zhou Ze Jiang, an engineer at OFDC, there will be a 40% to
50% annual growth of the organic sector in the next few years. It is
expected that in ten years the organic food sector could account for 1%
to 1.5% of the domestic food market with 3% of market share in the
international market. The government has realized that organic
production is a sustainable way to develop the agricultural sector of
China.

# 5. CERTIFICATION AND REGULATIONS 

In 1990, the first organic product to be certified in China was tea of
Zhejiang province by a Dutch certification body. Up till now, there are
three Chinese entities that are involved in certification of organic
products:

a)  Organic Food Development Center (OFDC)

b)  Organic Food Certification Center (OFCC)

c)  Hanzhou China Agricultural Quality Certification Center（HCAQCC）

## 5.1 OFDC

The first Chinese certification body was the Organic Food Development
Center (OFDC) of the State Environmental Protection Administration.
Founded in 1994, this partly State run entity was accredited by IFAOM in
2003. It works together with the government, farmers and enterprises in
promoting organic farming and production in China, while engaging in
active dialogue with international organic practitioners. Based in
Nanjing, OFDC has set up 22 offices in most of the major cities and
granted certificates to over 400 organic farms and processors. By the
end of 2004, there were 228 companies and 588 kinds of products which
received organic certificates from OFDC with annual sale of 3.5 billion
yuan or USD230 million. It maintains bilateral recognitions with many
countries as most of its clients' products would be sold outside of
China. The OFDC, which has become the most credible Chinese
certification agent, claims to be using the same organic standards as
the International Federation of Organic Agriculture Movements (IFOAM).

## 5.2 OFCC

China Green Food Development Center (CGFDC) was set up by the China
Agricultural Ministry to engage in certification and management of the
green food sector in China. Founded in 1995, CGFDC introduced different
grading systems among green food, i.e. A grade and AA grade green food.
In 2002, China Organic Food Certification Center (OFCC) was founded by
the CGFDC to expedite the expansion of organic products in China.
Despite its English name, China Organic Food Certification Center, its
Chinese name does not communicate anything related to organic food. The
mission of the organization is to promote and certify organic products,
but an average consumer would not associate this organization's name,
China Green (direct translation in Chinese), with organic food.

In two years, OFCC has expanded to 38 branches and a total of 140
registered inspection personnel in addition to 42 experts in the field.
Standards of A grade Green Food was drafted with reference to the food
and hygiene standards in developed countries. The AA grade green food
standards were based on the basic principles of organic food by IFOAM,
supplemented by regulations that were unique to the current situations
of China. Director Guo Chun Min of OFCC recently stated that there were
148 newly certified organic enterprises in 2004, an increase of 45% from
the previous year.

As of 2004, 588 commodities were certified as organic by OFCC totaling
372,000 tons. Product breakdowns:

![](media/image4.wmf)

## 5.3 HCAQCC 

Founded in 1999, the Organic Tea Research and Development Center (OTRDC)
is the most accredited authority in providing certifications to organic
tea and its products. With approval from the China Agricultural
Ministry, OTRDC specializes in certification of tea and related products
in China. The standards it uses were developed with references to the
international requirements while making adjustments according to China's
current situations. In addition to certification, it also provides
training to growers and processors of tea products. In 2003, OTRDC
changed its name to Hangzhou China Agricultural Quality Certification
Center (HCAQCC). As a result, it is no longer a governmental agency but
an independent business entity. HCAQCC has its own labels and
certification systems for tea products. So far, there are over 200 tea
growers and processors who have received certification from HCAQCC.

## 5.4 International Certifiers

In addition, the offices of some international certifiers can also be
found in China, such as the Organic Crop Improvement Association (OCIA),
the Japan Organic and Natural Foods Association (JONA), ECOCERT
International, BCS and GFRS of Germany, SKAL of The Netherlands and the
Institute for Market Ecology (IMO) of Switzerland. Most of these
international certifiers have local partners in China, either with a
governmental agent or a local agricultural university, such as the OCIA
with OFDC and the French Ecocert with China Agricultural University.
There are now over 500 international certifiers in China. During the
certification process, these international entities implement the
standards and requirements according to the laws and regulations of
their respective countries, although they are operating within Mainland
China. Literally, all these entities fall under the management of the
OFDC. In 2004, administrative responsibility was transferred to the
Certification and Accreditation Administration of China (CNCA). Nearly
all the products certified by these organizations were sold outside of
China, except some organic products of Beijing Tian Di Sheng Company,
which is the largest Chinese organic producer and distributor within
China. In order to get their products into as many international markets
as possible, many organic producers applied for certification from more
than two certifiers. For export-oriented enterprises, the German BCS
certified many of their products as it has negotiated bilateral
recognition with the United States, Japan and Europe.

## 5.5 San Pin (three kinds of foods)

Until recently, OFCC certified organic food as AA grade green food. This
was because when China started environmental friendly farming a few
years ago, it realized that it was impossible for the whole country to
go organic. Therefore, it created a "green" idea that would include both
green food labels and organic food labels. In China, there are three
food categories that are not clearly defined and often confusing to
consumers and even some retailers: "no-public-harm" food, green food and
organic food. The definitions for these three categories are very
ambiguous. Even on the official website of the Chinese food related web
pages, a consumer will not get a clear picture of the defining
characteristics of each category. Below are the explanations according
to the Director of the Guangdong Green Food Center.

