Voluntary Report - Public distribution

**Date:** 10/30/2007

**GAIN Report Number:** CH7081

CH7081

**China, Peoples Republic of**

**Dried Fruit**

**Annual**

**2007**

**Approved by:**

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

AGBEIJING

**Prepared by:**

Zhang Lei, Evid Liu, Tanya Franke, Eric Trachtenberg, and Chanda Beckman

**Report Highlights:**

China\'s MY 2007/08 raisin production is forecast at 145,000 MT, a
16-percent increase from 2006/07 because of favorable weather, increased
acreage, and higher input use. MY 2006/07 consumption has been revised
up 1,641 MT to 113,641 MT. Raisin imports are also forecast up at 12,500
MT, a two-percent increase over MY 2006/07. U.S. raisins continue to
dominate the market, and are mostly packaged or processed for re-export
to Japan.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[**Production 3**](#production)

[Increases in Turpan, Xinjiang Province
3](#increases-in-turpan-xinjiang-province)

[Figure 1. Turpan Raisin Wholesale Prices
3](#figure-1.-turpan-raisin-wholesale-prices)

[Trade 4](#trade)

[U.S. Raisins Dominate Imports, Mostly for Re-export to Japan
4](#u.s.-raisins-dominate-imports-mostly-for-re-export-to-japan)

[Exports Continue to Increase 4](#exports-continue-to-increase)

[Figure 2. China's Raisin Exports by Country
5](#figure-2.-chinas-raisin-exports-by-country)

[Consumption and Marketing 5](#consumption-and-marketing)

[Steady Growth of Dried Fruit Consumption
5](#steady-growth-of-dried-fruit-consumption)

[Emerging Middle Class Drives Consumption
5](#emerging-middle-class-drives-consumption)

[SWOT Analysis and Recommendations for U.S. Dried Fruit Marketing in
China
6](#swot-analysis-and-recommendations-for-u.s.-dried-fruit-marketing-in-china)

[Table 1: SWOT Analysis of U.S. Dried Fruit in China
7](#table-1-swot-analysis-of-u.s.-dried-fruit-in-china)

[Statistics Tables 8](#statistics-tables)

[Table 2: Production, Supply and Demand (PS&D) Table
8](#table-2-production-supply-and-demand-psd-table)

[Table 3: China Raisin Imports by Country
9](#table-3-china-raisin-imports-by-country)

[Table 4: China Raisin Exports by Country
9](#table-4-china-raisin-exports-by-country)

# Production

## Increases in Turpan, Xinjiang Province

Post forecasts China's marketing year (MY) 2007/08 (August-July) raisin
production at 145,000 tons (MT), a 16-percent increase from MY 2006/07.
Four factors contribute to the increase: favorable weather in China's
major raisin producing area, fewer pest and disease occurrences, more
input use, and expanded planting area. According to the local weather
department in China's largest raisin producing area of Turpan, Xinjiang
Province, 2007 has been an excellent year for raisin production. Warmer
temperatures in May and early June aided plant flowering, pollination,
and grape growing. Higher temperatures, sufficient sunlight, and less
rain on average in August and September contributed to grape maturity,
sugar accumulation, and aided the grape drying process. Turpan
government sources also report lower than normal pest and disease
occurrences in 2007. They cite favorable weather and accurate, advanced
weather forecasts as the primary reasons for the decline in pests and
diseases. Good returns coupled with field management training and small
loans from local governments have also encouraged farmers to increase
input use. As a result, farmers improved field management techniques and
applied fertilizer more frequently in 2007 to help increase yields.
China's MY 2007/08 raisin grape acreage is forecast at 28,670 hectares,
up seven percent from the previous year mainly because of the recent
good returns. MY 2007/08 fruit bearing area is also expected to rise as
the MY 2003/04 expansions begin bearing fruit.

Turpan is the largest raisin producing area in China, accounting for
more than 80 percent of China's total raisin production. About 85
percent of Turpan's production is made up of green raisins that are
air-dried. The fresh grapes usually mature in July, but are not
harvested until August to allow the grapes to increase in sugar content.
After harvest, fresh grapes are hung on the vine in special drying
houses. Grapes take about 40 days to dry into raisins. The peak season
for Turpan's raisin trade is late September through November.

