Required Report - public distribution

**Date:** 11/8/2005

**GAIN Report Number:** CH5823

CH5823

**China, Peoples Republic of**

**Exporter Guide**

**China Exporter Guide**

**2005**

**Approved by:**

![](media/image1.wmf)Ross Kreamer

U.S. Consulate

**Prepared by:**

Ralph Bean

**Report Highlights:**

In 2004, China Customs reported agriculture, fisheries and forest
products imports of over \$33 billion. Imports of consumer-oriented
agricultural products (not include fisheries, bulk or intermediate
products) accounted for over \$3 billion of this total. The U.S.
continues to hold the top position in both overall agricultural exports
to China and in consumer-oriented products, despite setbacks in both
poultry and beef exports to China. As incomes continue to grow, China is
showing signs of becoming a more consumption-driven economy.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Shanghai \[CH2\]

\[CH\]

Table of Contents

[**Section I. 3**](#section-i.)

[I.1. Economic Situation 3](#i.1.-economic-situation)

[I.2. Demographic Developments 3](#i.2.-demographic-developments)

[I.3. Consumer Buying Habits 4](#i.3.-consumer-buying-habits)

[I.4. Consumer Foods Market Size and Growth
5](#i.4.-consumer-foods-market-size-and-growth)

[I.5. Advantages and Challenges Facing U.S. Suppliers of Food Products
to China
5](#i.5.-advantages-and-challenges-facing-u.s.-suppliers-of-food-products-to-china)

[Section II. Exporter Business Tips
7](#section-ii.-exporter-business-tips)

[II.1. Local Business Customs 7](#ii.1.-local-business-customs)

[II.2. Consumer Tastes 7](#ii.2.-consumer-tastes)

[II.3. Regulatory Framework 8](#ii.3.-regulatory-framework)

[Section III. Market Sector Structure and Trends
8](#section-iii.-market-sector-structure-and-trends)

[III.1. Food Retail 8](#iii.1.-food-retail)

[III.2. Hotel, Restaurant and Institutional (HRI)
9](#iii.2.-hotel-restaurant-and-institutional-hri)

[III.3. Food Processing 10](#iii.3.-food-processing)

[Section IV. Best High-Value Product Prospects
12](#section-iv.-best-high-value-product-prospects)

[Section IV. Key Contacts and Further Information
13](#section-iv.-key-contacts-and-further-information)

[Appendix 1. Statistics 13](#appendix-1.-statistics)

# Section I.

## I.1. Economic Situation

China's economy continues to grow rapidly, posting 9.5% growth in 2004
and a forecast 9.4% in 2005, despite government efforts to cool the
economy. Concerns about overheating continue to weigh on Chinese
policymakers, as inflation continues to creep up. Much of the increase
has taken place in food prices, causing ambivalence among policymakers,
who are worried about inflation, but also seeking ways to improve farm
incomes. The government has tacitly revised its projection for 2005 up
to 9%, but retains a 5-year target of 7.5%.

![](media/image2.jpeg){width="3.363888888888889in"
height="2.4097222222222223in"}

Efforts to cool down property markets have yielded mixed, but generally
good, results. Prices in Beijing and Guangzhou have stabilized, while
price increases in Shanghai appear to be slowing, apart from the very
high end. Domestic speculators appear to have moved on to other, less
central markets such as Nanchang and Chongqing, while the high-end
market in Shanghai now appears to be driven more by international than
local buyers. Liberalization of restrictions on foreign ownership and on
distribution rights appears to be driving a gradual, rather than
revolutionary change in the economy.

## I.2. Demographic Developments

![](media/image3.wmf)Although China has relaxed restrictions on the
movement of rural residents, the largest cities continue to restrict
employment and housing for unlicensed migrants. In addition, production
costs in the major metropolitan areas have risen. The result has been a
boom in the growth of second and third-tier cities across China. These
emerging city markets fall into three broad categories: coastal
population centers, satellite cities and inland giants. **Coastal
Exporters:** China's eastern coast is dotted with major cities that have
cashed in on growth in export markets to fuel an economic boom
independent of the major urban centers in Guangzhou and Shanghai. Cities
such as Qingdao, Dalian and Xiamen are becoming independent export
powers. **Satellite Cities:** By contrast, a large number of satellite
cities close to and economically dependent on Guanghzou and Shanghai
have also sprung up in large numbers in recent years. Growth in these
cities is driven by businesses seeking to escape ever higher costs in
the metropolis, while still cashing in on the large consumer and export
markets and distribution and logistics infrastructure. These include
both freewheeling commercial boomtowns like Shenzhen (Guangdong) and
Jiaxing (Zhejiang), and storied, historic power centers like Suzhou
(Jiangsu) and Hangzhou (Zhejiang). **Inland Giants:** Growth is no
longer passing China's interior cities by---some cities such as Chengdu
and Nanchang have seen aggressive growth in the past two or three years
and are becoming focal points for industrial development. These cities
are focused on a mix of domestic and low-end export manufacturing.
Although large, the regulatory climate in these cities can be
unpredictable and they are overall considerably less wealthy than
coastal cities. These are good markets for exporters with a long-term
focus. Those interested in Chinese markets should also keep an eye on
the government's drive to build new cities to relieve the population
pressure on major cities. The flagship project for this policy is a
planned community for 700,000 people being constructed near Suzhou, just
an hour's train ride from Shanghai.