### 5.5.1 No-public-harm Food

"No-public-harm Food" is the minimum food safety requirements developed
by the Chinese government. In 2003, the China Agricultural Ministry set
up a 5-year goal to improve the quality standards of all agricultural
products to at least meet the requirements under this category. At the
current time, most Chinese food products do not meet these minimum
safety standards.

### 5.5.2 Green Food (A grade green food) 

Despite its name, Green Food does not refer to the color of the food.
Instead, "green" implies wholesomeness and safety. When the China
Agricultural Ministry developed its food safety standards in the 1990s,
it wanted to bring its safety requirements close to those of developed
countries, such as the US and Europe. Therefore, when a product has a
green label, it means it has most likely met the basic food safety
levels of most western countries -- and has nothing to do with the
organic standards of these countries. Under the requirements of this
label, only certain chemicals can be used in limited amounts and for a
limited time. Occasionally, some food products that have green food
labels can be found in regular supermarkets.

### 5.5.3 Organic Food (AA grade green food)

The "organic" label came to the market only two years ago. Before, there
was no organic label issued by OFCC. If the products received AA grade
green food certification, then it meant that the products met the
requirements of organic food. Hence, AA grade of green food equals
organic food in China. According the Green Food Development Center of
China, AA grade green food was produced in an environment that meets
organic production standards. No chemicals were used through out the
production process and the production and packaging techniques passed
the specific requirements and inspections. Since many of the statistics
published by the Chinese government combine A grade and AA grade green
food, it is very difficult to get meaningful data to gauge the organic
food market in China. As a result of increased demand in organic food,
OFCC stopped using AA grade green food to address organic food items in
2003. In the meantime, OFCC's own organic labels were designed and
granted to products that met its requirements.

## 5.6 The New National Regulations on Organic Products

Before April 1 2005, there were no national or unified industrial
organic food standards in China. All the three Chinese certification
bodies are members of IFOAM, but used their own standards for organic
products. Due to these different standards, the certifiers did not have
a system that will recognize certifications from other organizations.
Back in 2001, OFDC published some guidelines and regulations for organic
certification and production. However, the three certifiers still used
their own certification standards. OFCC has its standards for AA grade
green food (organic food) standards, while OFDC implementing IFOAM's
standards and OTRDC using tea industry standards in China. International
agencies implement US, European or Japanese standards when issuing
organic certificates. Directors from the three Chinese certification
bodies said all these different variations are quite similar but the
implementations varied. For example, all of them require organic food to
be grown on uncontaminated land. When auditing, some certifiers would
skip inspecting the soil or water quality if the farm was located in a
remote area, away from industrial pollution.

In 2003, CNCA published Regulations on Certification of Organic
Production and Procession based on the OFDC standards. In the same year,
it started consultations on national organic food standards with an
objective to develop a set of standards that are recognized
internationally while accommodating the uniqueness of the current
situations in China.

On April 1, 2005, the Certification Administrative Procedures of Organic
Products were launched by CNCA. At the same time, the National Standards
of Organic Certification were being implemented along with the new
training and registration of organic auditors. With the new Procedures,
the China government hopes to maintain its market share in the European
organic food products and be on the list of Europe's "Organic Food
Supplier List of the Third Country". Mr. Xiao Xin Ji, Director of OFDC
commented that this new Procedures lay a solid base for the first
unified national standards for organic foods through eliminating
situations where individual certifiers could use their own standards
when certifying organic products. It set a milestone in promoting the
whole organic food sector in China.

Starting April 1, 2005, all the organic products sold in China are
required to print both "Chinese Organic Products" in Chinese and
"Organic" in English onto the packaging materials of certified organic
products. Eight months after the introduction of the new Procedures,
there were no organic products that could be found in the supermarkets
that met the requirements.

After April 1, only products that were certified by agencies that are
accredited by CNCA can label its products as organic. However, these new
procedures also require organic certification agencies to be an
independent legal entity and have a certain amount of registered
capital. This became problematic for many non-profit certifiers who were
advocates for environmentally friendly organic farming practices.
Literally, all the international certification bodies are operating
illegally in China according to these two requirements.

The other drawback with these new procedures is that it does not explain
how foreign organic food products can be sold in China, products that
received certifications from international agencies, or how they could
sell their products in China in the event they decide to switch from
exporting. Since there are no international certification agencies that
have been approved by the CNCA, these certifiers can not use the newly
introduced organic labels. Consequently, products not certified by one
of the three Chinese certifiers can not be sold legally in China.

According to these new procedures, packaging materials or labels that
consist of words such as "organic product", "converting to organic
product", "non-contaminated", or "completely natural" without proper
certification, will face fines up to 30,000 yuan (USD 3,727)[^9]. But as
with many administrative regulations on paper, the implementation of
this policy is extremely difficult in China. Packaging that contained
the above mentioned words appeared everywhere in the market eight months
after the introduction of the new procedures.

