Voluntary Report - Public distribution

**Date:** 12/12/2007

**GAIN Report Number:** CH7616

CH7616

**China, Peoples Republic of**

**Market Development Reports**

**Nanning: Strategic Gateway to Southwest China**

**2007**

**Approved by:**

![](media/image1.wmf)Joani Dong

U.S. Agricultural Trade Office Guangzhou

**Prepared by:**

Ken Chen

**Report Highlights:**

With strategic support from Beijing, excellent location, transportation
development and communication linkages with South China and ASEAN,
Nanning is poised to ride the crest of an economic boom. No doubt, this
will further drive consumer demand and attract investment. Increasing
growth of hotels, restaurants and supermarkets already substantiate
this. ATO Guangzhou interviewed scores of governmental officials and
executive managers across sectors who shared surprising insights about
market opportunities for U.S. agricultural products.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Guangzhou ATO \[CH3\]

\[CH\]

# 

Table of Contents

[**I. Nanning: Well connected to Southwest China and ASEAN
3**](#i.-nanning-well-connected-to-southwest-china-and-asean)

> [A. Sea Ports 3](#a.-sea-ports)
>
> [B. Railway 3](#b.-railway)
>
> [C. Highway 4](#c.-highway)
>
> [D. Airport 4](#d.-airport)

[II. Nanning at a glance 4](#ii.-nanning-at-a-glance)

[Chart 1: Nanning at a glance 5](#chart-1-nanning-at-a-glance)

[Chart 2: CY 2006 - GDP in Guangxi Province and GDP by City
(US\$billions)
5](#chart-2-cy-2006---gdp-in-guangxi-province-and-gdp-by-city-usbillions)

> [A. Beibu Gulf Economic Zone (BGEZ) 5](#__RefHeading___Toc185145647)
>
> [B. Nanning spearheads BGEZ's development
> 6](#__RefHeading___Toc185145648)

[III. U.S. imports (Soybeans) 6](#__RefHeading___Toc185145649)

[Chart 3: Soybean exports to Guangxi
7](#chart-3-soybean-exports-to-guangxi)

[Chart 4: Soybean exports to China 7](#chart-4-soybean-exports-to-china)

[Chart 5: Comparison among U.S., Brazilian and Argentine soybean
8](#chart-5-comparison-among-u.s.-brazilian-and-argentine-soybean)

[IV. U.S. imports (Livestock) 8](#iv.-u.s.-imports)

[V. HRI Sector 9](#__RefHeading___Toc185145654)

[VI. Retail 11](#__RefHeading___Toc185145655)

> [A. Wal-Mart 11](#__RefHeading___Toc185145656)
>
> [B. Beijing Hualian 12](#__RefHeading___Toc185145657)
>
> [C. Retail market development for U.S. imports
> 12](#c.-retail-market-development-for-u.s.-imports)

[VII. Conclusion 13](#vii.-conclusion)

[Chart 6: Promising U.S. Products 13](#chart-6-promising-u.s.-products)

#  

# 

# 

# 

#  

# I. Nanning: Well connected to Southwest China and ASEAN

![](media/image2.png){width="4.476388888888889in"
height="4.184722222222222in"}

Nanning is the capital of Guangxi - Zhuang Autonomous Region. Its deep
sea ports and location are ideal for businesses looking for new
development opportunities in booming Southwest China.

Guangxi's strategic position offers good access to developing regions
key to the Beijing government's agenda for national development.

On a regional level, Nanning is an integral part of South China's
Economic Circle (including the Pearl River Delta and Guangdong
Province)*,* Southwest China's Economic Circle (including cities such as
Kunming, Chongqing and Chengdu), and ASEAN Economic Circle (*Note* -
ASEAN is the Alliance of ten Southeast Asia Nations consisting of Brunei
Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines,
Singapore, Thailand, and Vietnam*.*)

## A. Sea Ports![](media/image3.wmf){width="2.979861111111111in" height="2.40625in"}

In Southwest China, Guangxi is the only province with direct ocean
access to the South China Sea through Fangcheng, Qinzhou and Beihai, all
deep water ports that can receive ocean vessels from foreign ports and
Hong Kong. Nanning is linked to the three ports by highways within a
radius of 1 to 1--½ hours drive. Last year these ports alone handled
37.4 million tons of cargo.