Another important demographic element is generational. The population
currently is divided into three groups: those born in 1946-1964, who
have lived through some of China's most turbulent times; those born
1965-1976, who came of age during China's drive to development; and
those born after 1976, who have grown up in an increasingly affluent and
stable environment. While there are significant differences between the
first two groups, they share similar spending habits: they are both
extremely price sensitive and conservative about spending, with
extremely high savings rates. The most recent generation of consumers is
different, having embraced a consumption-oriented lifestyle. They are
more willing to spend money, willing to experiment, are much more style
conscious, and are more sensitive to advertising. These consumers are
gaining rapidly in importance, as they become income earners in their
own right. This generation also does not shy away from taking loans: a
significant part of China's housing boom is being led by young, white
collar workers who are taking advantage of newly available long-term
mortgages with low interest rates to buy their own apartments. In the
process, they are leaving home and establishing households before they
get married, yet another major break with tradition.

## I.3. Consumer Buying Habits

According to official statistics, total consumer expenditure (GDP by
expenditure approach: SSB yearbook) increased by 11.7% in 2004 compared
to 7.5% in 2003. Consumer expenditure grew much faster for urban
residents, who already account for a disproportionately large percentage
of the total, with urban household expenditures increasing by 13.6%, as
compared to 9.5% for rural households. Long-term consumption is expected
to continue growing. China's increasingly wealthy citizens have limited
vehicles for investment and low interest rates for home loans, a
situation that encourages consumers to spend or to put their money into
homes.

Generational distinctions aside, Chinese consumers tend to be
conservative and price sensitive when it comes to personal spending.
Exceptions to this rule include spending on education, medical care,
gifts and entertainment, and children. The greatest successes for
high-end U.S. food products have been those aimed at hotels and
restaurants (seafood and pork, for example), and high-end products given
as gifts (fresh fruit, wine and liquor). Acceptance of imported products
as guarantee of safety and high quality is common, and U.S. products in
particular have benefited.

Food safety itself has become a major issue, especially in the major
urban centers. Food safety or adulteration problems are nothing new in
China, but they have recently become favorite topics for the Chinese
media, and even minor incidents in the most far-flung areas are now
often reported nationwide. This, along with SARS, hog disease and avian
influenza scares, has created a widespread perception that many food
products are unsafe. This feeling appears to be strongest at higher
income levels, where consumers rely more heavily on processed or
pre-packaged foods. As a result, consumers in these income brackets are
placing a premium on famous brands or buying in venues with a solid
reputation.

## I.4. Consumer Foods Market Size and Growth

The total value of the Chinese food market has continued to grow at a
rapid clip. This trend was bolstered as the inflationary trend of 2003
accelerated. Price changes for food through the years 2000 -- 2004 were
2.6%, 0%, -0.6%, 3.4%, and 9.9%, respectively (SSB Yearbook, 2005).
Combined wholesale and retail food sales exceeded RMB1 trillion in 2004,
but this figure falls to RMB 386 billion when tobacco and liquor
revenues are excluded. Total sales revenues for chain restaurants
reached nearly RMB 40 billion, but figures for the total catering sector
are no longer available. The actual figure is likely several times
higher, since most restaurants in China are not part of a registered
chain. Stagnation in food wholesaling appears to be ending, as
consolidation and modernization start to pay off. If tobacco and liquor
are excluded, however, retail and catering continue to grow at a faster
pace. This reflects rapid development in modern retail formats and a
growing trend toward dining out.