Raisins are available year round in the Chinese market, but at varying
prices. Figure 1 shows raisin wholesale prices in the Turpan Shengda
Raisin Wholesale Market, the largest raisin wholesale market, with
annual raisin sales of 60,000 MT. For more information on China's raisin
production and distribution, please refer to [GAIN
CH6093](http://www.fas.usda.gov/gainfiles/200610/146249404.pdf).

## Figure 1. Turpan Raisin Wholesale Prices 

![](media/image2.png){width="5.374409448818898in"
height="2.2173228346456693in"}

Source: Ministry of Agriculture, China

# Trade

## 

## U.S. Raisins Dominate Imports, Mostly for Re-export to Japan

The United States dominates China's raisin import market, accounting for
about 90 percent of China's total imports. In MY 2006/07, China imported
a total of 12,262 MT of raisins, 11,072 MT from the United States.
Imports from Turkey (935 MT in MY 2006/07) and South Africa (160 MT in
MY 2006/07) account for the remaining 10 percent of the market.

Post forecasts a slight increase to 12,500 MT in China's MY 2007/08
raisin imports, up two percent from 2006/07, driven by strong demand for
re-exports to Japan. Japan is the largest buyer of U.S. raisins,
accounting for 16 percent of U.S. worldwide exports in MY 2006/07, and
U.S. raisins continue to enjoy a good reputation in the Japanese market.
Many Japanese raisin traders contract with Chinese processors in the
duty free zones of Qingdao and Tianjin to re-process U.S. raisins.
China's labor, packaging, and land expenses are much lower than in both
the United States and Japan, so traders capitalize on this opportunity
to decrease costs. Post visited a Chinese processor located in Qingdao,
Shandong Province who imports raisins from the United States in bulk.
After freezing (to kill any pests or pests eggs), the raisins are graded
by hand, packaged, and re-exported to Japan. The quantity, price, and
U.S. suppliers are determined by Japanese importers. The Chinese company
is responsible only for re-processing and collects only processing
charges from the Japanese importers.

Industry sources indicate that very few Chinese-grown raisins are
exported to Japan because of high import hygiene requirements and the
Japanese consumer preference for U.S. raisins. Despite their higher
price, Japanese consumers will pay for raisins of U.S. origin. The
import duty is listed below:

  --------- --------------- ------- -------- ------- ------- -------- --------
            H.S. Code       Imp.             VAT (%)         Rebate   
                            Duty                             (%)      
                            (%)                                       

                            2006    2007     2006    2007    2006     2007

  Raisin    08062000        10      10       13      13      5        5
  --------- --------------- ------- -------- ------- ------- -------- --------

Source: China Customs Data

## Exports Continue to Increase

The MY 2006/07 export estimate is revised up to 23,621 MT, a
five-percent increase over Post's previous estimate. MY 2007/08 raisin
exports are forecast to reach 26,500 MT, a 12-percent increase from the
previous year. Both increases are driven by strong international market
demand and the decline of production in Turkey. Chinese media recently
reported Turkey's 2007 raisin production will decrease 15-20 percent
because of continued high temperatures and a severe drought.

Japan is China's largest raisin export market because of re-processing
and transshipment of U.S. raisins \-- however, the overall share is
declining. In MY 2004/05, 75 percent of China's total raisin exports
were shipped to Japan, but declined to 50 percent of total raisin
exports in MY 2005/06 and 43 percent in MY 2006/07. Other emerging
markets for Chinese raisins are Germany, Poland, and Canada, all because
of competitive pricing.

## Figure 2. China's Raisin Exports by Country 

# Consumption and Marketing

## Steady Growth of Dried Fruit Consumption

While there are no official statistics on dried fruit consumption in
China, industry sources indicate a steady increase across China, based
on the increasing number of new food varieties with dried or preserved
fruits as ingredients available in the retail market. The majority of
dried fruit products are made with domestically produced fruit ranging
from deciduous and tree fruit, to citrus and tropical fruit, but limited
varieties are available. Dried raisins, plums, and tropical fruits
(mango and pineapple) have long been imported into China, albeit in
limited quantities and mostly in affluent, urban areas.

Although only entering the market two or three years ago, dried
cranberries and blueberries represent a small but increasing share of
dried fruit consumption, because of effective promotion efforts. In
recent years, dried tropical fruits from Southeast Asian countries have
also become popular, stimulating the processing of domestic sub-tropical
fruits in south China.

