Fruit is the third largest trade surplus in China's agricultural trade after vegetables and aquatic products. In recent years, production costs have continued to rise, and market and policy environments have changed significantly. China's fruit trade development faces a series of challenges. Since joining the WTO, China's fruit trade has developed rapidly. From 2001 to 2015, the value of fruit exports increased from US$800 million to US$6.89 billion, with an average annual growth rate of 16.7%. The export volume of China’s fruit trade increased from 1.485 million tons to 4.503 million tons, with an average annual increase of 8.2%. Import volume increased from US$350 million to US$5.87 billion, with an average annual growth rate of 22.4%, and import volume increased from 930,000 tons to 4.485 million tons, with an average annual growth of 11.9%. Overall, China's fruit trade surplus increased slightly, but experienced a trend of rising first and then falling. Especially since 2008, the fruit trade surplus has fallen from US$3.02 billion to US$1.02 billion in 2015, an average annual decrease of 14.4%.

Export product structure and changing characteristics of China’s fruit trade

China's fruit exports are dominated by fresh and frozen fruits, and their proportion has increased year by year. The proportion of fruit juices, canned fruits and other processed fruits has decreased. From 2001 to 2015, the export value of fresh and frozen fruits increased from US$240 million to US$4.51 billion, with an average annual increase of 23.2%, and its proportion increased from 30.6% to 65.4%. The proportion of canned fruit and other processed fruit exports decreased from 22.5% and 25.7% to 9.2% and 15.7% each year. The proportion of fruit juice increased from 21.2% to 35.5% in 2007 and then decreased to 9.7% in 2015.

Apples, oranges, grapes, apple juice, and pears are the main export products in recent years, and the proportion of exports has been increasing. The total export value of these five products in 2015 was US$4.06 billion, accounting for 58.9% of the total fruit exports. Among them, apple exports accounted for 15%, and citrus fruits accounted for 18.3%. From 2001 to 2015, the proportion of citrus and grape exports to total fruit exports increased rapidly, from 5.1% and 0.03% to 18.3% and 11.1%, respectively. The proportion of apple juice exports fluctuated greatly, rising from 13.3% to the highest level of 33.2% in 2007, and then rapidly falling to 8.1% in 2015.

Export market structure and main competitors

ASEAN, the United States, Japan and Russia are the main export markets for Chinese fruits. Among the ASEAN markets, Thailand, Vietnam, Indonesia, Malaysia and the Philippines are China's main target markets. In 2015, apples exported to Thailand, Vietnam, and the Philippines accounted for 16.2%, 11.9%, and 9.2%, respectively; oranges exported to Thailand, Malaysia, and Vietnam accounted for 20.6%, 15.7%, and 12.2%. Grapes exported to Thailand, Vietnam, and Indonesia accounted for 61.8%, 18.3%, and 4.9%, respectively; pears exported to Indonesia, Vietnam, and Malaysia accounted for 18.5%, 14.7%, and 10.7%, respectively. The export value of major products exported to ASEAN accounts for more than 50% of China's total fruit exports. In 2015, the proportion of Chinese grape exports to ASEAN was as high as 90.2%, and the proportion of orange, pear and apple exports to ASEAN was 66.8%, 62.5%, and 55.2%, respectively.

Judging from the trends in recent years, the proportion of grapes exported to ASEAN has increased by 77.7 percentage points from 12.5% ​​in 2001, but compared with 2014, the proportion of citrus and pear exports decreased. Russia is the second largest market for Chinese fruit exports. In 2015, the proportion of citrus, apple, apple juice, pear and grape exports to Russia was 11.7%, 8.2%, 7.2%, 5.1% and 1.7%, respectively. Since 2001, the share of China's exports of apples and grapes to Russia has continued to decline, but the proportion of orange, pear and apple juice exports has been relatively stable.

The United States and Japan are China's main fruit export markets after ASEAN and Russia. The share of Chinese apple juice exports to the United States and Japan in 2015 was 49.4% and 14.2%, respectively. The proportion of the two markets combined has increased compared to 2012. Since 2002, the proportion of Chinese apple juice in the US market has increased, and in the Japanese market has decreased. Poland is a competitor for Chinese apple exports, Morocco is a competitor for Chinese citrus exports, Peru and Chile are competitors for Chinese grape exports, and South Africa and Argentina are competitors for Chinese pear exports. In the apple export market, in addition to its higher share in the ASEAN market, Chinese apple export faces competition from Poland in markets such as Russia and Kazakhstan where China has 8.2% and 23.7% of the market shares, but Poland has 39.9% and 44.4% of the market shares in these countries. In the citrus export market, taking Russia as an example, China's share is 12% and Morocco's 11.9%.

