Analysis of the Crisis and Opportunities in China's Eel Industry
The Crisis and Opportunity of China's Eel Industry
□By Fan Xubing, Beijing Haiqiao Market Promotion Co., Ltd.
When the author worked at the Ministry of Agriculture, he was once responsible for the technical introduction of European eel farming, and published a monograph, "European Eel Farming Technology and Disease Prevention and Control," in which he conducted a comprehensive and in-depth analysis of the global eel market.
In recent years, as the head of Beijing Haiqiao Market Promotion Co., Ltd., the author has been engaged in the promotion of imported aquatic products, including Norwegian salmon, Norwegian herring, Canadian lobster, Canadian geoduck, and wild Arctic shrimp, and has accumulated relatively rich theory and experience in promoting aquatic products in the Chinese market.
Moved by the current situation of large-scale serious losses across the entire eel industry, and combining his understanding of the eel market with his experience in market promotion, the author has written this article specifically, hoping to offer some useful suggestions to those involved in China's domestic eel industry.
Bottleneck in Eel Fry Resources Restricts Expansion of Eel Farming Output
As is well known, the worldwide challenge and bottleneck in artificial eel farming is this: to date, artificial breeding technology for any species of wild eel in the world has not been successfully achieved. More than 20 years of large-scale artificial eel farming, whether for the main farmed species the Japanese eel (Anguilla japonica) and the European eel (Anguilla anguilla), or for the rarely farmed American eel (Anguilla rostrata), Australian eel (Anguilla australis), and even African eel (Anguilla mossambica), has relied entirely on catching natural eel fry. This is why eel fry are called "soft gold," why fights break out over catching eel fry, and why eel fry smuggling remains difficult to eradicate.
Global annual eel production has for many years remained stable at around 200,000 tons, mainly comprising Japanese eel and European eel production. Japanese eel production is approximately 180,000 tons, accounting for 90% of global eel production, of which 99% is farmed production; China is the largest farming country, and Japan, Taiwan, China, and South Korea are also major farming countries and regions. European eel production is approximately 16,000 tons per year, with the ratio of farmed to wild being roughly 60%:40%; China is the main country farming European eel, and the fry are basically imported from France and other European countries. Australian eel and American eel together have an annual production of approximately 4,000 tons, most of which is wild, with a small amount of Australian eel being farmed.
The Convention on International Trade in Endangered Species of Wild Fauna and Flora (i.e., the Washington Convention), concluded in June 2007, listed the European eel as an endangered wild animal. Starting in the second half of 2007, European countries adopted measures such as limiting catches of European eel fry and buying them back for release, which caused the quantity of exportable European eel fry to decrease substantially and the price of European eel fry to rise sharply. As a signatory party to the Washington Convention, starting from March 13, 2009, the Chinese government also cancelled the preferential policies of a 5% export tax rebate on live European eel and a 13% export tax rebate on roasted European eel.
The production of wild Japanese eel fry is affected by various factors, and El Niño is one of the most important factors affecting eel fry production. In years when El Niño occurs, Asian eel fry production often decreases. Over the 10 years from 1990 to 1999, average annual eel fry production in Asia was 92.6 tons; in 1991, when El Niño occurred, eel fry production dropped to 72.1 tons. The strongest El Niño occurred in 1997-1998; in those two years, Asian eel fry production was 53 tons and 29.8 tons respectively, the lowest in recent years. Over the 10 years from 2000 to 2009, average annual eel fry production in Asia was 93.9 tons; in 2005 and 2007, when El Niño occurred, eel fry production dropped to 60.1 tons and 66.5 tons respectively.
The World Meteorological Organization stated on August 19, 2009, that the El Niño phenomenon had already appeared in the eastern Pacific and would affect at least the remainder of 2009, and could possibly continue into the first quarter of 2010. The El Niño expected to occur in the summer of 2009 will affect Japanese eel fry production in the winter of 2009 and the spring of 2010.
From the above analysis, it can be seen that global eel production is mainly limited by the supply of eel fry. The supply of European eel fry is strictly restricted by the Washington Convention, and the supply of Japanese eel fry is affected by El Niño and fluctuates considerably from year to year.
Eel Sales Rely Excessively on the Shrinking Japanese Market
Large-scale eel farming in China began in the early 1990s, initially taking over industrial transfer from Japan and Taiwan, China, caused by rising labor costs and water shortages. In the early 1990s, China mainly farmed Japanese eel, and from the mid-1990s began farming European eel. At present, Guangdong, Fujian, and Jiangxi are the main farming provinces. China currently farms approximately 100,000 tons of eel annually, of which about 90,000 tons is Japanese eel and about 10,000 tons is European eel.
Japan was once the most important eel-consuming country in the international market, with annual eel consumption of around 100,000 tons, of which about two-thirds depended on imports, mainly from mainland China and Taiwan, China. In 2004, China exported 93,000 tons of eel products to Japan, accounting for 84.6% of China's total exports; thereafter it declined substantially year by year, and by 2008 exports of eel products to Japan had fallen to 35,000 tons, with the share of China's total exports sliding to 58.3%. During the same period, exports to Japan from another major eel-farming region, Taiwan, China, also declined substantially. The severe international financial crisis since 2008 made Japan one of the main victim countries; the depreciation of the yen, economic contraction, and rising unemployment made matters even worse, causing further shrinkage of eel consumption within Japan. In addition, Japan itself still has annual eel farming production of about 30,000 tons. With weak domestic demand, the Japanese government's first priority is to ensure a market for Japan's own farmed eel, and therefore it will adopt severe trade protection measures against imported eel.