Some of the highlights of the new procedures:

-   Labels with "Chinese organic food products" in Chinese and "Organic"
    in English must be printed or placed with stickers onto the
    packaging materials of the organic products;

-   Product that contains more than 95% of organic ingredients can be
    labeled as "Organic";

-   For processed foods with more than 70% but less than 95% of organic
    ingredients, can be labeled as "Manufactured with Organic
    Ingredients";

-   For products that contains organic ingredients less than 70%, can
    only mark the specific ingredient/s as organic;

-   There are two kinds of certified organic label under the new
    procedures. One is "Chinese organic product", and the other is
    "Conversion to organic product". The design of the logo is the same,
    but the color is different, green for organic, brown for conversion
    organic;

-   Producers of organic products have to apply for sales permit and the
    sales volume can not exceed the approved limit;

-   Organizations that are engaging in organic food certification must
    apply for recognition of its qualifications and competencies from
    the Organic Food Certification Committee of CNCA;

-   Certification organizations have to be an independent legal entity
    with some registered capital;

-   Organic labels are to be provided by the Organic Food Certification
    Committee;

-   The organic certification is valid for one year. Producers or
    farmers must apply for renewal each year.

Although CNCA said it did not intend to limit the numbers of certifiers
in the China market, it is expected that many small sized organizations
will eventually be phased out. Three years ago, OFDC was the only
certifier for organic products. Since the organic food market is very
small in China, many certification organizations may not have enough
business after the introduction of the new procedures.

# 6. PACKAGING AND LABELING

## 6.1 Packaging

Unlike organic food sold in the US, all organic fresh produce is packed
in small quantity in plastic wraps or bags. Although the packaging makes
it impossible for consumers who prefer touching and feeling the produce
by hand, the advantage is that the price of the produce will not seem
too expensive as it would otherwise appear in larger quantities. For
example, tomatoes will be packed by two pieces in a plastic wrap,
selling at 8 yuan (USD 1) per unit. This kind of packaging strategy can
help consumer to make the purchase decision easier than putting the
produce loosely on the display counter. As many media pointed out that
counterfeit products are everywhere in China, the system of trust in the
China market is lacking. Consumers in Mainland China still have
difficulties believing what the organic label claims, which affects
their buying decisions. If organic produce is being loosely displayed,
skeptical consumers may think that the products are the same kind of
regular produce but being packed in an organic labeled plastic bag for
staggering prices. Since consumers can not tell whether a product is
organically grown or not from the appearance of the product, the
packaging and labeling become the critical link in marketing the product
which is conceptually different from other regular agricultural
products.

China is still in the process of developing guidelines for storing,
handling and packaging of organic products.

## 6.2 Labeling

All of the certified products are required to place the organic label on
its packaging materials along with the name of the product, place of
origin, manufacturer/producer, production date, shelf life, and product
grade. At present, there are three kinds of organic labels in the China
market, one from each of the Chinese certification organizations,
namely, OFDC, OFCC, and HCAQCC. It is important to know that, as of
April 1, 2005, the new "organic" label and "conversion to organic" label
were introduced to replace the above mentioned labels. With only one
organic label in the market, it is hoped that more branding and
positioning of the sector can be done to better educate consumers.
However, there still seems to be much confusion in the market place
regarding the new labels. Several OFCC staff were either unaware of the
new labels or did not know the new labels are in effect already. OFDC
explained that the three labels will continue be used for certification
purpose and the new labels will be put along with their existing ones.

+-----------------------------------+----------------------------------+
| Organic label of OFDC             | ![](media/image5.jp              |
|                                   | eg){width="1.2361111111111112in" |
|                                   | height="1.5520833333333333in"}   |
+-----------------------------------+----------------------------------+
| Organic label of OFCC             | ![](media/image6.p               |
|                                   | ng){width="1.2236111111111112in" |
|                                   | height="1.2597222222222222in"}   |
+-----------------------------------+----------------------------------+
| Organic tea label of HCAQCC       | ![](media/image7.p               |
|                                   | ng){width="1.1819444444444445in" |
|                                   | height="1.1819444444444445in"}   |
+-----------------------------------+----------------------------------+
| New organic label in China        | ![](medi                         |
|                                   | a/image8.jpeg){width="1.19375in" |
| (introduced on April 1, 2005)     | height="1.1277777777777778in"}   |
+-----------------------------------+----------------------------------+
| New conversion label in China     | ![](media/image9.jp              |
|                                   | eg){width="1.2354166666666666in" |
| (introduced on April 1, 2005)     | height="1.1819444444444445in"}   |
+-----------------------------------+----------------------------------+

# 7. ENTRY BARRIERS

-   Organic food is a brand new concept to most Chinese consumers. Even
    for those who have been exposed to the terminology, they are still
    confused by the various categories mentioned above:
    "no-public-harm", "green" foods, or "organic" foods. There is a
    large amount of education and marketing that needs to be done in
    order to increase the sales of organic products;

-   Weak market recognition of organic food: In most mid- to high-end
    supermarkets, when approached for organic products, customers would
    be referred to the "no-public-harm food" unit. Many retail staff
    would insist those are organic products, even though the packaging
    indicated otherwise;

-   The exchange rate between the US dollar and RMB fluctuates around
    8.05. Because of the lower labor costs in China, it will be
    difficult for many US organic products to be competitive with
    Chinese ones;

-   Confusing regulations on label and certification requirements makes
    it difficult for US organic products to be sold on the market
    legally. New regulations do not clearly address what imported
    organic products need to do in terms of labeling;

-   Purchasing habits of average Chinese consumers limit the potential
    placement channels of US organic foods, as many people are still
    buying from traditional wet markets where food items are much
    cheaper than in supermarkets;

-   Only selected mid- to high-end supermarkets carry organic products.
    There are very few specialty or health stores in South China. It is
    not very convenient for loyal customers to buy organic products on a
    regular basis unless they live near these few select stores.