## B. Railway

There is direct rail access between Nanning, Chengdu and Chongqing, the
fastest developing cities in less developed Southwest China*.* However,
rail access between the city and each of the three sea ports is still
under construction. Once completed, Nanning becomes an important supply
route for Southwestern China markets.

## C. Highway

Even more ambitious plans are underway for rail and road links between
Nanning and Hanoi (Vietnam's capital). These plans are part of a grand
vision to connect key ASEAN nations into a future "Economic Corridor"
running from Nanning to Singapore. From Hanoi, the road and rail network
would pass through Phnom Penh, Bangkok, and Kuala Lumpur before reaching
Singapore. With this goal in mind, a highway was constructed between
Nanning and Pingxiang boarding Vietnam. It takes about a four hours
drive from Nanning to Hanoi.

## D. Airport

Another key infrastructure development is *Nanning Wuxu International
Airport*, recently expanded to receive international flights from mostly
Southeast Asian cities. By the end of 2007, Nanning will be connected
with Singapore, Jakarta, Bangkok and Phnom Penh by regular flights.

Politically, Guangxi enjoys many favorable policies from the central
government in Beijing. For example it is recognized as a National
Minority Autonomous Zone which means its provincial government has more
self governing rights than other provinces. It is also part of Beijing's
Western Development Policy, which aims to fast track economic
development of China's lagging rural areas. Other significant policies
include "Coastal Area Open" policy and "Border Open" policy status
enabling Guangxi to develop international trade links, much in the same
way as key coastal cities and special industrial zones have grown
successfully in the past 15 years.

It's clear to see Nanning is poised to become an important logistics hub
for Southwest China. Some even speculate Nanning will become the next
"Shenzhen" success story because both cities are built on their valuable
ports and sophisticated logistic networks to support economic
development.

# II. Nanning at a glance

Nanning has sub-tropical weather with a monsoon season between May to
August, and annual rainfall of 34.77 inches. It is a pleasant "green
city" with a temperate climate for most of the year making it a
comfortable place to
live.![](media/image4.jpeg){width="3.227777777777778in"
height="2.078472222222222in"}

October 1, 2007, the United Nations (UN) -- HABITAT awarded the "Habitat
Scroll of Honor" to the Nanning Municipal People's Government for having
developed China's first Integrated City Emergency Response System to
collocate the city's police and fire emergency, paramedic ambulance
response and traffic accident reporting systems, along with 30 other
non-emergency public services previously managed by many different
administrative departments.

From an economic perspective, Nanning is relatively undeveloped and
ranked 86th on the nation's top 100 cities list. However, many investors
view this as a tremendous opportunity, given its logistic linkages with
fast developing Chongqing, Chengdu and Kunming.

### Chart 1: Nanning at a glance 

+----------------------------------+-----------------------------------+
| 1\. Nanning City Area:           | 8,535 square miles                |
+----------------------------------+-----------------------------------+
| 2\. Urban Area:                  | 2,501 square miles                |
+----------------------------------+-----------------------------------+
| 3\. Population:                  | 6.7 million                       |
+----------------------------------+-----------------------------------+
| 4\. Urban Population:            | 2.6 million                       |
+----------------------------------+-----------------------------------+
| 5\. GDP:                         | US\$11.6 billion, up 16.4% from   |
|                                  | 2005                              |
+----------------------------------+-----------------------------------+
| 6\. Per Capita GDP:              | US\$1,743, up 14.4% from 2005     |
+----------------------------------+-----------------------------------+
| 7\. Per Capita Annual Disposable | US\$1,359, up 10.8% from 2005     |
| Income                           |                                   |
+----------------------------------+-----------------------------------+
| 8\. Per Capita Annual            | US\$974, up 6.1% from 2005        |
| Consumption Expenditure          |                                   |
+----------------------------------+-----------------------------------+
| 9\. Per Capita Annual Food       | US\$382, up 3.2% from 2005        |
| Consumption Expenditure          |                                   |
+----------------------------------+-----------------------------------+
| 10\. Hotel (star-rated)          | 4 five-star, 6 four-star and 66   |
|                                  | other hotels                      |
+----------------------------------+-----------------------------------+
| 11\. Retail                      | International chain:              |
|                                  |                                   |
|                                  | -   *Wal-Mart* (2 stores)         |
|                                  |                                   |
|                                  | Chinese national chains:          |
|                                  |                                   |
|                                  | -   *Beijing Hualian* (3 stores)  |
|                                  |                                   |
|                                  | -   *Nancheng Baihuo* (2 stores)  |
|                                  |                                   |
|                                  | -   *Ren Ren Le* (2 stores)       |
|                                  |                                   |
|                                  | Local chains:                     |
|                                  |                                   |
|                                  | -   *Likelong* (15 direct sales   |
|                                  |     stores, 22 franchised stores, |
|                                  |     4 convenience stores)         |
|                                  |                                   |
|                                  | -   *Daremen* Shopping Center (1  |
|                                  |     store)                        |
+----------------------------------+-----------------------------------+