Many people often see the various strict restrictions Japan has imposed on imports of Chinese eel in recent years (such as the Positive List System for Agricultural Chemical Residues implemented starting in May 2006), as well as the distrust Japanese consumers have developed toward Chinese eel due to the poisoned dumpling incident, the melamine incident, and others, but they fail to see that the capacity of Japan's domestic eel market is gradually shrinking due to Japan's long-term economic downturn and changes in the Japanese diet. In recent years, the proportion of per capita aquatic product consumption in Japan's diet has been declining year by year, while the proportion of meat consumption has been rising year by year; in 2008, Japan's meat consumption officially surpassed its aquatic product consumption.
European eel has an annual catch production of about 10,000 tons and an annual farming production of 7,000 tons in Europe, mainly consumed locally in Europe; part of the 10,000 tons of European eel farmed in mainland China is also exported to Europe. However, the overall capacity of the European market is limited and cannot absorb the surplus production caused by the substantial shrinkage of the Japanese market. North America and other countries and regions do not have a tradition of eating eel, and short-term new market demand is also not large.
From the above analysis, it can be seen that long-term excessive and highly concentrated reliance on the Japanese market has caused "collective blindness" in China's eel industry. During the 20 years of development of China's eel industry, much of the time it has simply drifted with the tide amid the rises and falls in eel supply and demand caused by factors such as high and low years of eel fry supply, eel farming diseases, and the rise and fall of Japan's domestic market.
In the era when the Japanese market was prosperous, the eel industry was also shrouded in prosperity. Eel was once the third-largest export earner among China's aquatic products, an important product whose export value once reached 1 billion US dollars. It was precisely in this process that a complete industrial chain and huge system composed of large eel feed mills, numerous farms, and large processing plants developed, also making eel an important export-earning product for Guangdong, Fujian, Jiangxi, and other provinces. But such an industry, highly dependent on the international market (mainly the Japanese market), neglected to plan ahead and, in the prosperous years, to open up the domestic market and emerging foreign markets early.
The Eel Industry Must Open Up Both International and Domestic Markets Early
Since 2009, the export volume and prices of roasted eel and live eel from Guangdong Province have both fallen by more than 30% year on year; conditions in Fujian and Jiangxi provinces are even worse. Affected by the cancellation of the export tax rebate policy for European eel, exports have come to a complete halt, and large quantities of eel are being held in ponds. Eel farmers have suffered losses for two to three consecutive years, most eel processing and feed production enterprises have stopped production, and the entire industry is facing an unprecedented predicament.
It should be said that the global financial crisis is not the most fundamental factor behind the severe blow currently suffered by China's eel industry; the financial crisis has merely made this eel crisis appear somewhat more serious. The real crisis is our eel industry's lack of awareness of preparing for danger in times of peace, the government's need for correct policy guidance, and the lack of relevant specific measures.
However, every crisis contains opportunity within danger. As long as we correctly understand the current problems, grasp the main contradiction, and seek change amid the crisis, it is possible to find a "path to salvation." The following are specific suggestions:
1. Strong government support
Many enterprises hope the government will temporarily restore the European eel export tax rebate, or even extend the export tax rebate period as long as possible. They do not realize that the government is precisely using the cancellation of the export tax rebate as a "visible hand" to push our eel enterprises to seek a path of change as quickly as possible. Personally, I believe the government should not restore the export tax rebate, because this would neither conform to WTO rules nor conform to the principle of opposing new global trade protectionism strongly advocated by the Chinese government, and would even violate the commitment made by the Chinese government when signing the Washington Convention.
On the contrary, what the government should do is convert this portion of direct price subsidies to export enterprises from the European eel export tax rebate into a special eel market promotion fund. Calculating on the basis of China exporting 5,000 tons of European eel annually, at an average price of 5,000 US dollars per ton, with an average export tax rebate rate of 9% ((5%+13%)/2), the annual export tax rebate amount is 2.25 million US dollars, equivalent to approximately 15 million yuan. In May 2009, the Chinese government temporarily restored the export tax rebate policy for European eel and stated that it might continue this temporary policy for 2-3 years. If the government completely cancels the export tax rebate policy for European eel starting in 2009 and uses this 15 million yuan each year to establish a special eel market promotion fund, what kind of situation will there be after 2-3 years?
Two policies, one "giving a person a fish" and the other "teaching a person to fish" - which one should we choose?
2. Establish a nationwide eel market promotion fund as soon as possible
The funding sources for this fund should mainly come from the central government and the local governments of the main producing provinces, while major enterprises should also provide some supporting funds. It is suggested to adopt a contribution ratio of central:local:enterprise = 50%:30%:20%.
It is suggested that the fund amount be approximately 30 million to 40 million yuan per year, with the central government contributing 50% (i.e., 15 million yuan, coming from the state fiscal subsidy saved after cancelling the export tax rebate), with the first phase lasting 3 years. It would mainly be used to support eel market promotion in the main producing provinces (Guangdong, Fujian, Jiangxi, etc.).