## I.5. Advantages and Challenges Facing U.S. Suppliers of Food Products to China

+-----------------------------------+-----------------------------------+
| ###### Advantages                 | ###### Challenges                 |
+-----------------------------------+-----------------------------------+
| Chinese consumers spend nearly    | Chinese consumers are             |
| half of their disposable income   | price-sensitive: imported         |
| on food and beverages.            | products have difficulty          |
|                                   | competing with domestic           |
|                                   | substitutes on price.             |
+-----------------------------------+-----------------------------------+
| Imported goods are generally      | Imports are regarded as luxury    |
| regarded as safe and high in      | goods: the vast majority of       |
| quality.                          | consumers do not believe they can |
|                                   | afford them.                      |
+-----------------------------------+-----------------------------------+
| New markets for imported products | Transportation and logistics for  |
| are appearing in fast-growing     | these cities remains difficult,   |
| cities throughout China.          | and many lack the presence of a   |
|                                   | qualified distributor for         |
|                                   | imports.                          |
+-----------------------------------+-----------------------------------+
| Many U.S. brands, such as         | Most of the U.S. brands widely    |
| Budweiser, Coca-Cola, M&Ms and    | available in China are            |
| Pringles are widely recognized in | manufactured locally or in other  |
| China.                            | parts of Asia.                    |
+-----------------------------------+-----------------------------------+
| Overseas fast-food chains are     | Foreign fast-food chains source   |
| extremely popular, and provide    | most of their products locally.   |
| exposure for foreign foods.       |                                   |
+-----------------------------------+-----------------------------------+
| Overseas retail chains are        | Few of these chains import        |
| growing quickly, and carry more   | directly from overseas, working   |
| imported products than domestic   | instead through distributors.     |
| counterparts.                     | Many charge high listing fees to  |
|                                   | promote new products.             |
+-----------------------------------+-----------------------------------+
| Overseas retail chains and        | Although interested in quality    |
| convenience chains are            | for their house labels, these     |
| increasingly interested in        | chains are tough negotiators, and |
| establishing house brands. This   | will leave suppliers with little  |
| is creating opportunities for     | room for profit.                  |
| bulk shipment of quality foods.   |                                   |
+-----------------------------------+-----------------------------------+
| Under WTO, China's duties on      | Increased access for imports has  |
| imported foods have fallen, and   | resulted in greater competition   |
| more products are shipped         | from other exporting countries    |
| directly to China, instead of     | for products like beef, seafood   |
| through Hong Kong.                | and pistachios.                   |
+-----------------------------------+-----------------------------------+
| Food is an essential part of      | The Chinese have very strong      |
| Chinese culture and social life.  | taste preferences. While they are |
| Key life events revolve around    | willing to experiment, they are   |
| food, and little expense is       | less willing to incorporate       |
| spared.                           | foreign tastes into their daily   |
|                                   | life.                             |
+-----------------------------------+-----------------------------------+
| China is incomprehensibly large.  | China is incomprehensibly large.  |
| Though many consumers still lack  | Regional differences in culture   |
| the income to purchase imports,   | and taste can be quite stark.     |
| millions join the middle class    | Promotions with limited budgets   |
| every year.                       | must target specific groups.      |
+-----------------------------------+-----------------------------------+
| The Chinese market often moves    | If a product is successful, it is |
| en-masse. If a product becomes    | likely to be counterfeited or     |
| trendy, sales can skyrocket       | imitated.                         |
| overnight.                        |                                   |
+-----------------------------------+-----------------------------------+

# Section II. Exporter Business Tips

## II.1. Local Business Customs

China possesses an ancient and vibrant mercantile culture of its own.
Although this culture values efficiency, value and profit, there are
important differences from western business culture. Key features
include: a) respect for age and hierarchical position, b) the importance
of personal relationships, c) group orientation and d) the concept of
face. Food is a key component of Chinese culture, and this extends to
business culture: working lunches and dinners are an important part of
doing business in China. These events help to build those all-important
personal relationships, provide information not available in formal
business meetings, and are an opportunity to establish face with your
business contacts. To help U.S. exporters on their travels in China, FAS
has prepared several reports outlining the key points: [Chinese Business
Etiquette]{.underline} (CH4835) and [Business Travel in
China]{.underline} (CH4836). These reports are available on the FAS
website at [www.fas.usda.gov]{.underline} (look under 'Attache
Reports').

## II.2. Consumer Tastes

It is dangerous to assume anything about China. Tastes vary widely from
place to place in China, and are constantly evolving. As a general rule,
Chinese tastes favor Asian products, particularly those with a strong
similarity to Chinese foods or heavily influenced by China. Nonetheless,
consumers are willing to experiment with new tastes, and it is difficult
to predict what products will succeed without conducting actual
research. For example, pizza has proven immensely popular, despite a
widespread myth that Chinese people do not like cheese. One promotion in
the inland city of Wuhan found Mexican foods to be a runaway success,
while another in Chengdu scored a success for boneless pork butt. Key
regional distinctions include North and Northeast China (Beijing and
north), where dishes tend to be salty; East China (centered on Shanghai)
where the taste is sweet and spicy dishes are unpopular; Central China
(Sichuan and Hunan), which are famous for hot and spicy food; and South
China, famous for delicate tastes, seafood and an appetite for the
exotic. Keep in mind, though, that consumers in any of these places may
be willing to experiment with new tastes, including those from other
parts of China.

![](media/image4.wmf)In addition to regional patterns, there are some
overall preferences shared by most Chinese consumers:

\- Chinese prefer fresh meats and produce to canned or processed ones.
Many buy fish or fowl live to be butchered on the spot.