Competition from Chinese "green" food may have an impact on the demand
for organic products. If the OFCC is successful in convincing consumers
that their "green" food category is much safer than conventional
produce, the demand for organic produce could be reduced significantly.

# 8. COMPETITOR ANALYSIS

Most Chinese organic farmers are relatively small players. The following
section provides case study information after surveying some of the
larger players in the green food/organic market in South China.

## 8.1 Guangdong

### 8.1.1 Guangzhou Dong Sheng Organic Vegetables Farm 

With organic vegetable fields in Conghua city, Guangzhou Dong Sheng
Organic Vegetables Farm is part of the Hong Kong Ou Thai Kee Company.
The organic farm is located at the upper stream of Liuxi River, which
supplies the drinking water for Guangzhou city. The first part of the
organic project took up 1,500 mu (100 hectare)[^10] and grows vegetables
such as organic cucumbers, tomatoes, beans, carrots, lettuces,
strawberries and choy sum. Over 60 percent of their produce is exported
to Hong Kong, Macau, Canada, Singapore and the US. A small amount is
sold to Wal-Mart and Sam's Club in Mainland China. By 2004, they had
more than 60 products certified as organic. Their "green food" label and
"no-public-harm" label products are now being sold in most of the major
supermarkets in Guangzhou and Shenzhen. Dong Sheng is aiming to expand
its farm to 5,000 mu (333 hectare) and hoping that the surrounding farms
would follow suit, resulting in 11,000mu (733 hectare) of organic
vegetables farmland in Conghua city.

### 8.1.2 Zhuhai Nong Feng Import and Export Company Limited

Interestingly, this company was involved in the pesticides business
before it moved into organic rice production. The company started
growing organic rice in 2002 and received organic certification from a
Hong Kong certification entity in 2003. They produced more than 1,000
tons last year which was all sold to Hong Kong and Macau. The organic
rice field occupies 5,000 mu (333 hectare) of land and receives
technical support from the South China Agricultural University. It is
now the biggest organic rice producer in Guangdong province.

### 8.1.3 Zengcheng Organic Farm

Zengcheng Organic Farm is a supplier of Beijing Tian Di Sheng Company.
It grows vegetables and ships them directly to chain stores in Guangzhou
and Shenzhen every morning directly from the farm. It grows more than 20
kinds of vegetables with annual production of 8,000 tons, among which
90% are sent to Hong Kong and other South East Asian markets. The annual
sales value reached USD 2 million this past year. Although their
products enjoy a strong demand in overseas markets, they have decided to
focus on the rapidly developing domestic market for organic produce. The
Deputy General Manager, Duan Min, said they saw greater risks on
international markets than in the domestic one although the profit
margins would be much higher when selling to other countries. They worry
about strong competition and have decided to focus on the domestic
market to improve their production processes. They have over 1, 000 mu
(66.7 hectare)[^11] of certified organic land in Zengcheng, which is
about an hour away from Guangzhou by car.

### 8.1.4 Shenzhen Yu Nong Ju Industrial Company Limited

Producing organic vegetables since 2001, Shenzhen Yu Nong Ju Company
received assistance from the Shenzhen government in becoming the
official supplier of the city's vegetables. Being the only certified
organic farm in Shenzhen, Yu Nong Ju produces five tons of organic
vegetables daily and supplies supermarkets in Hong Kong and Shenzhen.
Currently, the farm run by Yu Nong Ju takes up 400 mu (26.7 hectare) of
land. They plan to expand it to 1,000 mu (66.7 hectare) in the near
future. Unlike the Beijing Tian Di Sheng Company, Yu Nong Ju supplies
its organic vegetables only to the Sui Bao Department Stores in
Shenzhen.

## 8.2 Guangxi

### 8.2.1 Guangxi Sha Lian Na Food Company

With investments in a 67 hectare organic vegetable farm in Guangxi
province, Guangxi Sha Lian Na Food Company, a branch of Hong Kong Sha
Lian Na, tested waters in Shenzhen two years ago. Due to a relatively
small sales volume, the company had to suspend its supply to the
domestic market. Now, they think the Shenzhen vegetable market is more
mature and decided to reintroduce its organic vegetables in Shenzhen.
The company hires over 300 farmers to work on 133 hectare of land. In
2004, Sha Lian Na exported more than 1,000 tons of vegetables to Hong
Kong and East South Asia. It supplies about 2,000 tons of vegetables for
supermarkets in Shenzhen on a daily basis. Hong Kong Sha Lian Na owns
some farms and organic food bases in Ningxia, Inner Mongolia and Hebei
province. Sha Lian Na provides free seeds and technical support to
growers and signs purchase contracts at set prices.