Structure of imported products and changing characteristics

The main imported varieties of fruits are bananas, cherries, dragon fruits, grapes, and durians. The import value and proportion of five categories of products are increasing. The total value of imports in 2015 was US $ 3.26 billion, accounting for 55.6% of the total fruit imports in that year, of which imported bananas accounted for 13.2%, cherries accounted for 11.4%, dragon fruits accounted for 11.3%, grapes accounted for 10%, and durians accounted for 9.7%.

From 2012 to 2015, the proportion of banana and cherry imports increased rapidly, from 9.7% and 8.2% to 13.2% and 11.4%, respectively. Cherry imports grew most rapidly, from US$310 million to US$670 million, with an average annual growth rate of 29.9%. Bananas increased from US$370 million to US$770 million, with an average annual growth rate of 28.3%; Dragon fruits increased from US$330 million to US$660 million, an average annual growth rate of 26.6%. Grapes increased from US$380 million to US$590 million, an average annual growth rate of 15.2%; durians increased from US$400 million to US$570 million, an average annual increase of 12.4%.

China's tropical fruit imports are mainly from ASEAN, cherries are mainly from Chile, and fresh grapes are mainly from Chile and Peru. From 2012 to 2015, the proportion of bananas imported from ASEAN dropped from 90.5% to 71.2%, and Ecuador's bananas gained access to China's exports, and their proportion increased rapidly from 8.5% to 28.5%. The proportion of Chilean cherries increased from 76.8% to 79.1%, while those from the United States fell from 23.1% to 14.5%. Chile and Peru, as large grape exporters, occupy a relatively high position in the Chinese market, their proportions increased from 25.3% and 8.5% to 39.1% and 36%, respectively. In addition, in 2015, 99.9% of China's dragon fruit and all durian imports came from ASEAN. Import prices of major fruits are generally on the rise. Among them, cherry rose the most, from 0.76 US dollars per kilogram in 2001 to 7.34 US dollars in 2015, an increase of 8.6 times, an average annual increase of 17.6%. Grapes, durians, bananas and dragon fruits have relatively small gains.

Factors affecting the development of fruit trade

In recent years, the cost of fruit production in China has continued to rise, with labour costs rising the most rapidly. Take Apple as an example. From 2004 to 2014, production costs rose from 1340.3 RMB per mu to 5431.5 RMB each year, an average annual increase of 15%. Labour costs rose from 612.2 yuan to 3186.8 yuan per mu, an average annual increase of 17.9%, which was 2.9 percentage points higher than the increase in production costs. Material and service fees and land costs increased from 636.6 RMB and 91.6 RMB per mu to 1885.8 RMB and 358.8 RMB, respectively, with an average annual increase of 11.5% and 14.6%. The rapid rise in production costs is an important reason for the continuous rise in China's fruit export prices in recent years. With the further increase in production costs, the price competitiveness of major export fruits will be further affected. The appreciation of the renminbi is another important reason for the rise in China's fruit export prices. From 2007 to 2015, the exchange rate of the US dollar against the RMB dropped by 18.1%. Apple's market price rose from 3.23 RMB to 4.85 RMB per kilogram, an increase of 50.2%. However, if converted into USD, the price of Apple will rise from US$0.42 to US$0.78, an increase of 83.4%, which is 33.2 percentage points higher than RMB.

Changes in consumer preferences caused changes in trade structure.

Fruit consumption in major countries in the world shows a gradual increase in the proportion of fresh food consumption and a decline in the proportion of processed fruit consumption. The proportion of fresh fruit consumption in Turkey, China, Russia and the EU has always remained above 70%, and the proportion of fresh fruit in Turkey and China has even exceeded 90%. As the representative of the world ’s most developed countries, the proportion of fresh fruit consumption in the United States is also increasing, from 34.3% in 2010 to 45.7% in 2015. Among them, the proportion of fresh food consumption of citrus is significantly lower than that of apples and pears.

The development of refrigerated transportation and fresh-keeping technology has led to changes in the fruit consumption structure of major countries in the world. Against the background of the global fruit consumption structure showing a gradual rise in the proportion of fresh food consumption, China's processed fruit exports have shown a downward trend. As a major fruit processing country, the future development of China's fruit processing industry is under great pressure. The fruit industry must optimize the allocation of resources, adjust the production structure, and actively meet the changes in consumer demand.

Multilateral and bilateral trade agreements brought about changes in fruit trade and production environment. In the context of trade liberalization, the process of fruit trade liberalization has continued to advance, and the tariffs of major fruit trading partners have shown a downward trend. In terms of exports, in recent years Russia's tariffs on China's main fruit varieties have gradually decreased. From 2012 to 2016, the tariffs on fresh apples fell from 31.39% to 11.75%, apple juice fell from 15% to 12%, and fresh pears fell from 10% To 5%, fresh citrus and grapes remain at a low level of 5%. In terms of imports, China's tariffs on major imported fruits have also gradually decreased. From 2006 to 2016, Costa Rica's banana import tariffs were reduced from 10% to 6%, Chilean cherry and grape import tariffs were lowered from 10% and 13% to 0, and dragon fruit in Taiwan, China, was reduced from 20% to 0. Import tariffs of Peruvian grapes were also down from 13% to 0. From the perspective of fruit export, the export markets of China's main fruits such as apples, oranges and pears have further expanded. At the same time, China has further liberalized imports from more countries, especially blueberries and grapes, which will have a greater impact on China's related industries. The fruit industry is China's comparative advantage. Under the background of open trade, the ceiling effect of international market prices has caused domestic fruit prices to rise more slowly than costs.