\- Consumers prefer small-sized packages to 'economy' sizes, even though
the unit cost may be higher.

\- In the case of snacks, candies or breakfast cereals, Chinese
consumers like to see the actual product inside the package. It is a
good idea to include a transparent 'window' on the package. This goes
double for new-to-market products.

\- The attractiveness of the package is important. Size, colors and
design are all taken into consideration.

\- Chinese buyers are attracted to established brand names, which are
seen as a guarantee of authenticity and superior quality.

**Before jumping into the Chinese market, U.S. exporters are advised to
invest in targeted market research and taste testing.** In a country the
size of China, it is absolutely critical to identify a specific target
group of consumers, and confirm the product's appeal to that group. For
example, one might target new mothers in the Shanghai area, or,
alternatively, teens from affluent families in Guangzhou. Whichever
group one chooses to target, both the product and the approach will be
entirely different. Failure to take the preferences of Chinese consumers
into account is a common reason for the failure of new products.

![](media/image5.jpeg){width="1.9840277777777777in" height="2.95in"}

## II.3. Regulatory Framework

Over the past few years, the Chinese government has published a host of
regulations governing standards and labeling for food products.
Enforcement of these regulations is also becoming more rigorous.
Although reputable distributors often deal with these issues on the
exporter's behalf, exporters making a serious commitment to the China
market are advised to study the relevant laws carefully and ensure that
they are in compliance.

To help U.S. exporters understand these regulations, FAS has prepared a
series of unofficial translations. Collectively, these reports are
called the **China Food and Agricultural Import Regulations and
Standards Report** (or **China FAIRS Report**). The translations
available are listed in the FAIRS Report Working Index, which is posted
on the FAS website ([www.fas.usda.gov]{.underline}).

# Section III. Market Sector Structure and Trends

## III.1. Food Retail

Growth in retail sales has been driven by the rapid development of food
retail chains across China. Supermarket chains are now present in
virtually every city in China, while hypermarkets exist in most large
cities. Of particular interest to exporters is the rapid growth of
foreign-invested hypermarket chains such as Wal-Mart, Carrefour, Lotus
and Metro, which are more aggressive than local chains in seeking out
and promoting high-margin imported products. While some of these chains
are moving toward centralized purchasing, initial efforts have been
largely unsuccessful. Foreign-invested stores are popular with the large
and growing expatriate population, but are also favored by local Chinese
as venues for buying food and other items to be given as gifts.
Packaging is critical in this particular niche, and many exporters
and/or distributors have developed special gift package versions of
their products. China's packaging industry is extremely sophisticated,
and a growing number of U.S. exporters are choosing to ship in bulk and
pack their products in China, a practice that may also help to resolve
product labeling issues.

In response to the growth of foreign-invested retailers, Chinese retail
chains are consolidating, and now have nationwide reach. Although the
recent merger of China's two largest food retail chains, Lianhua and
Hualian, created an entity several times larger than any other chain
operating in China, the two retailers appear to be continuing to operate
independently. Both had previously absorbed a large number of smaller
chains, and are still incorporating them into their management
structure. Domestically-owned hypermarkets are a reasonable prospect for
imported products, but loose management of supermarket chains continues
to make that sector a poor prospect for imports other than dried fruit,
nuts and frozen vegetables.

![](media/image6.wmf)Retail sales have also been boosted by the rapid
growth of convenience store chains, particularly in East China. Shanghai
alone is home to as many as 3,000 convenience stores, mostly domestic
chains. Foreign-invested convenience stores have established a
significant presence in Guangzhou, and the convenience store format is
now making an appearance in Beijing. Management of these chains is
strong, and most rely on centralized purchasing and distribution. These
stores also rely less on deep discounting, making them a reasonable
prospect for imported products. An ATO/Shanghai sponsored food promotion
with Lawson's convenience stores introduced a wide variety of new
products, and encountered fewer complications than promotions at
hypermarkets, due to the high level of standardization and
well-developed distribution systems. Refrigerator and freezer cases are
routinely available in hypermarkets, supermarkets and convenience
stores, and microwave ovens are common in both convenience stores and
homes. USDA's Cold Chain Initiative, supported by ATOs in Shanghai and
Guangzhou is further helping to ensure that the quality of temperature
sensitive imports can be maintained, creating opportunities for new
products.

Retail growth received a boost in 2005, when China removed restrictions
on foreign ownership of businesses, leading Wal-Mart to open its first
store in Shanghai. Other important trends in the retail sector include a
rapid increase in personal ownership of refrigerators, freezers and
microwave ovens, which has boosted sales of frozen and heat-and-eat
products. Hypermarkets and convenience stores also now offer a wide
variety of ready-to-eat foods, including box lunches and rotisserie
chicken. For more detail on China's retail food sector, please refer to
FAS/China's **Food Retail Sector** reports, available on the FAS website
at [www.fas.usda.gov]{.underline}.