## 8.3 Hunan

### 8.3.1 Hunan Tea Company

The company owns 12 organic tea production bases and obtained
certifications from Europe's IMO, NOP of US, JONA of Japan. The
certified land of Hunan Tea Company takes up about 15, 810 mu (1,054
hectare)[^12] and the output accounts for 95.6% of the province's total
tea exports. Their export sales reached USD 4.50 million in 2003 with
prices that were 30% higher than regular tea products.

## 8.4 Beijing

### 8.4.1 Beijing Tian Di Sheng Organic Food Products Company Limited

Founded by a former OFCC Director, Beiing Tian Di Sheng Organic has been
very successful in sourcing and selling organic vegetables in South
China. All but one supermarket chain in South China received organic
product supplies from this single company.

The General Manger of the company, Ms. Chen Cong Hong, saw a great
market potential for organic food when she was in charge of the
certification of organic products at OFCC. After five years of
operation, the company now owns the "Organic Farm" trademark and has
200,000 mu (13,333 hectare) of organic food production bases throughout
China. In addition to vegetables, they also consolidate beans, corn,
tea, peanuts, eggs and beef from their contracted suppliers. However, in
South China, they only provide vegetables, beans and peanuts to the
chain stores. They do not own most of the farms, but set up contractual
relationships with individual farms. Tian Di Sheng tells the farms what
they want and sets the purchase prices a year in advance. Most of the
products sold have OFDC or BCS certification.

The company has had to face some false news reports that it sold
non-organic products on designated organic shelves in some northern
cities. Therefore, the biggest challenge of the company is how they can
convince more consumers to believe their products meet certification
requirements. As an average person, it is impossible to tell whether the
products he/she is paying 3 to 8 times more for are organic.

### 8.4.2 Beijing Hua Bang Food Company Limited

Founded in April 1995, Beijing Hua Bang Food Company Limited specializes
in the production of fruit juice with an annual capacity of 100,000
tons. In 2002, Hua Bang started to plant organic peaches, kiwi,
hawthorn, oranges and grapes on its 70,000 mu (4,667 hectares)[^13] of
land located in Beijing, Sichuan, Hebei and Henan provinces. Its organic
fruit received certifications from OFDC, OCIA and JAS. Its first organic
fruit juice line was introduced to the Northern China market at the end
of 2005. The company is expecting return on investments by 2006. Hua
Bang also plans to develop organic canned fruits. The company is working
hard to become the official juice supplier of the 2008 Beijing Olympic
Games.

Although Hua Bang is not marketing its products in South China now, it
is expected to go South in the near future.

## 8.5 New Zealand

In October, 2005, New Zealand Trade and Enterprise-sponsored Focus
Center was opened in Hong Kong with an eye on the quickly expanding
Mainland China market. The Trade Negotiations Minister was reported
saying that "there is a lot of emphasis on organic products... and Hong
Kong offers exposure to the growing numbers of Chinese that travel here
and can be a gateway to the mainland." In the past years, South China
has seen a big increase of imported food items from New Zealand and
Australia. The New Zealand Trade Council has been very active in
promoting their foods in this fast growing market. Therefore, organic
exporters from this country can be strong potential competitors in the
South China market.

## 8.6 Competitors' Strengths

Proximity to the market -- Many of the competitors are producing fresh
produces that have a shorter shelf life and require proper storing
techniques for transportation. Therefore, their ability to grow near the
market reduces the costs involved in order to keep them fresh and
maintain the good taste and nice shape.

Inexpensive labor -- Opposed to industrialized farming, organic
production requires more attention and more labor input throughout the
growing cycle. China has a vast labor force to provide this kind of care
at a much lower cost.

Suitable products -- Due to dramatic differences in culture, Chinese
have strong preferences for traditional Chinese produce that may not be
grown in the US. However, the situation is less so in fruits, snacks,
beverages and other processed foods.

Uncontaminated seeds -- Modern agriculture was only introduced to China
20 years ago. Before its opening to the outside world, Chinese farmers
did not use pesticides or fertilizers, not to mention genetically
modified seeds. Even nowadays, many of the Chinese farmers are still
feeding or growing their animals and plants in traditional ways. It is
much cheaper and easier to find organic seeds or embryos for organic
production in China.

## 8.7 Competitors' Weaknesses

Limited knowledge of labor force -- Despite the large labor force on
farms, most workers are uneducated and are not familiar with organic
farming. They have to receive instructions from buyers on what to do and
how to produce their products. During production, they lack much of the
needed knowledge on what the final product should be and why people want
to buy organic products, which will affect the quality of their
products. For example, it was reported that some farmers do not believe
in organic pesticides and sometimes they were caught applying chemicals
to the plants. Thus the buyers need to spend lots of time and efforts in
monitoring, training and educating farm workers on every process of
organic production. Improper growing, handling, storing, and
transporting of organic products costs farmers, buyers, and nearby
growers a lot of money and effort.

Limited technology -- As it is an emerging sector, organic farming and
production technology are not well developed yet. The most successful
organic producer, Tian Di Sheng Company, said they lose almost 50% of
their vegetable output due to various technical reasons. Many of the
agricultural experts are still learning from testing on farms, not to
mention individual farmers who just learned the term "organic" recently.
The processing technology of organic products is nearly non-existent for
most food products. Proper handling, storage, and transportation
techniques still need to be explored by regulators and practitioners to
minimize shrink and waste.