Lagged industrial chain development led to weak quality competitiveness. Insufficient development of various links in the fruit industry chain leads to the weak competitiveness of Chinese fruit products in the international market, making it difficult to enter the high-end consumer market. In China, the proportion of secondary fruit in the production stage is high, and the shape of the product is not good. The pre-cooling treatment ratio in the post-production commercialization stage is low (only 5%, Japan is more than 90%). Single classification index, backward inspection and testing technology, all these factors have led to weak competitiveness in the high-end market. Even the domestic high-end market is replaced by foreign fruits, and the import of high-end fruits is increasing. In China, the development of cold chain transportation in the circulation stage is insufficient, and the fruit product loss rate is high (about 30%, compared with 7% in developed countries). The development phase of the processing stage needs improved management which in most cases is currently done by small-scale enterprises. In the marketing stage, brand building lacks overall planning, international credibility is difficult to establish, and brand added value is not high.

Development Trend and Potential of Fruit Trade in China

ASEAN countries are markets that China needs to actively maintain; markets such as Russia and Kazakhstan face competition from Poland, Belarus and other countries that offer far lower prices than Chinese products, which puts more pressure on Chinese exports. The US market will be the potential for China's future export growth. Due to inspection and quarantine reasons, Chinese fresh apples have been rejected by the United States. With the signing of the Chinese apple export work plan in 2015, the United States will become China's export potential market. Chinese citrus has a higher market share in ASEAN; there is still room for further growth in market share in Russia and Canada. Due to competition from Morocco, Turkey, Spain, Peru and other competitors to provide low-priced citrus the competitive pressure is also great. In addition, with the US Department of Agriculture's plan to allow China's five kinds of citrus fruits to be exported to the United States and the implementation of the China-Korea Free Trade Agreement, the United States and South Korea may become markets for Chinese citrus exports.

China's total fruit trade will continue to grow, but under the background of higher import growth than export growth and rising unit price of exports, the trade surplus will gradually shrink. In recent years, trade data show that the growth rate of imported fruits has been rapid, and the export of processed fruits has been declining. Although the export of grapes and other fruits has been growing rapidly, it is still difficult to offset the decline in processed fruits, especially fruit juice exports, and the growth of imported fruits. As the cost of fruit production in China climbs year by year, coupled with the increase in the exchange rate of RMB against the US dollar, and the rapid increase in the unit price of fruit exports, the export prices of pears and oranges have reached the world's highest level, and the price competitiveness has dropped significantly.

ASEAN countries and Ecuador are still important source countries of China, but with China's liberalization of more countries' restrictions on fruit exports to China in recent years, such as Sri Lanka ’s bananas being approved for export to China in 2015, China ’s banana import source countries will be more diversified and import concentration will decrease. Chile and the United States, as the world's largest cherry producers, will still occupy a high share of the Chinese cherry import market. However, with the development of domestic cherry planting technology, the quality of cherries continues to improve, China's cherry self-sufficiency ability will gradually increase, and the growth rate of cherry imports will slow down. Thailand has been monopolizing the Chinese market. As major durian producing countries such as Malaysia continue to intensify their efforts to explore the Chinese market, the source countries of durian will be diversified. Mainly from Chile and Peru, their market share may continue to increase.

With the liberalization of the import market, South Korean grapes were allowed to export to China in August 2015, and the source countries of grape imports will increase. China pear occupies a higher share in the ASEAN and China Hong Kong markets, but faces competition from South Africa, a major pear producer. In 2014, the export price of fresh and pears in South Africa was only US$0.92 per kilogram, which was US$0.26 lower than the export price of Chinese pears. It may squeeze the market share of Chinese pears in the future. In addition, with the signing of the "Bilateral Quarantine Arrangement on the Requirements for Israel's Import of Chinese Pears and Sand Pears", Israel may become a growth point for Chinese pear exports. The United States, Japan, Canada, and Russia are the main target markets for China's processed fruit and fruit juice exports. The fruit demand structure of the United States, Japan, and Canada is basically stable, and these countries also have strong fruit processing industries. As China's fruit production costs have risen, the export price advantage of processed fruits has declined. Therefore, China's processed fruit and juice exports have increased space is limited. The proportion of fresh food consumption in Russia's fruit consumption structure has continued to increase, and China's processed fruit has insufficient growth potential for its exports.