## III.2. Hotel, Restaurant and Institutional (HRI)

HRI is one of the most dynamic sectors of the economy, as seen in the
rapid growth of revenue for the catering industry. This sector covers
the entire spectrum, from roadside stands to massive cafeterias to
world-class gourmet restaurants. Previous statistical series have been
discontinued, making it difficult to identify trends in the HRI sector.
Under the new nomeclature, statistics are only available for chain
catering services, which excludes the legions of independent family
restaurants that form the bulk of the industry. Using these definitions,
snack counters dominate the catering industry, at nearly 60% of total
industry revenues, with restaurants lagging behind at 39%. The new
series is useful, however, in showing the extremely rapid growth of the
snack counters, which increasingly provide quick meals (steamed
dumplings, for example) or meal starters (such as roasted chickens) for
China's growing population of busy professionals.

HRI is a key player in introducing imported foods. High-end restaurants
and hotels are less constrained by price considerations and more
interested in presenting dishes and products that are unique. If
successful, their efforts are likely to be copied by other restaurants,
bringing them closer to mainstream middle-class consumers. Another
important trend is the recent emergence of medium to high-end restaurant
chains. Like other high-end restaurants, these are interested in
offering consumers something different and unique, but unlike them, if a
product is successful, they can purchase directly and in bulk, reducing
cost considerably. This development holds a great deal of promise, as
Chinese consumers view restaurant chains as a guarantee of quality in a
largely unregulated industry. Though still in its infancy, this trend
may become an important factor for imports.

It is important to note that while the sector as a whole has great
potential, many parts of the HRI industry are not strong candidates for
imported foods. Catering operations that run cafeterias and provide box
lunches as well as small family-owned restaurants, account for a large
portion of the industry and are extremely price-sensitive. For example,
lunch box manufacturers typically aim for a production cost of \$0.75 or
less, making them a poor candidate for most imported foods. Once again,
exporters are advised to research the market and pick their targets
carefully. For more analysis on China's HRI sector, please refer to
FAS/China's **HRI Sector** reports, available on the FAS website at
[www.fas.usda.gov]{.underline}.

## III.3. Food Processing

The food processing industry is another of the fastest growing segments
in the Chinese economy, with the China Food Industry Association citing
annual growth of 10-12%, while official statistics (which typically
exclude the legions of small-scale processors) show significantly higher
growth. Still in its infancy, the recent development of this sector also
makes it one of the most modern. Poor regulation, however, makes it
difficult to determine the exact size of the industry. Official
statistics indicate that there were 19,022 food processing ventures with
total sales of \$123 billion in 2003. The majority of these are involved
in primary processing, while food and beverage manufacturing account for
roughly 20% each. Currently, only 30% of China's food consumption is
processed, as compared to 80% in more developed countries. According to
Chinese officials, the main barrier to further development of this
sector is China's underdeveloped agricultural production and
distribution systems.

Food safety has become a major concern for the Chinese government, after
a series of poisoning and contamination incidents culminated in a major
scandal over sales of substandard infant formula, which resulted in the
deaths of a number of infants. Food contamination incidents get
widespread media coverage, and have become a fixture in many consumers'
minds. Many will now buy food only from well-known and reputable
manufacturers, and some manufacturers have opened their own retail
stores or booths in order to prevent adulteration of their products.
Government efforts to improve quality and inspection of food
manufacturing facilities are likely to accelerate the trend toward
consolidation.

The food processing sector provides growing opportunities for U.S.
exporters. The industry is concentrated primarily in Guangdong, Shanghai
and Shandong provinces. Although inputs are primarily domestic, many
processors are seeking new ingredients to help distinguish their
products from competitors. U.S. products that have been particularly
successful in this area include nuts (almonds and pistachios), dried
fruit (particularly raisins and prunes), soy flour, flavorings and
sauces, and dairy ingredients and supplements. ATOs in Shanghai and
Guangzhou have launched or plan to launch a series of seminars for
Chinese bakeries, promoting the use of U.S. food ingredients, and baking
ingredients continue to be one of the best export prospects. Frozen and
dehydrated potato products continue to be successful, due largely to the
lack of local equivalents. For a more in-depth analysis of the food
processing sector, please refer to FAS/China's **Food Processing
Sector** reports, available on the FAS website at
[www.fas.usda.gov]{.underline}.