Small scale -- Like any other agricultural sector, farms in China are
small in size and operate on their own with their hands. To bring the
organic sector to a higher level, it requires more organized production
that can maintain supplies in a larger quantity with higher quality. At
present, the supply of organic products is not large enough to meet the
demands of high-income residents in large cities.

Low credibility -- As reported by the Guizhou Green Food Office, some
green food sold in the market is packed nicely, but sometimes the
quality is extremely low and some even contain toxic ingredients. This
kind of irresponsible behavior has weakened the image of authentic green
and organic products. In Hainan, an industrial expert claimed that 80%
of the green food labels are fake. Some retailers pack washed vegetables
with green food labels and than sell for higher profit margins. These
short-sighted behaviors have created lots of difficulties for genuine
certified products to win trust from consumers. Most of the consumers
interviewed said they didn't buy and would not buy organic because they
don't trust labels or certifications.

Weak administration -- The AA grade green food standards of China are
not completely the same as the organic food standards on the
international market. There are some laws and regulations that have been
introduced for organic food, but the management and implementation of
them remain challenges for the government. The typical way of doing
business in China results in a large number of consumers who do not
trust authorities and do not believe in regulations, which, however, is
vital to the development of organic products. The various levels of
Green Food Offices in China do not coordinate their efforts in expanding
or promoting the organic sector.

Poor marketing efforts -- Green/organic food producers have not
adequately leveraged the certifications to market their products. The
certification labels were simply being stuck onto the products and the
producers did little to educate consumers about the health benefits of
consuming these premium products. Like many agricultural producers,
Chinese organic food practitioners did not invest in brand building or
marketing initiatives. There is no brand recognition or brand management
in the Chinese organic food market.

Limited variety -- Most of the organic products available on market are
limited to mostly vegetables. Few if any meat products, organic fruit,
or processed organic food products can be found in stores in South
China. Even for vegetables, the selections are limited. Organic teas are
for export only. This limited variety of supplies suppresses consumers'
interests in buying organic.

# 9. PRODUCT MIX

The following Chinese organic products can be found in supermarkets of
Guangzhou, Zhuhai, and Shenzhen:

  ------------------------------- ---------------------------------------
  Organic products being produced Liquor, tea, chicken, oranges, longan,
  in South China                  lychee, vegetables, bamboo shoots,
                                  fungus, camellia oil, and rice.

  Organic products from other     Beans, peanuts, eggs, cereal and fruit
  parts of China                  juice.
  ------------------------------- ---------------------------------------

Since South China is already producing some fresh fruit and vegetables,
it is not recommended that US organic exporters try to compete with them
due to handling and transportation difficulties and for the great
confusion in understanding the labeling/certification process. However,
South China is lacking a wide variety of organic processed foods and
beverages. US organic exporters can take advantage of this gap and
provide the market with a wider selection of organic drinks and snacks.
These products are suitable for long distance transportation and easy
for importers and distributors to handle and store. Since many Chinese
parents worry about the health and wellness of their only child, they
are more likely to use a US brand that they know they can trust. Thus,
there is great market potential for baby food and children's organic
food products as well.

In short, high quality and easy-to-consume, packaged foods are the best
market entry products for US organic exporters.

# 

# 

# 

# 

# 10. PLACEMENT MIX

Depending upon how individual US organic food exporters would like to
do, the placement mix opportunities can vary greatly.

## 10.1 Importers

## In China, not every company or business entity can bring foreign products into the Chinese market. Only a company that has import licenses can import food products from other countries. These companies can be big or small. Some importers help buyers to handle only the paper work while some have their own distribution channels and engage in selling the products as well. It is recommended that any potential US exporter take the time to study the market very carefully before entering into a business relationship with a Chinese importer/distributor. The business culture is dramatically different in China than in the US and personal relationships "guanxi" is most important. Finding the "right" partner is extremely important for the US company to develop a long-term position in the market place. The ATO in Guangzhou has developed strong relationships with major importers in South China and can provide all sorts of assistance to US food exporters, such as setting up meetings, recommending contacts and providing opportunities for menu-promotions and in-store promotions. These marketing activities are most useful in assisting local importers/distributors get into the HRI and Retail sectors.

## 10.2 Distributors and Wholesalers

The ATO in Guangzhou can assist new-to-China US exporters explore the
market before making the plunge. Since most retailers rely on
importers/distributors, it is nearly impossible to ship directly to the
retailers. The ATOs are familiar with most major importers/distributors
and are happy to make introductions. By using the services provided by
the Guangzhou ATO, US organic food exporters can reach potential
partners with less hassle and save a lot of time in figuring out
logistics and networking.

## 10.3 Retail Outlets

Because of the long history, culture and high population density, retail
outlets can be found on every street in South China. However, since an
average consumer will not be able to tell whether a product is organic
or not, they rely completely on the green food certification systems to
ensure they are getting what they have paid for. For historical reasons,
consumers do not generally trust labels or individual retailers. With
counterfeit products flooding the market, consumers have very low
confidence in getting high quality products from regular retail outlets.