This fund can also come from an export tax levied on eel exports; in this regard, Norway's method of levying an export tax on Norwegian salmon for market promotion can be used as a reference. It is suggested to levy a 1% export tax on eel based on export value. If calculated on the basis of the current export value of approximately 600 million US dollars as the tax base, a 1% eel export tax would be 6 million US dollars, equivalent to approximately 41 million yuan per year. As eel export volume recovers and grows, the tax base can continue to grow, and promotion funding can also continue to increase; moreover, this is a continuous and guaranteed source of funding.
Another source of promotion funding could be a levy on eel fry resources. It is suggested to levy an eel fry resource tax of 0.1 yuan per eel fry. Based on China's annual farmed eel production of 100,000 tons and an average adult eel size of 250 grams per fish, the annual demand for farmed eel fry is 400 million fish, and the annual eel fry resource tax base could reach 40 million yuan. This is also a sustainable and guaranteed source of promotion funding.
In short, if the method of special taxes is adopted, the tax base for eel market promotion funding should be large and the tax rate should be low, so that the burden on those taxed is very small, the impact on production costs and product competitiveness is very small, and collection is relatively easy. In addition, publicity work must be done well; the annual eel market promotion plan and the use of funds must be open and transparent, to win public trust and prevent market promotion funds from being exploited by a small number of people or interest groups.
At the same time, to ensure that the source of eel market promotion funding is continuous and can continue to expand, relevant laws and regulations must provide supporting support. It is suggested to formulate and pass an "Agricultural Product Market Promotion Fund Law" as soon as possible, or follow the example of the United States and formulate and pass an "Agricultural Trade Act," and to establish a "National Agricultural Product Market Promotion Fund" as soon as possible. The "Agricultural Product Market Promotion Fund Law" should be a law supporting the "Law on Farmer Professional Economic Cooperative Organizations" promulgated and implemented by the state in 2007, and is an important law for ensuring that agricultural products can smoothly enter the market and for safeguarding farmers' rights and interests.
In terms of organizational work, it is suggested that the National Eel Working Committee take the lead, together with professional eel chambers of commerce and major regional eel chambers of commerce such as the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products, the Guangdong Eel Industry Chamber of Commerce, and the Fujian Eel Association, to form an eel market promotion coordination committee, or establish a nationwide China Eel Market Promotion Association.
Market promotion includes both domestic and international markets.
3. Open up international markets
International market promotion includes Japan and other markets.
The main problem in the Japanese market is that Chinese eel does not have high brand recognition among Japanese consumers and does not have a good reputation in the Japanese market, resulting in selling prices far lower than Japanese domestic eel. Therefore, the focus of promotion should be on educating Japanese consumers and publicizing the safety and traceability of Chinese eel. Once Japanese consumers understand the farming and processing process of Chinese eel and develop trust in the safety of Chinese eel, Chinese eel can win the support of Japanese consumers by virtue of its superior cost-performance ratio relative to Japanese farmed eel. However, in this process, it will certainly face strong opposition and smearing from Japanese eel farmers. Therefore, Chinese export enterprises should, under the leadership of the eel association, on the one hand truly ensure product quality and safety and not give Japanese competitors any handle, and at the same time strive to win the trust of the Japanese media, because consumers obtain product and origin information through the media. In conjunction with media publicity, tasting and promotional events for Chinese eel should also be frequently held in mainstream Japanese supermarkets and restaurants, so that consumers can directly compare and experience the advantages of Chinese eel.
When opening up the Japanese market, attention should be paid to avoiding Japan's annual Eel Day in July, because that is the season when Japanese domestic eel is heavily promoted, and in years of economic recession, Japanese eel farmers will certainly do their utmost to persuade Japanese people to eat more domestic eel.
While winning over Japanese consumers, it is necessary to actively open up European and American markets. The European market should focus on major cities in France and Germany, and actively develop smoked eel products that Europeans like; the North American market should focus on major US cities such as San Francisco, Los Angeles, and New York. Although eel sales in Japan are constantly declining, roasted eel, as an important element of Japanese cuisine, is also increasingly expanding in sales in Japanese restaurants in Europe and America as Japanese cuisine flourishes globally. The followers of Japanese cuisine in the global market include almost white people, Chinese people, and people of various other ethnicities, giving it a considerable global character. Therefore, the promotion of eel in Europe and America should first focus on Japanese restaurants, which is also a market segment where results are easily achieved in the short term. At the same time, do not forget to guide local Europeans and Americans to try more cooking methods with eel and integrate it into local food culture, but this requires a relatively long process and continuous investment and will not produce results very quickly.
At the same time, attention should be paid to opening up other emerging markets. Asian markets such as Singapore (highest annual imports of Chinese roasted eel 353 tons, live eel 3,535 tons), Hong Kong, China (highest annual imports of Chinese roasted eel 4,098 tons, live eel 805 tons), and South Korea (highest annual imports of Chinese roasted eel 1,244 tons, live eel 3,534 tons) have dietary cultures similar to China's and are relatively promising markets.