*Source:*

*\# 1 - 9 reflect Calendar Year 2006 data from Guangxi Statistic
Yearbook (2007);*

*#10 -- 11 reflect Calendar Year 2007 data from interviewees.*

Together Nanning, Liuzhou and Guilin alone make up 43.5 percent of the
GDP generated in Guangxi. (*Refer to Chart 2 below*)

### Chart 2: CY 2006 - GDP in Guangxi Province and GDP by City (US\$billions)

  ------------------------ ------------------- --------------------------
  **Guangxi Province**     **64.4**            **100%**

  Nanning                  11.6                18.0%

  Liuzhou                  8.3                 12.9%

  Guilin                   8.1                 12.6%

  **Total for three        **28.0**            **43.5%**
  cities**                                     

  All other cities         36.4                56.5%
  ------------------------ ------------------- --------------------------

# 

[]{#__RefHeading___Toc185145647 .anchor}**A. Beibu Gulf Economic Zone
(BGEZ)**

*China wants to make it easy to trade with ASEAN.*

The Beibu Gulf Economic Zone (BGEZ) is a promising strategic initiative
that has won a great deal of attention recently. It integrates Nanning,
the three ports Beihai, Qinzhou and Fangcheng as well as the transport
and logistics networks of Yulin and Chongzuo. The vision for BGEZ is to
develop an international logistics, trading, processing and information
exchange base that will become a leading center for the China-ASEAN free
trade zone. The aim is to enhance the flow of commodities, capital,
labor, and information between China and ASEAN members.

![](media/image5.jpeg){width="2.977777777777778in"
height="1.9840277777777777in"}

Since the Free Trade Agreement was signed in July of 2005, by China and
ASEAN, tariffs of 5,735 products have been either reduced or exempted.

In 2006, the overall trading turnover was US\$16.08 billion. By 2010, it
is expected to reach US\$20 billion, and over 90 percent of commodities
will be tariff free.

Since 2004, Nanning has hosted the China-ASEAN Expo every October to
support traders and investors throughout the region.

Nanning has even made provisions for the ten ASEAN member nations to
construct consulates to provide diplomatic services to the region.
Vietnam and Cambodia have already opened theirs in downtown Nanning.

[]{#__RefHeading___Toc185145648 .anchor}**B. Nanning spearheads BGEZ's
development**

In July 2007, the Guangxi government incorporated two companies to
manage BGEZ's future development. *Guangxi Beibu Gulf Development
Investment Company* (DIC) and *Guangxi Beibu Gulf International Harbor
Affairs Group Company* (IHAGC) together lead integration. The DIC will
manage State assets as authorized by the regional government for the
development of key infrastructure projects such as harbors, transport
system, supply of water/power and use of coastal resources in the BGEZ.
The IHAGC will integrate property rights of State assets of
*Fangchenggang Harbor Affairs Group Co.*, *Qinzhou Port (Group) Co.*,
*Beihai Harbor Co.* and *Guangxi Coastal Railway Co.* and be responsible
for construction, operation and management of the zone\'s three ports
and railways.

Recent BGEZ project announcements include;

-   **Iron and steel** venture valued at US\$7.2 billion in Fangcheng;

-   **Oil refinery** valued ad US\$1.6 billion in Qinzhou (*with a
    capacity of 10 million tons annually);*

-   **Paper pulp plant** valued at US\$53 billon in Qinzhou;

-   **Aluminum smelter** in Nanning valued at US\$384 million;

-   **Nuclear power plant** in Fangcheng.