With more than ten years of change in China, chain stores have become
more and more popular in urban areas. For the younger generation, it has
completely replaced the traditional wet market, where farmers would sell
their produce directly to consumers. In Guangzhou and Shenzhen, high
income earners have become accustomed to shopping at mid- to high-end
international chain stores for quality and safe food. These
international chain stores should become the main retail channel for US
organic foods in order to attract and retain targeted customers. The
downside of using supermarkets as the core placement strategy is that
most of the stores will require stocking fees and event/holiday
promotional fees from suppliers. Meanwhile, the supply has to be
consistent in substantial volume; otherwise suppliers will face high
penalties from retailers.

# 11. PRICE MIX

Currently, the sales prices of Chinese organic products are at least
three to five times higher than regular agricultural products. For
imported organic products, there are no additional taxes or tariffs to
paid over conventional products. However, the regular customs and the
17% value added tax have to be paid on any imported items. It is not
clear whether imported organic products will be required to obtain
Chinese certification. When reached for comments, government officials
said they had not seen a policy on the issue yet. Therefore, it is of
vital importance for US organic food exporters to locate an experienced
importer or distributors for their products in order to eliminate
unnecessary costs.

Depending upon what products a US organic exporter would like to bring
into the South China market, the pricing mix should be either high-value
strategy or premium strategy, meaning supplying high quality product at
high prices or medium prices.

To gain some sense of the current market prices for both conventional
and "organic" foods, the following information is compiled from visits
to various stores in Shenzhen and Guangzhou.

VanGuard Stores ![](media/image10.jpeg){width="0.7138888888888889in"
height="0.38333333333333336in"} (Exchange Rate: \$1 = RMB 8.05)

+---------------------+------------------------+-----------------------+
| Products            | Unit Price/Kg          | Unit Price/Kg         |
|                     |                        |                       |
|                     | Regular                | Organic               |
+---------------------+------------------------+-----------------------+
| Potato              | RMB 4.00 (USD 0.50 )   | RMB 15.8 (USD 1.96)   |
+---------------------+------------------------+-----------------------+
| Lettuce             | RMB 2.40 (USD 0.30 )   | RMB 17.9 (USD 2.22)   |
+---------------------+------------------------+-----------------------+
| Cucumber            | RMB 3.4 (USD 0.42 )    | RMB 15.6 (USD 1.94)   |
+---------------------+------------------------+-----------------------+
| Onion               | RMB 2.6 (USD 0.32 )    | RMB 17.5 (USD 2.17)   |
+---------------------+------------------------+-----------------------+
| Eggplant            | RMB 3.0 (USD 0.36 )    | RMB 16.9 (USD 2.10)   |
+---------------------+------------------------+-----------------------+
| Bell Pepper         | RMB 3.6 (USD 0.44 )    | RMB 17.9 (USD 2.22)   |
+---------------------+------------------------+-----------------------+
| Red/Yellow Bell     | RMB 5.0 (USD 0.62 )    | RMB 34.6 (USD 4.3)    |
| Pepper              |                        |                       |
+---------------------+------------------------+-----------------------+
| Celery              | RMB 4.0 (USD 0.50 )    | RMB 21.5 (USD 2.67)   |
+---------------------+------------------------+-----------------------+
| Leek                | RMB 5.8 (USD 0.72 )    | RMB 23.3 (USD 2.89)   |
+---------------------+------------------------+-----------------------+
| Egg                 | RMB 0.4 /each (USD     | RMB 1 /each (USD      |
|                     | 0.05 )                 | 0.12)                 |
+---------------------+------------------------+-----------------------+
| Soybean             | RMB 12.5 (USD 1.56 )   | RMB 22.0 (USD 2.73)   |
+---------------------+------------------------+-----------------------+
| Red Bean            | RMB 15.0 (USD 1.86 )   | RMB 28.0 (USD 3.48)   |
+---------------------+------------------------+-----------------------+
| Green Bean          | RMB 15.0 (USD 1,86 )   | RMB 25.3 (USD 3.14)   |
+---------------------+------------------------+-----------------------+
| Millet              | RMB 10.0 (USD 1.24 )   | RMB 19.5 (USD 2.42)   |
+---------------------+------------------------+-----------------------+
| Peanut Kernel       | RMB 16.5 (USD 2.05 )   | RMB 33.8 (USD 4.20)   |
+---------------------+------------------------+-----------------------+
| Peanut in Shell     | RMB 18.0 (USD 2.24 )   | RMB 49.5 (USD 6.15)   |
+---------------------+------------------------+-----------------------+
| Corn Meal           | RMB 5.6 (USD 0.70 )    | RMB 18.5 (USD 2.30)   |
+---------------------+------------------------+-----------------------+
| Brown Rice          | RMB 9.0 (USD 1.12 )    | RMB 19.3 (USD 2.4)    |
+---------------------+------------------------+-----------------------+

JUSCO ![](media/image11.png){width="0.81875in"
height="0.31180555555555556in"} (Exchange Rate: \$1 = RMB 8.05)