4. Open up the domestic market
In opening up the domestic market, the focus should be on major cities such as Beijing, Shanghai, and Guangzhou and coastal provincial-capital-level cities. It is suggested to promote both roasted eel and live eel at the same time. Roasted eel promotion should focus on domestic Japanese restaurants and Japanese restaurant chains, as well as supermarket hypermarkets, and large eel processing enterprises should be encouraged to establish roasted eel specialty stores in key cities. Live eel promotion should focus on Chinese restaurants. At the same time, consumer-oriented media publicity and offline promotions and tastings should also be carried out, supplemented by appropriate large-scale promotional activities (such as eel festivals).
Whether for international or domestic market promotion activities, it must be recognized that investment cannot produce obvious results within just a few months. Therefore, promotion activities must not be hastily stopped just because the market has temporarily emerged from difficulty; perseverance is required, and the temporary recovery-based rise in eel prices should not be attributed entirely to the results of market promotion.
Strictly Restrict Japanese Eel Fry Exports and Smuggling
China is one of the main producing countries of Japanese eel fry, catching about 40 tons of wild Japanese eel fry each year, accounting for approximately 50% of total wild Japanese eel fry production. In recent years, as the international supply of eel fry has become increasingly tight, eel farming in Japan, South Korea, and Taiwan, China has increasingly needed the Japanese eel fry caught by China. As the most important limiting factor in eel farming, control over eel fry is control over adult eel, which is control over the market.
Therefore, it is suggested that the Chinese government promptly adopt strict restrictive measures on eel fry exports (of a strategic resource nature) (seasonal export restrictions and establishment of export quotas), resolutely crack down on illegal eel fry catching, and resolutely crack down on eel fry smuggling exports. In this regard, Taiwan, China already began seasonally prohibiting eel fry exports to Japan in 2007, and Japan also seasonally prohibited eel fry exports to Taiwan, China many years ago; the dispute between Japan and Taiwan on the eel fry issue has a long history.
Give Full Play to the Role of Professional Aquatic Product Marketing and Promotion Agencies
Aquatic product market promotion is a complex systematic project that requires many years of experience and channel networks in the catering industry, retail industry, and related media, and cannot be handled by ordinary advertising companies or public relations companies. Therefore, it is suggested to hire professional promotion companies to design plans and be responsible for execution. The main work of the funders (the government and the eel association) is to communicate with the professional promotion company, set specific promotion goals, target specific segmented target markets, formulate specific promotion plans, and supervise and evaluate the work of the promotion company. It is suggested that the government and the eel association should not personally intervene in the specific implementation of promotion work, because that is not work the government and the eel association are good at. What eel processing plants and farms, eel exporters, and distributors should do is actively participate in promotion work, cooperate with promotion plans, and do a good job in sales, distribution, and terminal promotion in various segmented and regional markets. Beijing Haiqiao Market Promotion Co., Ltd. has, over many years in mainland China and Hong Kong, successfully promoted imported seafood such as Norwegian salmon, Canadian geoduck, Canadian lobster, and wild Arctic shrimp to mainstream supermarket hypermarkets, mainstream restaurants and eateries, and mainstream catering and consumer media across China. With the help of a professional promotion company, promotion work can avoid detours and achieve twice the result with half the effort. But if the wrong promotion agency is chosen, the design and execution results of an originally very good promotion project may very likely be compromised.
The Future of China's Eel Industry Is Bright
In fact, as long as the problem of market outlets for eel is solved, the future of Chinese eel is very bright.
After the financial crisis, Japan's eel market will recover somewhat. After experiencing various food safety incidents, Japanese people will favor "low-priced safe food" even more, and producing "low-priced safe food" is precisely the specialty of China's eel industry. The key issue is that, first, we must truly practice industry self-discipline, and second, we must quickly make Japanese consumers believe that eel "made in China" is truly "low-priced safe food"; then Japan's own eel industry will suffer a huge impact. However, in order to avoid continuing to be constrained by the current sales channels in Japan, trustworthy sales channels for us must be cultivated in Japan as early as possible.
After the financial crisis, the importance of the Asian economy in the global economy will become even more prominent, especially mainland China, Hong Kong, China, Singapore, South Korea, and other countries and regions. Strengthening market promotion in these European and American countries and these Asian countries and regions, deeply cultivating local markets, and gradually integrating eel consumption into local food culture will be the most important responsibility of China's eel industry in the next 10 years.
The world's wild eel fry production is only so much each year, European eel fry exports also face increasingly strict restrictions, and Japanese eel fry may perhaps also be included in the protected list of the Convention on International Trade in Endangered Species of Wild Fauna and Flora in the future. As long as artificial eel fry breeding technology is not solved, global eel farming production will not expand. Then, as the world's largest eel farming country (which also possesses comparative advantages in farming costs and processing costs), China's eel industry only needs to do one thing well: expand eel consumption in China and around the world.
As long as this one thing is done well (which of course requires the eel market promotion fund and the investment and support of the entire eel industry), the eel market will expand, and eel products will be in short supply. Because we have reason to [believe] in detail: as a delicious and nutritious high-grade quality aquatic product, eel can be accepted and loved by more and more consumers. By that time, our eel feed mills, eel farms, eel processing plants, and all enterprises participating in them will all make handsome profits.
However, if we still cannot awaken by now, and remain at the point of begging the government to extend the export tax rebate period, or demanding that the government continue to provide protection, or pinning all hope on the Japanese market recovering its former prosperity in the future, then the final result will probably be only what Mr. Lu Xun described as "lamenting their misfortune and angering at their lack of fight."