# Section IV. Best High-Value Product Prospects

+-----------------+------+--------+-------+--------+-------------------+
| Product         | 2004 | 2004   | 5-Yr  | Import | Key Constraints   |
| Category        | Ma   | I      | Avg   | Tariff | on Market         |
|                 | rket | mports | I     | Rate   | Development       |
|                 | Size | (\$mi  | mport |        |                   |
|                 |      | llion) | G     |        |                   |
|                 |      |        | rowth |        |                   |
+-----------------+------+--------+-------+--------+-------------------+
| Red Meats       | NA   | 321    | 9.7%  | 12 --  | Competition from  |
| Fr/Ch/Fz        |      |        |       | 25%    | other import      |
|                 |      |        |       |        | sources           |
|                 |      |        |       |        | (Australia),      |
|                 |      |        |       |        | limited capacity  |
|                 |      |        |       |        | for handling      |
|                 |      |        |       |        | fresh imports,    |
|                 |      |        |       |        | growing           |
|                 |      |        |       |        | competition from  |
|                 |      |        |       |        | domestic product, |
|                 |      |        |       |        | BSE restrictions  |
|                 |      |        |       |        | on beef.          |
+-----------------+------+--------+-------+--------+-------------------+
| Processed Fr. & | NA   | 526    | 66.5% | 5 --   | Competition from  |
| Veg.            |      |        |       | 30%    | Asian countries   |
|                 |      |        |       |        | with similar      |
|                 |      |        |       |        | tastes; rapid     |
|                 |      |        |       |        | development of    |
|                 |      |        |       |        | domestic          |
|                 |      |        |       |        | industry.         |
+-----------------+------+--------+-------+--------+-------------------+
| Poultry Meat    | NA   | 154\*  | -     | 20%    | Import quotas,    |
|                 |      |        | 60%\* |        | sanitary          |
|                 |      |        |       | (sp    | barriers,         |
|                 |      |        |       | ecific | competition from  |
|                 |      |        |       | duties | other exporting   |
|                 |      |        |       | are    | countries.        |
|                 |      |        |       | a      |                   |
|                 |      |        |       | pplied |                   |
|                 |      |        |       | to     |                   |
|                 |      |        |       | b      |                   |
|                 |      |        |       | roiler |                   |
|                 |      |        |       | cuts)  |                   |
+-----------------+------+--------+-------+--------+-------------------+
| Dairy Products  | NA   | 448    | 20%   | 6 --   | Competition from  |
|                 |      |        |       | 20%    | New Zealand and   |
|                 |      |        |       |        | Australia.        |
+-----------------+------+--------+-------+--------+-------------------+
| Fresh Fruit     | NA   | 318    | 7.4%  | 10 -   | Competition from  |
|                 |      |        |       | 30%    | domestic          |
|                 |      |        |       |        | products. U.S.'   |
|                 |      |        |       |        | advantage is in   |
|                 |      |        |       |        | special           |
|                 |      |        |       |        | varieties.        |
+-----------------+------+--------+-------+--------+-------------------+
| Tree Nuts       | NA   | 113    | 78%   | 0 --   | Competition from  |
|                 |      |        |       | 25%    | low-price, low    |
|                 |      |        |       |        | quality           |
|                 |      |        |       |        | exporters;        |
|                 |      |        |       |        | counterfeits.     |
+-----------------+------+--------+-------+--------+-------------------+
| Fruit & Veg.    | NA   | 61     | 66%   | 7.5 -- | Competition from  |
| Juices          |      |        |       | 30%    | other exporting   |
|                 |      |        |       |        | countries.        |
+-----------------+------+--------+-------+--------+-------------------+
| Breakfast       | NA   | 7.4    | 28.2% | 20 --  | Breakfast cereals |
| Cereals         |      |        |       | 30%    | are still a       |
|                 |      |        |       |        | novelty in China. |
+-----------------+------+--------+-------+--------+-------------------+
| Cheese          | NA   | 21.6   | 90%   | 12-15% | Strong            |
|                 |      |        |       |        | competition from  |
|                 |      |        |       |        | New Zealand and   |
|                 |      |        |       |        | Europe.           |
+-----------------+------+--------+-------+--------+-------------------+
| Nursery         | NA   | 51     | 29.7% | 0-23%  | Lack of phyto     |
| Products and    |      |        |       |        | protocols, lack   |
| Cut Flowers     |      |        |       |        | of approved       |
|                 |      |        |       |        | import quarantine |
|                 |      |        |       |        | facilities.       |
+-----------------+------+--------+-------+--------+-------------------+
| Salmon          | NA   | 126    | 78%   | 10 --  | Cost and          |
|                 |      |        |       | 14%    | competition from  |
|                 |      |        |       |        | other exporters,  |
|                 |      |        |       |        | esp. Norway.      |
+-----------------+------+--------+-------+--------+-------------------+
| Groundfish &    | NA   | 1,157  | 19%   | 10%    | Limited supplies  |
| flatfish        |      |        |       |        |                   |
+-----------------+------+--------+-------+--------+-------------------+
| Crustaceans     | NA   | 324    | 9.7%  | 5 --   | Limited supplies. |
|                 |      |        |       | 19.2%  |                   |
+-----------------+------+--------+-------+--------+-------------------+
| \* 2004 poultry |      |        |       |        |                   |
| imports         |      |        |       |        |                   |
| suffered a      |      |        |       |        |                   |
| sharp drop due  |      |        |       |        |                   |
| to avian        |      |        |       |        |                   |
| influenza       |      |        |       |        |                   |
| concerns,       |      |        |       |        |                   |
| drawing down    |      |        |       |        |                   |
| the long-term   |      |        |       |        |                   |
| average. YTD    |      |        |       |        |                   |
| data indicates  |      |        |       |        |                   |
| a full recovery |      |        |       |        |                   |
| for 2005.       |      |        |       |        |                   |
|                 |      |        |       |        |                   |
| Note: All data  |      |        |       |        |                   |
| are derived     |      |        |       |        |                   |
| from U.N. Trade |      |        |       |        |                   |
| Data. Commodity |      |        |       |        |                   |
| groupings are   |      |        |       |        |                   |
| based on FAS    |      |        |       |        |                   |
| BICO report     |      |        |       |        |                   |
| categories.     |      |        |       |        |                   |
+-----------------+------+--------+-------+--------+-------------------+

