Zhejiang Province
Zhejiang Province is characterized by and famous for its old history of fishing industry. The coast outside the Zhejiang Province is rich with fishery recourses, and has served the region with fresh and live seafood for centuries. Many of the companies in the Zhejiang province have well-known brands in China and the neighbouring countries. Zhoushan Islands or “The Thousand Islands” is a group of islands on the north part of Zhejiang Provinces’ coastline.
The islands are pure fishing societies with long traditions, and the brand names from Zhejiang Province and Zhoushan Islands is said to be quality assuring/ensuring. At the annual seafood exhibition in Qingdao the Zhoushan Island companies and Zhejiang companies were situated together and formed joint marketing for both the companies and their region. To be a fisherman some years ago in Zhejiang province could offer great opportunities. That is maybe the reason why some of the managers of the processing companies in Zhejiang province have histories as fishermen.
Today, the raw material is getting scarce and this makes it difficult for fishermen to make such a career today. I visited two fish markets where the fishermen land their catch and both places they talked about fewer fish resources and poorer quality of the raw material. This also has an effect on the processing companies. The companies with former fishermen as managers claim they have secure deliverances because of their relations to many former fisher colleagues. Another way of securing raw materials for the production is for the processing company to invest in their own boats. These boats negotiate price and buy the catch of the fishermen while still at sea. Then the fishermen land their catch in the company’s harbour.
The result is that the fish markets, where the catch traditionally is being sold and which gets a percentage of all traded goods, also suffer. This leads to a conflict between the fish markets, the fishermen and the processing companies. Even so, the informants seem to accept that times change and would rather like to find a solution which can benefit all, rather than making trouble for each other.
When it comes to the WTO treaty, the informants said that they believed the WTO treaty would make it easier for them to trade with the EU and the USA, but this has not happened.
The only thing they notice is that the international standards for food safety, which is not part
of the WTO, are making it more difficult for them to act on an international arena. All of the companies in this study had implemented and adjusted to the new standards through government funding, but there was a fear, especially in the smaller companies, that there would not be an end to new standardisations and regulations. These companies also found themselves vulnerable if there should come some import restrictions on Chinese seafood.
Some informants argued that the standardizations is a form of protectionism that has developed as China has joined the WTO. Despite successfully passing the tests on standardization, some companies in the Zhejiang province seem to struggle to take part on the international business arena. They struggle to find business partners and consumer knowledge in new distant markets. In some of the cases the companies have good experience from the Asian region but not from more distant markets. For the joint ventures and foreign investment firms the case is different. They have an international network and have enough assets to do research on markets and products. That some of the companies has few or none international relations may be seen in relation to the way the companies provide raw material. The region has long been self sufficient with raw material and there has been no question of importing raw material until the last two or three decades. Today some companies still get all of their raw material from the local fishermen in the ways mentioned above, while others have started to get raw material supplies from foreign markets. The company which is a joint venture has a big production capacity and imports most of its raw material. Breeding fish seems also to be a central way of providing raw material in the Zhejiang Province. The companies that breed fish are very focused on this part of their production, and have imported equipment and technology for this end. The rich companies try to do research to improve the quality of the breed fish. Two of the companies have ambitions of eliminating the difference between wild and breed fish.
As for the market, the local raw material is both for the domestic consumer market and the foreign consumer market. The imported raw material seldom goes to the domestic consumer market. This is mostly being exported because of the tax free rules for imported goods which will be exported after processing, and because of Chinese consumers’ preferences to live fresh fish. The companies who engage in this business are operating in different ways. The most common way is to do customers processing. This means that an agent or a foreign fishery company provide the raw material, the Chinese processing company processes it in accordance with customers’ specifications and then the products are being sent back to the agent. The fish processing company who may also add more value to the products and the
finished products are being distributed to the markets. The Chinese companies that only work like this are quite distant from the consumer market and do not collect much of the end value of the product.
Four of the Zhejiang companies in this study were involved in customers processing. The same companies also bought raw material independently of customers demand for a specific product. None of them had established themselves in foreign markets to try to inflect more of the production value chain, except for company 7. The companies that already were engaged on the international processing arena expressed a wish to develop in that direction. The companies that struggled to find international partners are smaller companies and do not have the capital to invest in representational offices or do market research. These companies were eager to cooperate in any way possible with foreign companies.