With these announcements and many others in advanced discussion, there
is good reason to view BGEZ as a booming region and an ideal logistics
hub for entering Southwest China.

[]{#__RefHeading___Toc185145649 .anchor}**III. U.S. imports**

*Soybeans are big business.*

Last year 2.6 million metric tons of soybeans with a value of US\$676
million were imported into Guangxi. This is an increase of 27.5 percent
over 2005 figures, and accounted for 9 percent of China's total soybean
imports because process capacity in Guangxi increased. Most were crushed
by two plants, one in Fangcheng port and the other in Qinzhou port. Both
plants source from the United States, Brazil, Argentina and Uruguay.

### Chart 3: Soybean exports to Guangxi

  ----------------- -------------------------- --------------------------
  **Country of      **2006 Volume** *(millions **% Change from 2005**
  Origin**          of tons)*                  

  Brazil            1.45                       +12.4%

  Argentina         0.71                       +700%

  **United States** **0.28**                   **-40%**
  ----------------- -------------------------- --------------------------

*Source: Nanning Customs*

Soybean import trade figures illustrate the trend that Brazil has
surpassed the States in supplying soybeans to China, and Argentina has
gained significant market share. For the most part, however, U.S. and
South American soybeans don't directly compete with each other since
they have different harvest periods.

### Chart 4: Soybean exports to China

+-----------------+-----------+------------+-----------+------------+
| **Country of    | **        | *          | **%       | **Total    |
| Origin**        | 2004/2005 | *2005/2006 | Change**  | Import**   |
|                 | Volume**  | Volume**   |           |            |
|                 |           |            |           |            |
|                 | (Millions | (Millions  |           |            |
|                 | of tons)  | of tons)   |           |            |
+-----------------+-----------+------------+-----------+------------+
| Brazil          | 6.7       | 11.7       | +75.3%    | 41.5%      |
+-----------------+-----------+------------+-----------+------------+
| Argentina       | 6.4       | 7.1        | -9.4%     | 22.7%      |
+-----------------+-----------+------------+-----------+------------+
| **United        | **11.9**  | **9.7**    | *         | **34.3%**  |
| States**        |           |            | *-18.2%** |            |
+-----------------+-----------+------------+-----------+------------+

*Source: Grain & Oil Market (Newspaper)*

While the national average for soybean imports from Argentina dropped by
9.4 percent, it's interesting to note that Guangxi increased its volume
by 700 percent from 2005. One significant factor influencing these trade
figures was in April 2006, the Qinzhou port crushing plan was purchased
by a Singaporean grain trader that has considerable soybean interests in
Argentina.

China mainly purchases second grade U.S. soybeans and processes them
into edible oil and into soy meal feed. Oil and protein content are
important gauges of quality which are factored into export sales
quotations. Post was told that U.S. soybeans that enter Fangcheng port
average around 12 percent moisture which matches the standard moisture
level of U.S. soybeans. Lower moisture levels make the beans brittle and
subject to splitting during handling. This leads to quality problems.

![](media/image6.jpeg){width="3.084722222222222in" height="2.08125in"}

China has a zero tolerance policy for weeds such as Columbus grass,
ragweed, Johsongrass and Giant Sumpweed in soybean shipments.

A trade source stated that shipments with weeds bound for crushing at
port are allowed by *China Inspection and Quarantine* (CIQ) local
inspectors, because weeds are destroyed in the process. However,
shipments bound for overland transport (train & truck) to other
locations are strictly prohibited.

### Chart 5: Comparison among U.S., Brazilian and Argentine soybean 

  ------------ ------------- --------- -------------- ----------- ------------------ ------------------
  **Origin**   **Protein**   **Oil**   **Moisture**   **Price**   **Color**          **Availability**
                                                      *US\$/MT*   *(depends on       
                                                                  variety)*          

  U.S.         34%           20%       12%            390         Yellow/Light Brown Oct. -April

  Brazil       36%           21%       11%            380         Reddish            April --Oct.

  Argentina    34%           20%       11%            375         Green              April -- Oct.
  ------------ ------------- --------- -------------- ----------- ------------------ ------------------

*Source: Interviewed importers*

U.S. soybeans have certain competitive advantages. New crops of U.S.
soybean are available in October while South American soybeans are
available in April. Furthermore, Chinese feed mills traditionally have a
preference for U.S. soy meal which has a brighter appearance because
most U.S. soybean has yellow or light brown skin. Soy meal made of South
American soybean is darker because the skin is either reddish or green.