## 

# Section IV. Key Contacts and Further Information

For a list of Chinese government regulatory agencies in Beijing,
Shanghai and Guangzhou, please see FAS/China report number CH1068,
available on the FAS website at www.fas.usda.gov.

For a list of importers and distributors, please see FAS/China report
number CH1068, also available on the FAS website.

For further information, please contact the appropriate ATO office.
FAS/China has ATOs in Beijing, Shanghai and Guangzhou. E-mail and fax
numbers are as follows:

ATO Beijing; ATOBeijing@usda.gov, (8610) 8529-9962

ATO Shanghai: ATOShanghai@usda.gov, (8621) 6279-8336

ATO Guangzhou: ATOGuangzhou@usda.gov, (8620) 8667-0703

# Appendix 1. Statistics

**Table 1. Key Trade and Demographic Information**

  ---------------------------------------------------------- ------------
  Agr. Imports From All Countries (2004) (\$mil)/US Market   26,264/28%
  Share (%)                                                  

  Consumer Food Imports From All Countries (\$mil)/US Market 3,187/21%
  Share (%)                                                  

  Edible Fishery Imports from All Countries (\$mil)/US       2,358/10%
  Market Share (%)                                           

  Total Population (millions)/Annual Growth Rate (%)         1,299/0.6%

  Urban Population (millions)/Annual Growth Rate (%)         542/3.6%

  Number of Major Metropolitan Areas (pop. over 1 million)   174

  Size of Middle Class (Millions)/Growth Rate (%)            NA

  Per Capita Gross Domestic Product (US Dollars)             1,271/15%

  Unemployment Rate                                          4.3%

  Per Capita Food Expenditures (urban residents only; rural  \$328
  exp. NA)                                                   

  Percent of Female Population Employed                      NA

  Exchange Rate (as of October 31, 2005)                     8.06

  (Source: China Statistical Yearbook, 2005, except import   
  statistics which are from UN Data sources)                 
  ---------------------------------------------------------- ------------

**Table 2. Consumer Food and Edible Fishery Product Imports**

  ---------------------------------------------------- ------- ------- -------
  China (Peoples Republic of) Imports of Agriculture,                  
  Fish & Forestry Products                                             

  (In Millions of Dollars)                                             

                                                       2002    2003    2004

  CONSUMER-ORIENTED AGRICULTURAL TOTAL                 2,256   2,808   3,187

  Snack Foods (Excl. Nuts)                             70      77      94

  Breakfast Cereals & Pancake Mix                      4       7       7

  Red Meats, Fresh/Chilled/Frozen                      200     296     322

  Red Meats, Prepared/Preserved                        10      8       3

  Poultry Meat                                         426     462     154

  Dairy Products (Excl. Cheese)                        281     355     449

  Cheese                                               6       10      22

  Eggs & Products                                      5       13      7

  Fresh Fruit                                          276     351     436

  Fresh Vegetables                                     3       2       3

  Processed Fruit & Vegetables                         260     340     526

  Fruit & Vegetable Juices                             55      75      61

  Tree Nuts                                            61      85      113

  Wine & Beer                                          76      84      87

  Nursery Products & Cut Flowers                       33      45      51

  Pet Foods (Dog & Cat Food)                           2       3       4

  Other Consumer-Oriented Products                     486     594     849

                                                                       

  FISH & SEAFOOD PRODUCTS                              1,574   1,880   2,358

  Salmon                                               49      108     126

  Crustaceans                                          10      18      25

  Groundfish & Flatfish                                198     299     325

  Molluscs                                             824     917     1,157

  Other Fishery Products                               273     261     333

  AGRICULTURAL PRODUCTS TOTAL                          220     276     392

  Source: United Nations Statistics Division                           
  ---------------------------------------------------- ------- ------- -------