For China's eel industry, the dawn should be not far ahead.
When the author worked at the Ministry of Agriculture, he was once responsible for the technical introduction of European eel farming, and published a monograph, "European Eel Farming Technology and Disease Prevention and Control," in which he conducted a comprehensive and in-depth analysis of the global eel market.
In recent years, as the head of Beijing Haiqiao Market Promotion Co., Ltd., the author has been engaged in the promotion of imported aquatic products, including Norwegian salmon, Norwegian herring, Canadian lobster, Canadian geoduck, and wild Arctic shrimp, and has accumulated relatively rich theory and experience in promoting aquatic products in the Chinese market.
Moved by the current situation of large-scale serious losses across the entire eel industry, and combining his understanding of the eel market with his experience in market promotion, the author has written this article specifically, hoping to offer some useful suggestions to those involved in China's domestic eel industry.
Bottleneck in Eel Fry Resources Restricts Expansion of Eel Farming Output
As is well known, the worldwide challenge and bottleneck in artificial eel farming is this: to date, artificial breeding technology for any species of wild eel in the world has not been successfully achieved. More than 20 years of large-scale artificial eel farming, whether for the main farmed species the Japanese eel (Anguilla japonica) and the European eel (Anguilla anguilla), or for the rarely farmed American eel (Anguilla rostrata), Australian eel (Anguilla australis), and even African eel (Anguilla mossambica), has relied entirely on catching natural eel fry. This is why eel fry are called "soft gold," why fights break out over catching eel fry, and why eel fry smuggling remains difficult to eradicate.
Global annual eel production has for many years remained stable at around 200,000 tons, mainly comprising Japanese eel and European eel production. Japanese eel production is approximately 180,000 tons, accounting for 90% of global eel production, of which 99% is farmed production; China is the largest farming country, and Japan, Taiwan, China, and South Korea are also major farming countries and regions. European eel production is approximately 16,000 tons per year, with the ratio of farmed to wild being roughly 60%:40%; China is the main country farming European eel, and the fry are basically imported from France and other European countries. Australian eel and American eel together have an annual production of approximately 4,000 tons, most of which is wild, with a small amount of Australian eel being farmed.
The Convention on International Trade in Endangered Species of Wild Fauna and Flora (i.e., the Washington Convention), concluded in June 2007, listed the European eel as an endangered wild animal. Starting in the second half of 2007, European countries adopted measures such as limiting catches of European eel fry and buying them back for release, which caused the quantity of exportable European eel fry to decrease substantially and the price of European eel fry to rise sharply. As a signatory party to the Washington Convention, starting from March 13, 2009, the Chinese government also cancelled the preferential policies of a 5% export tax rebate on live European eel and a 13% export tax rebate on roasted European eel.
The production of wild Japanese eel fry is affected by various factors, and El Niño is one of the most important factors affecting eel fry production. In years when El Niño occurs, Asian eel fry production often decreases. Over the 10 years from 1990 to 1999, average annual eel fry production in Asia was 92.6 tons; in 1991, when El Niño occurred, eel fry production dropped to 72.1 tons. The strongest El Niño occurred in 1997-1998; in those two years, Asian eel fry production was 53 tons and 29.8 tons respectively, the lowest in recent years. Over the 10 years from 2000 to 2009, average annual eel fry production in Asia was 93.9 tons; in 2005 and 2007, when El Niño occurred, eel fry production dropped to 60.1 tons and 66.5 tons respectively.
The World Meteorological Organization stated on August 19, 2009, that the El Niño phenomenon had already appeared in the eastern Pacific and would affect at least the remainder of 2009, and could possibly continue into the first quarter of 2010. The El Niño expected to occur in the summer of 2009 will affect Japanese eel fry production in the winter of 2009 and the spring of 2010.
From the above analysis, it can be seen that global eel production is mainly limited by the supply of eel fry. The supply of European eel fry is strictly restricted by the Washington Convention, and the supply of Japanese eel fry is affected by El Niño and fluctuates considerably from year to year.
Eel Sales Rely Excessively on the Shrinking Japanese Market
Large-scale eel farming in China began in the early 1990s, initially taking over industrial transfer from Japan and Taiwan, China, caused by rising labor costs and water shortages. In the early 1990s, China mainly farmed Japanese eel, and from the mid-1990s began farming European eel. At present, Guangdong, Fujian, and Jiangxi are the main farming provinces. China currently farms approximately 100,000 tons of eel annually, of which about 90,000 tons is Japanese eel and about 10,000 tons is European eel.
Japan was once the most important eel-consuming country in the international market, with annual eel consumption of around 100,000 tons, of which about two-thirds depended on imports, mainly from mainland China and Taiwan, China. In 2004, China exported 93,000 tons of eel products to Japan, accounting for 84.6% of China's total exports; thereafter it declined substantially year by year, and by 2008 exports of eel products to Japan had fallen to 35,000 tons, with the share of China's total exports sliding to 58.3%. During the same period, exports to Japan from another major eel-farming region, Taiwan, China, also declined substantially. The severe international financial crisis since 2008 made Japan one of the main victim countries; the depreciation of the yen, economic contraction, and rising unemployment made matters even worse, causing further shrinkage of eel consumption within Japan. In addition, Japan itself still has annual eel farming production of about 30,000 tons. With weak domestic demand, the Japanese government's first priority is to ensure a market for Japan's own farmed eel, and therefore it will adopt severe trade protection measures against imported eel.