Through Nanning, the two crushing plants supply Southwest China and part
of South China by rail and truck. Taking the Fangcheng port crushing
plant as an example, it supplies soy meal and edible oil to the local
Guangxi market as well as Yuannan, Guizhou, Sichuan, Chongqing, Hunan,
and Hainnan.

Thanks to geographic proximity, it started to penetrate into the
Vietnamese feed market by supplying soy meal in 70 kg (154 lbs) bags by
barge to small Vietnam inland river ports which normally handle 500 to
20,000 tonnage vessels.

Soy meal feeds are mainly consumed by swine and poultry industries in
Guangxi. Despite recent blue ear epidemic outbreaks among swine and
concern about curtailed demand for soy meal, crushers are considering
further expansion to manufacture Soybean Protein Concentrate (SPC) feeds
for the booming aquatic industry in Guangxi.

![](media/image7.jpeg){width="2.8125in" height="2.0548611111111112in"}

# IV. U.S. imports 

*Livestock is in hot demand.*

Livestock is an important agricultural sector in Guangxi. In 2006, there
were 40.4 million fattened hogs slaughtered and 26.1 million raised on
local farms. Pork accounts for more than 60 percent of meat served in
Chinese diets. However, few Chinese realize some of the pork is from
U.S. sourced genetic stock.

In 2004, a Nanning suburban breeding farm imported an airborne shipment
of 268 U.S. breeding swine. In 2007, it spent another US\$2 million
importing 460 U.S. purebred pigs (Duroc, Yorkshire - a.k.a. "Large
White" - and Landrace breeds). Duroc boars are valued for their fast
growth rates and crossbred with either Yorkshire or Landrace sows that
have higher fertility rates. The same farm plans to import more from the
States in 2008.

Post was told U.S. crossbred offspring are well received locally because
of their appearance, rapid growth rate, high fertility, disease
resistance and adaptability. Chinese pig farmers prefer strong rear legs
to support body weight and wide shoulders suggesting higher ratios of
lean meat.

It generally takes 180 days and 419 to 485 pounds of quality feed for
these U.S. crossbreds to reach market weight of 100 kilos (220 pounds).
In contrast Chinese breed equivalents require 210--240 days and more
feed.

![](media/image8.jpeg){width="2.561111111111111in"
height="1.8784722222222223in"}

Industry sources say U.S. sows typically produce 12 piglets which show
good levels of resistance to common diseases or even recent devastating
outbreaks of *Porcine Respiratory and Reproductive Syndrome* (PRRS, also
known as Blue Ear Disease) that usually cause high piglet mortality
rates. In comparison Chinese sows are said to have up to 15 piglets, but
growth is slow. Generally, reports of U.S. crossbred piglets are
positive as they adapt quickly to the local climate, living environments
and feeds. At 90 days, piglets are at its best physical shape and sold
to large scale commercial farms at this time.

Given China's growing demand for improved livestock production,
importers can apply to the *Ministry of Agriculture* for tariff
exemptions on imported animal genetic products (such as live breeding
animals and frozen semen/embryos). However, swine industry importers
generally prefer live animals, mainly because they care more about
visual appearance rather than pedigree records.

Another noticeable livestock development is in the dairy sector. In
Guangxi, the largest dairy company is headquartered in Nanning and has a
modern processing plant collecting raw milk from over 7,000 Holsteins
raised by its own two farms and 11 other contracted farms. Its
management is interested in importing alfalfa hay and frozen bovine
semen from the States to improve milk yield and quality.

[]{#__RefHeading___Toc185145654 .anchor}**V. HRI Sector**

*More development means more hotels and opportunities to promote U.S.
products.*

In line with Nanning's recent and future development, more hotels have
been built, or are in the planning phase and set to open soon.
![](media/image9.jpeg){width="2.9784722222222224in"
height="1.8173611111111112in"}

Nanning has four 5-star hotels, six 4-star and 66 other rated hotels
that accommodated 22,539 domestic and 83,916 foreign overnight tourists
(person -- time) in 2006.

The international hotel chain *Best Western* manages a newly opened
four-star, and in 2008-2009 two five-star hotels by *Marriot* and
*Shangri-La* will open.