Consumer preference for dried fruit varies in each region. In north
China, consumers tend to prefer sugar-seasoned fruits (apple, pear,
apricot), while consumers in south China prefer dried plums, or lemon
and small citrus fruits preserved with a mix of sugar, salt, and herbs.
These preserved citrus fruits have a long history in south China and are
believed to possess certain health functions. Consumer preference for
raisins, however, seems to be universal throughout the country.

## Emerging Middle Class Drives Consumption

Consumption of dried fruit is driven by the emerging middle class.
Consumers ranging from the young to the middle aged are increasingly
well educated and eager to create a healthy lifestyle for themselves,
their parents, and their children. With higher disposable incomes, they
are willing to pay a premium price for products that are nutritious,
healthy, or have other attributes such as medicinal, anti-aging, or
slimming and beauty properties. Consumers in this group live in larger
cities or industrialized regions like the Pearl River or Yangzi River
deltas.

The snack food, bakery, and up-scale food service industries currently
remain the major users of imported dried fruit. However, the fast
growing ice-cream, confectionary, and breakfast cereal industries are
expected to achieve 10--20 percent annual growth over the next few years
and will likely become larger users of imported dried fruit. These
sectors present excellent opportunities for the U.S. dried fruit
industry.

## SWOT Analysis and Recommendations for U.S. Dried Fruit Marketing in China

A SWOT analysis is useful in evaluating the Chinese market for U.S.
dried fruit. The strengths of U.S. dried fruit are product quality and
safety, advanced processing know-how, strong support from U.S.
government agencies, and the falling U.S. dollar.

Constraints include a lack of awareness of the quality of U.S. products
and specific dried fruit health benefits, consumer price sensitivity
resulting from the comparably high price of U.S. products, insufficient
U.S. supply, incomplete distribution channels in secondary (emerging
city) markets, and competition from domestic products and those imported
from other countries. A technical barrier for U.S. raisins is China's
low tolerance of sulfur dioxide (100 or 400 ppm) for processed fruit.
China's standard is much lower than the Codex standard (2,000 ppm) and
the typical residue level for the U.S. raisin industry. Finally, U.S.
products are also threatened by severe counterfeiting problems in China.

Nonetheless, there are still ample opportunities for U.S. products in
the Chinese market. Chinese consumers recognize the importance of food's
nutritional qualities to maintain health, and China's emerging
middle-class demands healthy snack foods. Moreover, among the fast
growing sectors that use dried fruits as ingredients (retail, baking,
snack food, ice cream, confectionary, and breakfast cereal) demand is
expected to increase. Table 1 details the SWOT analysis.

Based on this analysis, below are approaches recommended for marketing
dried fruit in China:

1.  Continue education of consumers and traders about U.S. product
    specifics and the advantages of U.S. dried fruit;

2.  Increase promotion of U.S. products in fast growing sectors, e. g.
    retail, bakery, snack food, ice cream, confectionary, breakfast
    cereals;

3.  Make U.S. products more price competitive;

4.  If possible, match dried fruit promotion with other current
    consumption trends.

## Table 1: SWOT Analysis of U.S. Dried Fruit in China

+-----------------------------------+-----------------------------------+
| **Strengths**                     | **Constraints**                   |
+-----------------------------------+-----------------------------------+
| -   U.S. products in general are  | -   Chinese consumers' general    |
|     regarded as good quality,     |     lack of knowledge of health   |
|     safe, and healthy;            |     benefits from U.S. dried      |
|                                   |     fruit;                        |
| -   Depreciating exchange rate of |                                   |
|     U.S. dollar versus Chinese    | -   Prices of U.S. products are   |
|     Renminbi enables a lower      |     generally higher than the     |
|     price for U.S. products in    |     counterparts produced in      |
|     the price-sensitive China     |     competitor countries;         |
|     market;                       |                                   |
|                                   | -   Price-sensitive Chinese       |
| -   U.S. manufacturers and        |     consumers are reluctant to    |
|     exporters have more expertise |     pay a premium price for U.S.  |
|     compared with competitors;    |     products without knowing the  |
|                                   |     specific benefits of such     |
| -   Strong support from U.S.      |     products;                     |
|     government agencies in        |                                   |
|     overseas marketing and        | -   U.S. products present vague   |
|     anti-counterfeiting.          |     image of USA as the country   |
|                                   |     of origin, therefore weak     |
|                                   |     differentiation from products |
|                                   |     produced by competitor        |
|                                   |     countries;                    |
|                                   |                                   |
|                                   | -   A technical barrier exists    |
|                                   |     for some U.S. dried fruit     |
|                                   |     because of China's extremely  |
|                                   |     low tolerance for sulfur      |
|                                   |     dioxide residue.              |
+-----------------------------------+-----------------------------------+
| **Opportunities**                 | **Threats**                       |
+-----------------------------------+-----------------------------------+
| -   Chinese consumers perceive    | -   Competition from products     |
|     that some kinds of food are   |     grown domestically or from    |
|     of health-supportive or       |     other countries;              |
|     medicinal functions;          |                                   |
|                                   | -   Severe counterfeiting         |
| -   Strong demand for healthy     |     problems in China.            |
|     snack foods in urban area;    |                                   |
|                                   |                                   |
| -   Emerging middle class in      |                                   |
|     cities who are well-educated, |                                   |
|     pursuing a healthy lifestyle, |                                   |
|     and able to afford higher     |                                   |
|     prices;                       |                                   |
|                                   |                                   |
| -   Fast growing sectors          |                                   |
|     including: retail, snack      |                                   |
|     food, bakery, ice cream,      |                                   |
|     confectionary, and breakfast  |                                   |
|     cereals are good channels for |                                   |
|     dried fruit promotion and     |                                   |
|     sales.                        |                                   |
+-----------------------------------+-----------------------------------+