Many people often see the various strict restrictions Japan has imposed on imports of Chinese eel in recent years (such as the Positive List System for Agricultural Chemical Residues implemented starting in May 2006), as well as the distrust Japanese consumers have developed toward Chinese eel due to the poisoned dumpling incident, the melamine incident, and others, but they fail to see that the capacity of Japan's domestic eel market is gradually shrinking due to Japan's long-term economic downturn and changes in the Japanese diet. In recent years, the proportion of per capita aquatic product consumption in Japan's diet has been declining year by year, while the proportion of meat consumption has been rising year by year; in 2008, Japan's meat consumption officially surpassed its aquatic product consumption.
European eel has an annual catch production of about 10,000 tons and an annual farming production of 7,000 tons in Europe, mainly consumed locally in Europe; part of the 10,000 tons of European eel farmed in mainland China is also exported to Europe. However, the overall capacity of the European market is limited and cannot absorb the surplus production caused by the substantial shrinkage of the Japanese market. North America and other countries and regions do not have a tradition of eating eel, and short-term new market demand is also not large.
From the above analysis, it can be seen that long-term excessive and highly concentrated reliance on the Japanese market has caused "collective blindness" in China's eel industry. During the 20 years of development of China's eel industry, much of the time it has simply drifted with the tide amid the rises and falls in eel supply and demand caused by factors such as high and low years of eel fry supply, eel farming diseases, and the rise and fall of Japan's domestic market.
In the era when the Japanese market was prosperous, the eel industry was also shrouded in prosperity. Eel was once the third-largest export earner among China's aquatic products, an important product whose export value once reached 1 billion US dollars. It was precisely in this process that a complete industrial chain and huge system composed of large eel feed mills, numerous farms, and large processing plants developed, also making eel an important export-earning product for Guangdong, Fujian, Jiangxi, and other provinces. But such an industry, highly dependent on the international market (mainly the Japanese market), neglected to plan ahead and, in the prosperous years, to open up the domestic market and emerging foreign markets early.
The Eel Industry Must Open Up Both International and Domestic Markets Early
Since 2009, the export volume and prices of roasted eel and live eel from Guangdong Province have both fallen by more than 30% year on year; conditions in Fujian and Jiangxi provinces are even worse. Affected by the cancellation of the export tax rebate policy for European eel, exports have come to a complete halt, and large quantities of eel are being held in ponds. Eel farmers have suffered losses for two to three consecutive years, most eel processing and feed production enterprises have stopped production, and the entire industry is facing an unprecedented predicament.
It should be said that the global financial crisis is not the most fundamental factor behind the severe blow currently suffered by China's eel industry; the financial crisis has merely made this eel crisis appear somewhat more serious. The real crisis is our eel industry's lack of awareness of preparing for danger in times of peace, the government's need for correct policy guidance, and the lack of relevant specific measures.
However, every crisis contains opportunity within danger. As long as we correctly understand the current problems, grasp the main contradiction, and seek change amid the crisis, it is possible to find a "path to salvation." The following are specific suggestions:
1. Strong government support
Many enterprises hope the government will temporarily restore the European eel export tax rebate, or even extend the export tax rebate period as long as possible. They do not realize that the government is precisely using the cancellation of the export tax rebate as a "visible hand" to push our eel enterprises to seek a path of change as quickly as possible. Personally, I believe the government should not restore the export tax rebate, because this would neither conform to WTO rules nor conform to the principle of opposing new global trade protectionism strongly advocated by the Chinese government, and would even violate the commitment made by the Chinese government when signing the Washington Convention.
On the contrary, what the government should do is convert this portion of direct price subsidies to export enterprises from the European eel export tax rebate into a special eel market promotion fund. Calculating on the basis of China exporting 5,000 tons of European eel annually, at an average price of 5,000 US dollars per ton, with an average export tax rebate rate of 9% ((5%+13%)/2), the annual export tax rebate amount is 2.25 million US dollars, equivalent to approximately 15 million yuan. In May 2009, the Chinese government temporarily restored the export tax rebate policy for European eel and stated that it might continue this temporary policy for 2-3 years. If the government completely cancels the export tax rebate policy for European eel starting in 2009 and uses this 15 million yuan each year to establish a special eel market promotion fund, what kind of situation will there be after 2-3 years?
Two policies, one "giving a person a fish" and the other "teaching a person to fish" - which one should we choose?
2. Establish a nationwide eel market promotion fund as soon as possible
The funding sources for this fund should mainly come from the central government and the local governments of the main producing provinces, while major enterprises should also provide some supporting funds. It is suggested to adopt a contribution ratio of central:local:enterprise = 50%:30%:20%.
It is suggested that the fund amount be approximately 30 million to 40 million yuan per year, with the central government contributing 50% (i.e., 15 million yuan, coming from the state fiscal subsidy saved after cancelling the export tax rebate), with the first phase lasting 3 years. It would mainly be used to support eel market promotion in the main producing provinces (Guangdong, Fujian, Jiangxi, etc.).