According to one 5-star hotel manager interviewed, 30 percent of their
338 rooms were usually filled with international guests visiting
predominantly for business. At the same time, 10 percent were said to be
there to adopt Chinese orphans, the majority coming from the United
States while others came from Spain, Holland, Norway and other European
countries.

On average, international guests stay four to five nights. Most visitors
are domestic business travelers who stay two to three nights. Room rates
average US\$65 for a standard room and US\$107 for executive suites
which come with complimentary broadband service, breakfast, and laundry
services.

High season starts in May and extends through to February each year.
Overall business sentiment in Nanning is positive with a number of large
domestic and international joint ventures setting up local operations. A
few examples include *Lenovo and British Tobacco.* Fine dinning options
are on the rise quickly responding to the rapid increase in
international visitors and successful mainland travelers coming to
Nanning.

Therefore good opportunities exist for exporters looking to find
emerging markets to promote their high quality foods, ingredients,
condiments and wine etc. Currently, though local distributors are still
not well established.

Meanwhile, U.S. wines are available and find its way onto many good
restaurant menus. However, there is stiff competition from French,
Australian, Italy and local wines. Pricing is erratic; for example, a
bottle of *Vintner's Reserve Chardonnay* from California's
*Kedall-Jackson* was available in one hotel at US\$64.

One successful national western style franchise restaurant in Nanning
began to offer U.S. seafood including halibut, black cod and snow crab
as part of its regular menu after a successful U.S. menu promotion held
by the *Alaska Seafood Marketing Institute* and *ATO/Guangzhou* in 2005.
He stated that U.S. pork did not sell well, but Post believes this had
to do with the use of sauces that typically hide its natural succulent
taste as well as improper cooking. U.S. pork has to be cooked at high
temperatures to shorten cooking time and better maintain moisture.
Chinese tend to use low temperatures. His chefs had never been to the
States. This indicates that chef training on correct and creative ways
to prepare western foods is vital.

Given that beef is the most popular dish, the restaurant owner was
confident that U.S. beef would be one of top sellers on his menu once
the embargo is lifted. Nanning consumer preference is similar to
Cantonese who prefer meat dishes prepared in either black pepper or
sweet barbecue sauce.![](media/image10.jpeg){width="2.813888888888889in"
height="1.9409722222222223in"}

Optimistic about Nanning's pending economic boom, investors congregate
in the downtown central business district such as the *Five Elephants
Square* which has a 58-story office building, the tallest in Nanning,
and houses many high-end restaurants.

Similarly, in 2006-2007, three wine agents entered Nanning promoting
wines from Australia and Europe. They organized several promotional
events and sell their product for US\$26-66 per bottle.

Fast food franchises have also been well received including two
*McDonalds,* one *KFC and a Pizza Hut.* Also, there's about 20 western
style restaurants and several high-end cafes in hotels.

However, U.S. food and wine exporters need to aggressively increase
promotional efforts in the HRI sector. Examples include:

1.  Promote U.S. ingredient promotions in key hotels and restaurants;

2.  Invest in developing local distributors to better represent U.S.
    products in Nanning and surrounding areas;

3.  Conduct more research into emerging cities like Nanning and view
    them as future new consumer markets.

    []{#__RefHeading___Toc185145655 .anchor}**VI. Retail**

*This sector is growing, but there aren't many U.S. food imports around*

In 2006, per capital disposable income of Nanning residents reached
US\$1,359, up by 10.75 percent from 2005 figures. Total retail volume
was recorded at US\$5.81 billion, up 15.21 percent. Spending on food,
drinks, cigarettes, and wine were up by 38.23 percent.

[]{#__RefHeading___Toc185145656 .anchor}**A. Wal-Mart**

*Wal-Mart* has one store in Nanning and plans to open another 15,000
square meters (approx. 161,400 square feet) store soon. A number of U.S.
fruits (such as *Washington apple*, Gala apple, California grape,
orange, plum, and cherry) are sold here. Generally speaking, U.S. fruit
is popular; however, it remains a premium priced product compared to
local equivalents. ![](media/image11.jpeg){width="1.976388888888889in"
height="1.5729166666666667in"}![](media/image12.jpeg){width="1.9819444444444445in"
height="1.3930555555555555in"}![](media/image13.jpeg){width="1.9465277777777779in"
height="1.2527777777777778in"}

Gift baskets that include U.S. fruit, wine, candy and cookies are most
popular during traditional Chinese festivals (e.g., Chinese New Year
around February and Mid-Autumn Festival in October). As a result, demand
for such highly regarded import items increases dramatically leading up
to these gift giving festivals when close relatives, friends and/or
important business associates are presented gifts.

