From Indonesia to Norway, China looking to invest in aquaculture overseas

The “Tropical Countries Aquaculture Science and Technology Innovation Cooperation Group” is a little-known entity with a potentially enormous impact on future Asian aquaculture production trends. 

Operating out of the China Academy of Fisheries, the entity shares Chinese know-how internationally. Speaking at a major aquaculture conference in Fuzhou recently, the academy’s director, Li Jian, explained how investing overseas in agriculture and fisheries has become a new priority under the “One Belt, One Road” (OBOR) program, China’s foreign policy blueprint of integrating regional and Middle Eastern countries into its economy through new infrastructure, of which the ‘New Maritime Silk Road’ is part. 

China sees Southeast Asia and Africa as part of the OBOR seafood initiative, with support in seawater cage aquaculture systems producing species like yellow croaker, grouper, cobia, and silver pomfret; according to Guan Chang Tao, the chief scientist for mariculture at the Fisheries Academy. He sees China’s “outstanding resources” and “improved seed selection” as key for collaboration with developing countries in Asia and Africa. 

On the same day as the conference in Fuzhou, Chinese media reported how Guinea – with which it has major trade relations – was seeking to expand its freshwater aquaculture and its poultry industries to become more self-sufficient. Likewise, Ecuador, another supplier of China’s resource requirement, has cancelled import duties on many inputs for agriculture and fisheries in order to encourage more production at home.

Chinese companies have invested USD 180 billion (EUR 155 million) in overseas agriculture and fisheries across 140 countries up to 2016, according to Gu Wei Bing, the senior agriculture ministry official, speaking at the Fuzhou conference. Indeed, Chinese industrial companies seeking to diversify their earnings have ploughed funds into overseas beef and soybean farms. They’ve been keen to lock down large assets and supply production back into China. 

China could now also increase output in South Asia in the same manner, according to Network of Aquaculture Centres in Asia Pacific (NACA) chief Yuan Derun. According to Deun, annual shrimp output has been increasing by an average four percent globally but output in China is flat. 

Also attending the Fuzhou conference was Rokhmin Dahuri from the Indonesian Aquaculture Association. Dahuri said her country “very much welcomes” foreign investment in aquaculture, particular offshore. 

“We want to reduce the impact of aquaculture on our environment, hence we want to do more offshore,” she said.

But there were many questions left unanswered in Fuzhou. Seeking to buy or build and operate shrimp and fish farms in Burma, Indonesia, or in Africa will require a major investment in infrastructure. Who’ll pay for the infrastructure, and how? Will developing countries take on loans from China to pay for the roads and power lines and chilled container lines that would be required to operate a significant seafood business? 

If so, the model already exists, as China has pursued this strategy in other industries, whereby China adds infrastructure ultimately paid for by the host nation in either loan repayments or in resource supply arrangements. That potentially locks in developing nations into long-term and unequal supply arrangements. 

There's also the question of whether countries on the Silk Road plan get to build their own value chains – the spoken goal of nations like Indonesia – or if they will be mere suppliers of raw materials for Chinese processors – and dinner tables. 

There is also the issue of control. Many of the Southeast Asian nations like Indonesia are also growing their own consumption, though average per capita incomes still lag behind those of China. It will take significant intensification to meet growing local demand and also meet China’s rising demand.  

It's also unclear if developing nations are set up to police any intensification in aquaculture. China itself is currently sending inspection teams across the country to close unlicensed aquaculture facilities and curb chronic water pollution. It took a long time for China to get this serious on their own soil,  so there is a risk that bad practices may merely be exported to other countries, where similar enforcement is unlikely. Vietnam’s Mekong Delta already has major problems brought on by intensification of shrimp and pangasius output, in large part due to growing Chinese demand for those products. 

As an alternative to major expansion into developing nations, Chinese investment could also be steered toward aquaculture in aquaculture powerhouses like Norway. Norwegian banker Rude Nilsen told the conference’s attendees in Fuzhou that salmon output has to rise by nine to 10 percent per year to meet rising demand that will see China become the world’s top consumer of the product. 

“Salmon’s a great investment opportunity,” Nilsen said.

Nilson hinted that he thought it can’t be long before until major Chinese investment into a Norwegian salmon production or processing business. True, capital is more plentiful from Western sources for proven projects such as salmon production. But a Chinese investment in distribution and marketing side of a Sino-foreign salmon venture would make sense.

There hasn’t been the same wave of Chinese overseas purchases in the seafood sector as there have been in soy and meat production overseas, in part because similar assets haven’t come up for sale with similar regularity but also because of the nature of corporate ownership in China’s seafood sector. Rather than state-owned giants that control the politically sensitive (for food security reasons) commodities like grain, the seafood sector is more the domain of smaller private companies whose investments are more commercial than political-strategic. Privately-owned firms like tilapia leader Baiyang and shrimp giant Guolian have been more enthusiastic about diversifying into opportunities in the domestic economy like e-commerce, information technology, education, real estate, and waste treatment. 

China is currently maxed out at 80 million tons of (red and white) meat production while seafood production at 65 million tons is set to fall back to 60 million tons in 2020, according to a government plan to improve quality and focus less on quantity. There will be a certain amount of substitution: Chinese will eat less carp and switch to other species. But it seems inevitable that there’ll be an increase in volumes of seafood sourced from elsewhere.

Photo courtesy of 2018 Fuzhou International Fisheries Expo