This fund can also come from an export tax levied on eel exports; in this regard, Norway's method of levying an export tax on Norwegian salmon for market promotion can be used as a reference. It is suggested to levy a 1% export tax on eel based on export value. If calculated on the basis of the current export value of approximately 600 million US dollars as the tax base, a 1% eel export tax would be 6 million US dollars, equivalent to approximately 41 million yuan per year. As eel export volume recovers and grows, the tax base can continue to grow, and promotion funding can also continue to increase; moreover, this is a continuous and guaranteed source of funding.
Another source of promotion funding could be a levy on eel fry resources. It is suggested to levy an eel fry resource tax of 0.1 yuan per eel fry. Based on China's annual farmed eel production of 100,000 tons and an average adult eel size of 250 grams per fish, the annual demand for farmed eel fry is 400 million fish, and the annual eel fry resource tax base could reach 40 million yuan. This is also a sustainable and guaranteed source of promotion funding.
In short, if the method of special taxes is adopted, the tax base for eel market promotion funding should be large and the tax rate should be low, so that the burden on those taxed is very small, the impact on production costs and product competitiveness is very small, and collection is relatively easy. In addition, publicity work must be done well; the annual eel market promotion plan and the use of funds must be open and transparent, to win public trust and prevent market promotion funds from being exploited by a small number of people or interest groups.
At the same time, to ensure that the source of eel market promotion funding is continuous and can continue to expand, relevant laws and regulations must provide supporting support. It is suggested to formulate and pass an "Agricultural Product Market Promotion Fund Law" as soon as possible, or follow the example of the United States and formulate and pass an "Agricultural Trade Act," and to establish a "National Agricultural Product Market Promotion Fund" as soon as possible. The "Agricultural Product Market Promotion Fund Law" should be a law supporting the "Law on Farmer Professional Economic Cooperative Organizations" promulgated and implemented by the state in 2007, and is an important law for ensuring that agricultural products can smoothly enter the market and for safeguarding farmers' rights and interests.
In terms of organizational work, it is suggested that the National Eel Working Committee take the lead, together with professional eel chambers of commerce and major regional eel chambers of commerce such as the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products, the Guangdong Eel Industry Chamber of Commerce, and the Fujian Eel Association, to form an eel market promotion coordination committee, or establish a nationwide China Eel Market Promotion Association.
Market promotion includes both domestic and international markets.
3. Open up international markets
International market promotion includes Japan and other markets.
The main problem in the Japanese market is that Chinese eel does not have high brand recognition among Japanese consumers and does not have a good reputation in the Japanese market, resulting in selling prices far lower than Japanese domestic eel. Therefore, the focus of promotion should be on educating Japanese consumers and publicizing the safety and traceability of Chinese eel. Once Japanese consumers understand the farming and processing process of Chinese eel and develop trust in the safety of Chinese eel, Chinese eel can win the support of Japanese consumers by virtue of its superior cost-performance ratio relative to Japanese farmed eel. However, in this process, it will certainly face strong opposition and smearing from Japanese eel farmers. Therefore, Chinese export enterprises should, under the leadership of the eel association, on the one hand truly ensure product quality and safety and not give Japanese competitors any handle, and at the same time strive to win the trust of the Japanese media, because consumers obtain product and origin information through the media. In conjunction with media publicity, tasting and promotional events for Chinese eel should also be frequently held in mainstream Japanese supermarkets and restaurants, so that consumers can directly compare and experience the advantages of Chinese eel.
When opening up the Japanese market, attention should be paid to avoiding Japan's annual Eel Day in July, because that is the season when Japanese domestic eel is heavily promoted, and in years of economic recession, Japanese eel farmers will certainly do their utmost to persuade Japanese people to eat more domestic eel.
While winning over Japanese consumers, it is necessary to actively open up European and American markets. The European market should focus on major cities in France and Germany, and actively develop smoked eel products that Europeans like; the North American market should focus on major US cities such as San Francisco, Los Angeles, and New York. Although eel sales in Japan are constantly declining, roasted eel, as an important element of Japanese cuisine, is also increasingly expanding in sales in Japanese restaurants in Europe and America as Japanese cuisine flourishes globally. The followers of Japanese cuisine in the global market include almost white people, Chinese people, and people of various other ethnicities, giving it a considerable global character. Therefore, the promotion of eel in Europe and America should first focus on Japanese restaurants, which is also a market segment where results are easily achieved in the short term. At the same time, do not forget to guide local Europeans and Americans to try more cooking methods with eel and integrate it into local food culture, but this requires a relatively long process and continuous investment and will not produce results very quickly.
At the same time, attention should be paid to opening up other emerging markets. Asian markets such as Singapore (highest annual imports of Chinese roasted eel 353 tons, live eel 3,535 tons), Hong Kong, China (highest annual imports of Chinese roasted eel 4,098 tons, live eel 805 tons), and South Korea (highest annual imports of Chinese roasted eel 1,244 tons, live eel 3,534 tons) have dietary cultures similar to China's and are relatively promising markets.
4. Open up the domestic market
In opening up the domestic market, the focus should be on major cities such as Beijing, Shanghai, and Guangzhou and coastal provincial-capital-level cities. It is suggested to promote both roasted eel and live eel at the same time. Roasted eel promotion should focus on domestic Japanese restaurants and Japanese restaurant chains, as well as supermarket hypermarkets, and large eel processing enterprises should be encouraged to establish roasted eel specialty stores in key cities. Live eel promotion should focus on Chinese restaurants. At the same time, consumer-oriented media publicity and offline promotions and tastings should also be carried out, supplemented by appropriate large-scale promotional activities (such as eel festivals).