All imported items are sourced by *Wal-Mart's* Shenzhen headquarters.
However, when inspected, the grocery section only had California raisins
and a few condiments such as *Tabasco* brand pepper sauce and *Heinz*
BBQ sauce. When staff was asked why this was the case, their response
was many U.S. imported food items were kept off shelves because less
than two-thirds shelf life remained.

Californian white wine, *Saint Pierre,* stood alone on the imported wine
shelf fighting armies of imported rivals from Germany, Australia, New
Zealand, Canada, and France. Top sellers were to be said in the range of
US\$10-\$13.

In 2006, this *Wal-Mart* Nanning store participated in a nationwide U.S.
food promotion activity held by USDA/ ATO Guangzhou. The store later
also put together its own "U.S. Turkey Festival." Both helped increase
sales and attract a good flow of customers who in general believe that
U.S. imported food is a safe, healthy and quality choice representing an
elevated living standard and style.

[]{#__RefHeading___Toc185145657 .anchor}**B. Beijing
Hualian**![](media/image14.jpeg){width="2.1493055555555554in"
height="1.8965277777777778in"}![](media/image15.jpeg){width="2.140972222222222in"
height="1.9326388888888888in"}

*Beijing Hualian* Hypermarket Co., Ltd. is a nationwide supermarket
chain that has three stores in Nanning, where sales of food account 45
to 50 percent of its annual sale worth US\$80million.

In Nanning, *Beijing Hualian* carries U.S. fruits such as *Washington
apple*, California grape, plum, and orange.

Although there is no U.S. imported grocery on shelves, *Beijing Hualian*
is interested in carrying leisure or confectionary food items such as
candy, nuts, biscuit, potato chip and meat jerky from the States.
Imports are from Australia, Germany, Belgium and Southeast Asian
countries.

Management stated that it was difficult for *Beijing Hualian* to find
qualified agents locally to supply imported goods. Due to the complexity
in importation procedure, supermarkets rely on agents to import and
distribute. There are three such agents supplying to *Beijing Hualian*,
but none carries U.S. products. There is an absence of big local
importers/distributor that can sustainably supply a wide variety of
imported products. *Beijing Hualian* sometime needs to source from
Guangzhou for its Nanning stores.

## C. Retail market development for U.S. imports 

*Consumers need a lot more exposure*

As Nanning's economy grows, the retail market follows suit. Another
international retail giant, *Carrefour,* plans to enter Nanning by
opening three stores in the newly developed commercial districts.

However, this market is still at its infancy and requires in-depth
research and analysis as well as continued efforts to nurture the
market. For many U.S. imports, Nanning is a new market full of curious
customers who became affluent but lack knowledge. With extensive media
coverage, in-store promotion activities including sampling, tasting, and
on-site demonstration will achieve an imminent and positive result.

It is critical to help local consumers to differentiate U.S. products
such as California plums from Chinese ones and California pistachio from
Iranian ones. They are similar in appearance but lower in price and
quality.

Gauging acceptance and profitability of U.S. imported products,
post-promotion sales data may attract new agents/distributors to the
Nanning market or make those current ones expand their portfolio.

# VII. Conclusion 

*There's a bright future for U.S. agricultural exports if aggressively
promoted*

Nanning, is an emerging gateway to Southwest China that business
development professionals and investors need to further explore. Over
time, with the combination of strategic location and favorable policies
from the central government, it is destined for rapid growth and
development.

As its economy grows and infrastructure improves in line with other key
southwestern developments such as Chengdu, Chongqing and Kunming,
Nanning will rise in prominence, and U.S. producers will fully note.

[In the livestock and feed sector]{.underline}, U.S. soybean and piglets
advance market shares as consumers can afford and enjoy eating more pork
and poultry; hay and genetics products will find their niches. [In the
HRI sector]{.underline}, U.S. seafood and wine have great potential to
grow. [In the retail sector]{.underline}, Nanning consumers will become
more receptive to U.S. fresh fruits, dried fruits and tree nuts. Much
will depend on market promotion efforts.