# Statistics Tables

## Table 2: Production, Supply and Demand (PS&D) Table

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

  **Commodity**   **Raisins**                                                            (HA)(MT)              

                  2005          Revised                2006       Estimate               2007       Forecast   

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

  **Market Year                 08-2005    08-2005                08-2006    08-2006                08-2007    08-2007
  Begin**                                                                                                      

  Area Planted    23,680        23,680     23,680      26,780     26,780     26,780      0          0          28,670

  Area Harvested  16,580        16,580     16,580      18,750     18,750     18,750      0          0          20,100

  Beginning       0             0          0           0          0          0           0          0          0
  Stocks                                                                                                       

  Production      105,000       105,000    105,000     125,000    125,000    125,000     0          0          145,000

  Imports         10,391        10,391     10,391      9,500      9,500      12,262      0          0          12,500

  Total Supply    115,391       115,391    115,391     134,500    134,500    137,262     0          0          154,500

  Exports         18,063        18,063     18,063      22,500     22,500     23,621      0          0          26,500

  Domestic        97,328        97,328     97,328      112,000    112,000    113,641     0          0          131,000
  Consumption                                                                                                  

  Ending Stocks   0             0          0           0          0          0           0          0          0

  Total           115,391       115,391    115,391     134,500    134,500    137,262     0          0          154,500
  Distribution                                                                                                 
  --------------- ------------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- -----------

## 

## 

## Table 3: China Raisin Imports by Country

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

  H.S. Code:                                                 
  08062000                                                   

  **Country**   **3rd Qtr      **4th Qtr      **1st Qtr      **2nd Qtr
                2006**         2006**         2007**         2007**

  United States 2,795          3,324          2,366          2,217

  Turkey        235            280            20             280

  Australia     1              2              0              1

  Kazakhstan    0              18             14             0

  Kyrgyzstan    2              19             0              0

  South Africa  40             40             80             0

  Japan         0              0              17             0

  Pakistan      0              20             0              0

  Others        0              1              0              0

  Total         3,074          3,703          2,496          2,499
  ------------- -------------- -------------- -------------- --------------

## 

## Table 4: China Raisin Exports by Country

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

  H.S. Code:                                                  
  08062000                                                    

  **Country**    **3rd Qtr      **4th Qtr      **1st Qtr      **2nd Qtr
                 2006**         2006**         2007**         2007**

  Japan          2,624          2,659          2,127          2,710

  Poland         700            1,020          140            218

  Lithuania      100            352            55             273

  Canada         348            324            861            145

  Pakistan       0              311            50             683

  Saudi Arabia   0              278            225            226

  Czech Republic 199            243            100            100

  United Kingdom 249            211            251            173

  Germany        557            177            0              19

  Australia      0              174            100            80

  Belgium        60             120            80             120

  Estonia        120            120            120            100

  India          22             114            157            215

  Taiwan         0              110            98             98

  Yemen          38             108            0              0

  Others         564            690            990            907

  Total          5,581          7,012          5,354          6,064
  -------------- -------------- -------------- -------------- --------------