Whether for international or domestic market promotion activities, it must be recognized that investment cannot produce obvious results within just a few months. Therefore, promotion activities must not be hastily stopped just because the market has temporarily emerged from difficulty; perseverance is required, and the temporary recovery-based rise in eel prices should not be attributed entirely to the results of market promotion.
Strictly Restrict Japanese Eel Fry Exports and Smuggling
China is one of the main producing countries of Japanese eel fry, catching about 40 tons of wild Japanese eel fry each year, accounting for approximately 50% of total wild Japanese eel fry production. In recent years, as the international supply of eel fry has become increasingly tight, eel farming in Japan, South Korea, and Taiwan, China has increasingly needed the Japanese eel fry caught by China. As the most important limiting factor in eel farming, control over eel fry is control over adult eel, which is control over the market.
Therefore, it is suggested that the Chinese government promptly adopt strict restrictive measures on eel fry exports (of a strategic resource nature) (seasonal export restrictions and establishment of export quotas), resolutely crack down on illegal eel fry catching, and resolutely crack down on eel fry smuggling exports. In this regard, Taiwan, China already began seasonally prohibiting eel fry exports to Japan in 2007, and Japan also seasonally prohibited eel fry exports to Taiwan, China many years ago; the dispute between Japan and Taiwan on the eel fry issue has a long history.
Give Full Play to the Role of Professional Aquatic Product Marketing and Promotion Agencies
Aquatic product market promotion is a complex systematic project that requires many years of experience and channel networks in the catering industry, retail industry, and related media, and cannot be handled by ordinary advertising companies or public relations companies. Therefore, it is suggested to hire professional promotion companies to design plans and be responsible for execution. The main work of the funders (the government and the eel association) is to communicate with the professional promotion company, set specific promotion goals, target specific segmented target markets, formulate specific promotion plans, and supervise and evaluate the work of the promotion company. It is suggested that the government and the eel association should not personally intervene in the specific implementation of promotion work, because that is not work the government and the eel association are good at. What eel processing plants and farms, eel exporters, and distributors should do is actively participate in promotion work, cooperate with promotion plans, and do a good job in sales, distribution, and terminal promotion in various segmented and regional markets. Beijing Haiqiao Market Promotion Co., Ltd. has, over many years in mainland China and Hong Kong, successfully promoted imported seafood such as Norwegian salmon, Canadian geoduck, Canadian lobster, and wild Arctic shrimp to mainstream supermarket hypermarkets, mainstream restaurants and eateries, and mainstream catering and consumer media across China. With the help of a professional promotion company, promotion work can avoid detours and achieve twice the result with half the effort. But if the wrong promotion agency is chosen, the design and execution results of an originally very good promotion project may very likely be compromised.
The Future of China's Eel Industry Is Bright
In fact, as long as the problem of market outlets for eel is solved, the future of Chinese eel is very bright.
After the financial crisis, Japan's eel market will recover somewhat. After experiencing various food safety incidents, Japanese people will favor "low-priced safe food" even more, and producing "low-priced safe food" is precisely the specialty of China's eel industry. The key issue is that, first, we must truly practice industry self-discipline, and second, we must quickly make Japanese consumers believe that eel "made in China" is truly "low-priced safe food"; then Japan's own eel industry will suffer a huge impact. However, in order to avoid continuing to be constrained by the current sales channels in Japan, trustworthy sales channels for us must be cultivated in Japan as early as possible.
After the financial crisis, the importance of the Asian economy in the global economy will become even more prominent, especially mainland China, Hong Kong, China, Singapore, South Korea, and other countries and regions. Strengthening market promotion in these European and American countries and these Asian countries and regions, deeply cultivating local markets, and gradually integrating eel consumption into local food culture will be the most important responsibility of China's eel industry in the next 10 years.
The world's wild eel fry production is only so much each year, European eel fry exports also face increasingly strict restrictions, and Japanese eel fry may perhaps also be included in the protected list of the Convention on International Trade in Endangered Species of Wild Fauna and Flora in the future. As long as artificial eel fry breeding technology is not solved, global eel farming production will not expand. Then, as the world's largest eel farming country (which also possesses comparative advantages in farming costs and processing costs), China's eel industry only needs to do one thing well: expand eel consumption in China and around the world.
As long as this one thing is done well (which of course requires the eel market promotion fund and the investment and support of the entire eel industry), the eel market will expand, and eel products will be in short supply. Because we have reason to [believe] in detail: as a delicious and nutritious high-grade quality aquatic product, eel can be accepted and loved by more and more consumers. By that time, our eel feed mills, eel farms, eel processing plants, and all enterprises participating in them will all make handsome profits.
However, if we still cannot awaken by now, and remain at the point of begging the government to extend the export tax rebate period, or demanding that the government continue to provide protection, or pinning all hope on the Japanese market recovering its former prosperity in the future, then the final result will probably be only what Mr. Lu Xun described as "lamenting their misfortune and angering at their lack of fight."
For China's eel industry, the dawn should be not far ahead.