### Chart 6: Promising U.S. Products 

+--------------+-----------+-------------------------------------------+
| **Product**  | **        | **Notes**                                 |
|              | Markets** |                                           |
+--------------+-----------+-------------------------------------------+
| Beef         | HRI       | Beef steak is the best seller in western  |
|              |           | restaurants that mostly use imported      |
|              |           | Australian beef for the high-end, and     |
|              |           | Chinese beef as a more affordable option. |
|              |           | HRI has a strong interest in introducing  |
|              |           | U.S. beef back on menus once the ban is   |
|              |           | lifted.                                   |
+--------------+-----------+-------------------------------------------+
| Seafood:     | HRI       | Halibut, black cod and snow crab are      |
|              |           | found on menus and are among the best     |
| halibut      |           | sellers. Consumption of U.S. seafood      |
|              |           | could go up if menu promotions are held   |
| cod          |           | during special occasions such as the      |
|              |           | *China-ASEAN Expo*.                       |
| snow crab    |           |                                           |
+--------------+-----------+-------------------------------------------+
| Wine         | HRI and   | Very promising, but must compete with     |
|              | retail    | European and Australian counterparts.     |
|              |           | Those successful agents carrying U.S.     |
|              |           | wine in first tier cities such as         |
|              |           | Shenzhen or Guangzhou need to give        |
|              |           | Nanning market a try.                     |
+--------------+-----------+-------------------------------------------+
| Fruits:      | Retail    | Washington apple, California citrus and   |
|              |           | grape will continue having a decent       |
| apple        |           | market share; high-end products such as   |
|              |           | cherries could have a niche before major  |
| citrus       |           | traditional festivals (such as Chinese    |
|              |           | New Year) when people tend to buy         |
| grape        |           | expensive gifts for important family      |
|              |           | members and business associates.          |
| cherry       |           |                                           |
+--------------+-----------+-------------------------------------------+
| Dried Nuts:  | Retail    | U.S. pistachios are shipped in bulk and   |
| pistachio    |           | repackaged. One interviewed supermarket   |
|              |           | store carries salted U.S. pistachio in    |
| almond       |           | 250 gram bags.                            |
+--------------+-----------+-------------------------------------------+
| Dried Fruit: | Retail    | U.S. brand *Sun-Maid* dried grape is sold |
|              |           | in *Wal-Mart* Nanning stores. Vietnam is  |
| grape        |           | also supplying various dried tropical     |
|              |           | fruit & vegetable (jackfruit, banana &    |
|              |           | sweet potato, taro) products to the       |
|              |           | market.                                   |
+--------------+-----------+-------------------------------------------+
| Feeds: soy   | Feed      | Soy meal (particular High Protein         |
| meal and     |           | Concentrate Soy meal) and corn DDGS have  |
| corn DDGS    |           | a big potential in Guangxi for swine,     |
|              |           | poultry and aquaculture production.       |
+--------------+-----------+-------------------------------------------+
| Dairy bovine | Dairy     | Nanning dairymen receive substantial      |
| genetics and | livestock | funding from the *Ministry of             |
| Hay(alfalfa) | and feed  | Agriculture* to develop its dairy sector, |
|              |           | particularly for cross-bred milking water |
|              |           | buffalo. There is also a sizeable herd of |
|              |           | Holsteins (7,000 head) in this region.    |
|              |           | There should be a niche market for U.S.   |
|              |           | genetics (frozen semen and embryo) and    |
|              |           | hay (alfalfa).                            |
+--------------+-----------+-------------------------------------------+
| Breeding pig | Livestock | Given a Nanning farm has successfully     |
|              |           | introduced U.S. breeding swine since      |
|              |           | 2004, it is optimistic U.S. breeds will   |
|              |           | outpace counterparts from Denmark, France |
|              |           | and Australia in this region.             |
+--------------+-----------+-------------------------------------------+

**Post Contact Information**

U.S. Agricultural Trade Office (ATO), Guangzhou

14/F, Office Tower, China Hotel

Guangzhou, China

Tel: (+86-20) 8667-7553

Fax: (+86-20) 8666-0703

Email: <atoguangzhou@fas.usda.gov>

Web: [www.usdachina.org](http://www.usdachina.org/)