From my interviews and observations in the Zhejiang Province I would say that there exist relations between the different actors, especially at Zhoushan Island where some of my informants also knew each other. The production system seemed to be in change, where new solutions and ideas are tried out, but where not everybody has the economic assets to take part in the changes. For the other informants “squatted” along the coast of the Zhejiang province it is more difficult to talk about relations between the companies. However, I noticed that the informants felt a kind of belonging to their Province and their local government. The local government coordinates the business and has helped the companies in implementing the international standards. The dynamics of the fishery industry in Zhejiang seems to be changing, something which could be interesting to follow up in future research.
Qingdao
While some companies in Zhejiang are developing from local and regional trade to more external trade, it seems the companies in Qingdao go the other way around. Most of the companies I interviewed seem firstly or exclusively to concentrate on importing raw material and exporting to foreign markets. The domestic market is for these companies “perhaps a future project”. The companies seem to be building up for import export purposes, according to the free industrial zones. As a long term plan they intend to go into the domestic market.
The reason for this may be that the products these companies are marketing do not “fit” the traditional Chinese consumer demands. The Qingdao companies I investigated offered frozen products, like filets and other Value Added Products. One example of a Value Added Product
is breaded products, but also products which are cooked and “ready to eat” for the consumer.
The traditional Chinese consumer wants fresh fish. The Chinese go to the market every day and buy live fish. Dead or frozen fish might be regarded with scepticism. This is a long tradition which may come from Chinese general preferences for fresh fish, but also the traditional storage of fish: dry and salted fish seems to be the most common way to store seafood products in China. The stores in China are filled with dried seafood products and the Chinese people seem to love it. The freezer was introduced to the Chinese consumers in the 1970’s but has not taken over the long tradition of live/fresh, salted and dried fish for the consumers. There is however marketing going on from both foreign and Chinese actors in the seafood business for frozen and fresh (put on ice) seafood. One of my key informants meant that:
“…the young Chinese is not as different as young people in for example Norway. They are very busy with work and studies and do not have as much time to prepare their meals as their parents. We think that young Chinese people will see the positive sides of preparing frozen or fresh fish without bones, already cut up in peaces, maybe with some sauce already added.
Just like you. Do you know how to prepare a whole fish?” “No”. “But your mother does?”
“Yes”. “I think it’s just the same way with the young generation of Chinese”.
Informant X
Some companies are already selling to the domestic market while it may seem that some of the companies want to wait and see how the domestic market develops. Especially companies with strict budgets do not have the ability go in and contribute to the development of this market.
Another theme which seems important for the companies in Qingdao is the workers. All the companies claim that it is getting more and more difficult to keep their workers, and that fewer people today want to work for low salaries. The workers are mainly women and they do not like to be in the “smelly” factory all day long, so there is a fear of loosing their workers to
“more delicate” industries. For these reasons the companies also want to invest in more production equipment, so that they can reduce the amount of workers. This is also connected with the development of higher Value Added Products, which they need production equipment for.
About WTO the Qingdao companies has the same opinion as the Zhejiang companies. WTO has little influence on their industry. Competition from new foreign companies does not seem to be any threat. What makes the competition is regulations and standards, especially for smaller companies. The big companies are building new production facilities according to standards and regulations, and a common sign is that they want to participate in all the parts of the production chain. Some of the companies have already representation offices abroad and are doing market research and research on new products. In addition, they want to cut down on the number of agents and have started contacting raw material suppliers directly, something which is easier today with internet communication. Also the companies have been some years in the business and they have developed some good relations with customers which makes such a development easier.
As for relations between the actors in Qingdao: One informant talks about networking from the Ocean University and others talk about an organization/board, where the companies come together to exchange information. Only some companies seemed to have heard of it and it is unclear for me whether this was a government initiative. However, all the companies mention their good relations to the government. Some of the informants seem to have a “Qingdao company feeling” – they must work together against other provinces, while others feel that all the companies in the business are competitors on the same level. It also seems that relations from the informants’ time as students are being sustained in business. Old classmates may help each other develop each others businesses, and in that way create a positive environment between the companies.
Comments
From the companies that were included in this study, we have seen some tendencies of difference between the companies from Zhejiang and the companies from Qingdao. The Zhejiang companies seem to have the biggest variety in all the variables of the tables while Qingdao companies are more similar to one another. We may also say that the fish processing environment in the two provinces has a tendency to differ from each other in the following way: The Zhejiang companies tend to and/or wish to go from the domestic to the international arena while the Qingdao companies are specialized in processing for international markets but tend to start to open their eyes to the domestic market.