+----------------------+-----------------------+-----------------------+
| Products             | Price/Kg              | Price/Kg              |
|                      |                       |                       |
|                      | Regular               | Organic               |
+----------------------+-----------------------+-----------------------+
| Potato               | RMB 6.0 (USD 0.75 )   | RMB 16.2 (USD 2.01)   |
+----------------------+-----------------------+-----------------------+
| Carrot               | RMB 7.6 (USD 0.94 )   | RMB 17.7 (USD 2.20)   |
+----------------------+-----------------------+-----------------------+
| Cucumber             | RMB 8.0 (USD 0.99 )   | RMB 13.5 (USD 1.68)   |
+----------------------+-----------------------+-----------------------+
| Onion                | RMB 3.0 (USD 0.36 )   | RMB 18.2 (USD 2.26)   |
+----------------------+-----------------------+-----------------------+
| Tomato               | RMB 3.4 (USD 0.42 )   | RMB 17.0 (USD 2.11)   |
+----------------------+-----------------------+-----------------------+
| Pepper               | RMB 6.5 (USD 0.81 )   | RMB 19.6 (USD 2.47)   |
+----------------------+-----------------------+-----------------------+
| Ginger               | RMB 8.4 (USD 1.04 )   | RMB 22.1 (USD 2.74)   |
+----------------------+-----------------------+-----------------------+
| Garlic               | RMB 5.8 (USD 0.72 )   | RMB 18.5 (USD 2.30)   |
+----------------------+-----------------------+-----------------------+
| Celery               | RMB 4.2 (USD 0.52 )   | RMB 20.0 (USD 2.48)   |
+----------------------+-----------------------+-----------------------+
| Leek                 | RMB 6.3 (USD 0.78 )   | RMB 20.0 (USD 2.48)   |
+----------------------+-----------------------+-----------------------+
| Egg                  | RMB 0.4 / each (USD   | RMB RMB 1 /each (USD  |
|                      | 0.05 )                | 0.12)                 |
+----------------------+-----------------------+-----------------------+

Carrefour ![](media/image12.png){width="1.742361111111111in"
height="0.2423611111111111in"} (Exchange Rate: \$1 = RMB 8.05)

+-----------------------+-----------------------+----------------------+
| Products              | Price/Kilograms       | Price/Kilograms      |
|                       |                       |                      |
|                       | Regular               | Organic              |
+-----------------------+-----------------------+----------------------+
| Green Pepper          | RMB 5.2 (USD 0,65 )   | 20.0 (USD 2.48 )     |
+-----------------------+-----------------------+----------------------+
| Eggplant              | RMB 4.0 (USD 0.50 )   | 19.6 (USD 2.47 )     |
+-----------------------+-----------------------+----------------------+
| Cucumber              | RMB 3.8(USD 0.47 )    | 15.9 (USD 1.98 )     |
+-----------------------+-----------------------+----------------------+
| Garlic                | RMB 5.4 (USD 0.67 )   | 17.5 (USD 2.17 )     |
+-----------------------+-----------------------+----------------------+
| Ginger                | RMB 6.8 (USD 0.84 )   | 20.9 (USD 2.60 )     |
+-----------------------+-----------------------+----------------------+
| Carrot                | RMB 4.1 (USD 0.51 )   | 17.0 (USD 2.12 )     |
+-----------------------+-----------------------+----------------------+
| Tomato                | RMB 4.4 (USD 0.55 )   | 17.6 (USD 2.19 )     |
+-----------------------+-----------------------+----------------------+
| Onion                 | RMB 3.4 (USD 0.42 )   | 17.2 (USD 2.14 )     |
+-----------------------+-----------------------+----------------------+
| Chinese Choy Sum      | RMB 2.00 (USD 0.25)   | 21.0 (USD 2.61 )     |
+-----------------------+-----------------------+----------------------+

# 12. CONCLUSION

The organic diet craze has only started its growth phase in South China
and the sales of Chinese organic products have made impressive headways.
Eating organic may be a life style choice in other countries, but in
China where food safety problems continue to be a major problem,
choosing organic is a must for many health sensitive consumers.

Our analysis indicates that the Chinese organic sector is still in its
infancy and is not ready to meet the needs of the international market
and ever more demanding domestic consumers. Therefore, there are
opportunities for US companies to enter and grow with this newly
evolving, organic food market especially with processed food and
beverage products.

[^1]: Xu Da Shan, "China's economy to grow 8% from 2006 to 2010", China
    Daily, March 21, 2005,
    <http://www.chinadaily.com.cn/english/doc/2005-03/21/content_426718.htm>
    accessed July 2005.

[^2]: Xin Zhi Gang, "Dissecting China's 'middle class'", China Daily,
    October 27, 2004,
    <http://www.chinadaily.com.cn/english/doc/2004-10/27/content_386060.htm>
    accessed July 2005

[^3]: Shanghai Daily Company Web Site .
    <http://www.shanghaidaily.com/art/2005/12/09/224907/Pollution_reduces_farmland_production.htm>,
    accessed on Dec. 10, 2005

[^4]: GD Green Food. page 6 volume 3 2005

[^5]: 1 Hectare = 15 Mu

[^6]: 1 USD = RMB8.05 Yuan

[^7]: 1 USD = RMB8.05 yuan

[^8]: 1 Hectare = 15 Mu

[^9]: 1 USD = RMB 8.05 Yuan

[^10]: 1 Hectare = 15 Mu

[^11]: 1 Hectare = 15 Mu

[^12]: 1 Hectare = 15 Mu

[^13]: 1 Hectare = 15 Mu