The demographic challenge facing China’s seafood industry

Workers in China’s aquaculture sector are getting older and fewer, forcing the country and its seafood industry to modernize and mechanize.

Wage growth slowed from a 21 percent year-on-year growth in 2011 to 7.2 percent in 2015, but there has still been a tightening of the labor supply for urban jobs like seafood processing, according to data from the National Bureau of Statistics. Slower economic growth has also meant slower growth in employment, which decreased from 5.4 percent year-on- year in 2010 to 1.3 percent in 2015.

With those two combined economic trends, there appears to be little incentive to work in rural-based enterprises like aquaculture. Migrant workers (the term is a generic one to describe the masses of workers from rural areas who staff China’s manufacturing enterprises and seafood processing plants) working off-farm now earn an average income almost the equivalent of the average urban annual income. Government initiatives to lift wages (and, theoretically, consumption spending) and social security coverage, as well as a tighter labor market, saw the non-farm income of a migrant worker rise from USD 193 (EUR 175) in 2008 to USD 424 (EUR 383) in 2014 and USD 464 (EUR 419) in 2015, according to the National Bureau of Statistics.

Chinese manufacturing wages now stand among the best in the developing Asia region. But Chinese manufacturers still enjoy a considerable advantage however in wage levels, with a USD 2.46 (EUR 2.22) per hour rate contrasting strongly with European Union averages, where hourly incomes range from EUR 8.60 (USD 9.52) in Poland, to EUR 21 (USD 23.26) in Spain, to EUR 30 (USD 33.23) in Germany, including social security payments.

The aging of China’s population – and the long-lingering effect of the recently abandoned one-child policy – means China’s migrant worker population declined by 5.68 million to 247 million people at the end of 2015, according to the NBS. That’s the first such decline ever, but given clear population patterns, this contraction in the labour force is set to continue.

Migrant workers now earn three times the average rural income, meaning incomes from farming and aquaculture are low. That’s a key reason why the age profile of rural China is rising dramatically. In 2011, the farming population was equally split between those aged 16-30 and those aged over 40. By 2015 the percentage of those aged over 40 had surpassed those in the 16-30 age bracket and accounted for over 60 percent of the overall farm population.

Hence, fewer and older workers are available for aquaculture, which is a largely rural enterprise in China. That’s a big driver for aquaculture and livestock industries to secure future supply. To adjust to the new demographic landscape, they’re increasingly mechanizing and modernizing – and consolidating their operations.

China’s demographic challenge is also leading the central government plans to adjust regulation of industries including fisheries and farming, ostensibly based on environmental and quality reasons. Aquaculture is on the list of industries slated to be banned in areas now declared to be off-limits to activities that endanger local water supplies (as it’s not as important a priority as livestock farming – and pig farming in particular).
The government also believes that consolidating the aquaculture sector into a series of large, more efficient companies will better assure the quality of Chinese aquaculture output and make it easier to enforce environmental regulations.

That is good news for the likes of Baiyang and Guolian and Zhangzidao – three big players in tilapia, shrimp and shellfish respectively – which, as local champions, can draw down subsidies to install equipment and processes under government schemes to modernize industries like aquaculture and seafood processing.

Ultimately, China’s demographic and wage pressures should lead to a more modern, efficient and clean aquaculture industry. But it will also likely lead to higher prices for Chinese farmed fish, and this will also create openings for other countries with burgeoning seafood sectors that could otherwise not compete with China on a wage basis.Some of these nations will struggle to compete with China’s very developed infrastructure, but it seems likely that competition will increase. 

This much, however, is certain: the days of rock-bottom Chinese wages are over.