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« July 2006 Table of Contents

One Man's Opinion: China, an economy on steroids

You have to travel around China these days to truly appreciate that this country's economy is on steroids. Words alone can't begin to describe a red hot GDP that is barreling along at a rate of 9 or 10 percent year after year. You have to see it to believe it.

In cities big and small (at least by Chinese standards), forests of construction cranes dominate the horizon. Massive new upscale apartment developments with names like Elite City are rising, built upon the rubble of housing that once sheltered legions of humble workers. New airports, built only five years ago, are suddenly inadequate, and sprawling new terminals are again under construction around the country.

Outside the cities, more shining new factories open daily, sporting names of the world's biggest companies. Industries around the world have decided that China has to be part of their business strategy. And the seafood industry is no exception (see "China tips the scales," Top Story, June SFB ).

Last year, China's global seafood trade reached $12 billion, an increase of almost 20 percent in just one year (since 2001, China's seafood trade has doubled). In reality, however, China's seafood trade is considerably higher. Chinese companies routinely route high-priced seafood imports like live lobster through Hong Kong, where they are smuggled into China to avoid tariffs that are still high enough on luxury seafood to make smuggling worth the risk.

Meanwhile, much of the seafood that is imported directly into China is undervalued on customs documents, so importers can pay lower taxes and get an advantage in a very competitive market.

Almost all of the world's big seafood companies - familiar names like Trident Seafoods from the United States, Maruha and Nippon Suisan from Japan, Icelandic from, yes, Iceland - have major presences in Qingdao and Dalian. These two cities in northeastern China dominate China's reprocessing industry, which processes seafood from around the world into a growing array of increasingly sophisticated value-added products.

Take a look in the frozen-seafood retail case and you may be surprised how much of that seafood was caught off U.S. shores and shipped to China and then back. The recovery of the Alaska salmon industry is due in no small part to China's voracious demand for inexpensive chum and pink salmon. The market for these salmon, canned or frozen whole, was stagnant at best until the Chinese stepped up to the plate and started paying cash for any fish they could get their hands on.

Wondering why the cost of Alaska H&G cod has shot through the roof? Look no further than China.

While demand for raw material for exports has soared along with the number of seafood factories, China's increasingly prosperous population is eating more and more seafood, too. Fortunately, China is a prodigious producer of some 30 million metric tons of seafood a year, almost 25 percent of the world total. But no one believes China can keep up with its own growing demand. By the year 2020, one study estimates, China will need an additional 20 million metric tons of fish for domestic consumption.

Depending upon your perspective, China's increasingly dominant role in world seafood trade may be either a curse or a blessing. Regardless of your view, however, when it comes to China, seafood companies around the world are going to have to learn to live with the consequences.

Contributing Editor Peter Redmayne lives in Seattle