**Table 3. Top Suppliers of Consumer Foods and Edible Fishery Products**

  --------------------- ----------------- --- --- --- ---------- ---------- --- --------- ---------- --- --------- ---------- --- --------- ---------- --- --------- ---------- --- ---------
  ** **                                               **Rank**   **2000**                 **2001**                 **2002**                 **2003**                 **2004**       

  **Consumer-Oriented                                                                                                                                                               
  Agricultural**                                                                                                                                                                    

                        **United States**             1                         635,982                  670,675                  767,122                  998,909                  656,363

                        **Thailand**                  2                         118,154                  239,779                  233,633                  289,308                  524,064

                        **New Zealand**               3                         145,587                  150,790                  188,547                  289,030                  387,976

                        **Australia**                 4                         63,897                   82,505                   99,399                   89,527                   136,213

                        **Japan**                     5                         88,635                   82,150                   85,720                   92,240                   115,951

                        **Brazil**                    6                         7,428                    12,136                   35,547                   50,295                   110,269

                        **Canada**                    7                         70,530                   76,758                   75,329                   77,495                   101,631

                        **Denmark**                   8                         39,934                   42,370                   29,849                   84,568                   99,076

                        **Argentina**                 9                         15,238                   11,215                   5,845                    6,134                    92,901

                        **Philippines**               10                        77,112                   66,554                   67,911                   86,085                   88,673

                        **Vietnam**                   11                        16,688                   65,517                   90,993                   112,332                  85,581

                        **France**                    12                        78,031                   70,162                   57,228                   67,806                   80,995

                        **Chile**                     13                        25,147                   31,616                   40,210                   50,010                   77,490

                        **Netherlands**               14                        128,755                  75,395                   49,537                   52,680                   73,707

                        **Singapore**                 15                        16,952                   16,175                   48,130                   39,899                   58,851

                        **Korea, Republic             16                        21,331                   23,457                   29,663                   42,637                   52,540
                        of**                                                                                                                                                        

                        **Taiwan                      17                        32,659                   26,844                   32,618                   37,574                   39,884
                        (Estimated)**                                                                                                                                               

                        **Germany**                   18                        20,946                   29,482                   44,832                   51,410                   37,427

                        **Indonesia**                 19                        24,869                   28,224                   24,388                   14,169                   37,346

                        **Russian                     20                        3,229                    13,971                   11,305                   15,390                   35,059
                        Federation**                                                                                                                                                

                        **Rest of World**             \-                        316,550                  274,059                  238,139                  260,434                  295,089

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

  ------------ ----------------- --- --- --- ---- --- --- --------- --- --- --------- --- --- --------- --- --- --------- --- --- ---------
  ** **                                                                                                                           

  **Fish and                                              2000              2001              2002              2003              2004
  Seafood                                                                                                                         
  Products**                                                                                                                      

               **Russian                     1            345,895           487,916           622,676           662,983           780,439
               Federation**                                                                                                       

               **Korea, North**              2            4,056             48,019            143,243           206,846           261,806

               **United States**             3            79,753            100,456           105,848           133,229           244,797

               **Canada**                    4            77,207            64,335            79,475            105,368           136,731

               **Norway**                    5            42,550            63,710            63,480            91,607            129,644

               **Japan**                     6            136,583           106,883           100,528           119,292           110,219

               **Korea, Republic             7            67,019            44,796            38,933            49,009            78,763
               of**                                                                                                               

               **New Zealand**               8            26,448            26,977            38,314            37,960            57,525

               **Netherlands**               9            7,223             24,986            9,985             23,507            52,016

               **India**                     10           87,157            77,886            49,969            45,955            47,353

               **Thailand**                  11           41,787            27,364            24,359            27,748            41,247

               **Indonesia**                 12           23,182            24,583            18,105            24,855            34,568

               **Peru**                      13           2,097             2,848             13,873            10,036            31,826

               **Iceland**                   14           10,050            16,504            12,537            21,232            25,562

               **Denmark**                   15           12,014            11,097            22,390            28,392            24,054

               **Greenland**                 16           5,318             10,223            12,388            22,120            20,466

               **Spain**                     17           28,042            25,989            18,768            22,480            18,553

               **Australia**                 18           13,848            18,763            11,542            18,321            18,246

               **United                      19           3,488             6,389             7,633             15,447            16,323
               Kingdom**                                                                                                          

               **Vietnam**                   20           3,773             9,034             12,329            12,143            15,800

               **Rest of World**             \-           199,567           138,671           167,984           201,224           212,312

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

  -----------------------------------------------------------------------
  ***NA - Data not available (not reported)       Data: Harmonized Tariff
  Schedule (HS 6 Digit)***

  ***Source: FAS\' Global Agricultural Trade System using data from the
  United Nations Statistical Office***
  -----------------------------------------------------------------------