China turning into one of the worlds biggest shrimp consumer.
As much as 270,000 metric tons of shrimp was smuggled across the Vietnam-China border in 2016, Undercurrent News has heard, as smugglers exploited unmet Chinese demand and lax border controls.
The staggering volume of smuggled shrimp—roughly equivalent to Thailand’s entire annual shrimp production—would be valued at well over $1 billion annually, and mean that up to four out of every five shrimp imported by China last year was smuggled.
Taken alone it would make China the world’s second largest importer of shrimp.
The smuggling route from Vietnam's northern port Haiphong to the Vietnam-China border is well known, but the huge increase in volume is only recent and largely owing to unmet demand in China.
This is because of increased consumption and problems with disease on Chinese shrimp farms. Tiny-sized shrimp are sold at numerous regional markets, an indication of early harvesting amid outbreaks of disease, while vanamei shrimp output in 2016 was down by 30-40% in top-producing regions.
New Hope Liuhe, a massive fish feed manufacturer, reckons China is experiencing an annual shortfall of 500,000t-700,000t of shrimp. This is according to the firm’s general manager, Li Fangyi, who last month spoke to Fish First, a Chinese trade publication.
While it is difficult to confirm this figure, domestic shrimp prices (80 count, farmgate) hit a record high of CNY 90 per kilo ($13/kg) at markets in Zhanjiang, Guangdong, China’s main production region, in April of 2016. Increased price volatility during this year's Chinese New Year could see domestic shrimp prices double.
Though domestic shrimp prices fell last summer and in December were below year-ago levels, this is partly owing to the influx of shrimp imports, an industry source in China who did not want to be quoted by name told Undercurrent.He added that last year 10-20% of shrimp farmers left the sector in Guangdong Province, China’s largest shrimp producing region, because of problems farming shrimp and market pressures stemming from increased imports. Imports hit the market in significant volumes in early 2015, he added.
Where did all the shrimp go?
Like a huge sinkhole, China has begun sucking up shrimp from all over the world. Very little of it, however, appears to come from legitimate sources.
Zhanjiang Guolian Aquatic Products, China’s largest shrimp company, reported total Chinese shrimp imports amounted to 300,000t in 2015. Guolian published this figure in a company filing at the Shenzhen Stock Exchange earlier in 2016.
Yet, Chinese customs stated Chinese shrimp imports (HS Code:030617) were just 59,166t in 2015, according to International Trade Center (ITC), a joint agency of the World Bank and United Nations. Therefore, 240,000t of shrimp would have needed to come through the backdoor route in order to match Guolian’s figure.
To try to confirm this, Undercurrent looked at volumes of shrimp being exported to Vietnam.
In the past few years, shrimp exports to Vietnam have rocketed, according to ITC. In 2013, Vietnam imported 101,967t of shrimp. Just two years later, Vietnam imported 209,067t, an increase of 105% in two years, making Vietnam officially the world's second largest importer of shrimp.
Vietnam imports shrimp from all over the world, including such origins as Australia, the US, Canada and Estonia. Saudi Arabia, Hong Kong, Thailand and Indonesia also supplied significant volumes in 2015. Most, however, comes from Ecuador and India, who combined exported 167,217t to Vietnam in 2015.
Vietnam does not provide ITC with complete data regarding the country's shrimp exports. However, according Vietnam's partner countries—those countries importing product from Vietnam—Vietnam exported 152,449t shrimp in 2015.
Therefore, at least 56,618t is required just for there to be a balance of trade in 2015. Moreover, Vietnam is one of the world's biggest shrimp producers itself. Furthermore, this is trade that is logged.
The first source said that Ecuadorian exports are often shipped out to Vietnam in white, unmarked boxes. He estimated that 60% of Ecuadorian production in 2016 would go to China via the backdoor.
Thailand has seen shrimp vanish from official figures, too. In 2016, the country was expected to produce 310,000t, according to feed sales, while fisheries report production of 270,000t, leaving around 40,000t unaccounted for.
India, which produces smaller shrimp, had exported 68,000t to Vietnam in the nine months to Sept 30, according to to ITC. The first source estimates full year exports could hit 100,000t for 2016. In 2015, India’s exports to Vietnam were 65,121t, according to ITC.
If just half of those Indian exports are going through the backdoor, Chinese shrimp farming has deteriorated significantly, said the source, given normally China has an abundance of small shrimp.
“The biggest factor in the world’s shrimp market today is China; it’s not Europe or the US or anybody else, it’s China,” said the source.
Building an entire industry outside of the law carries significant risks.
In summer of 2015, China’s government unexpectedly closed some of the smuggling routes. Global shrimp prices plummeted as producers and traders tried to offload thousands of tons of product originally destined for China.
“Ecuadorian producers were alarmed when the [back]door was closed,” said the first source. The biggest exporters promised they would not use unofficial routes again because of the dangers involved, he said.
But they started up once again a couple of months later, the source added. Official Chinese customs data shows that Ecuadorian shrimp imports jumped in the summer and autumn of 2015, but then fell back to normal levels towards the end of the year.
Smuggling shrimp into China is too attractive. Customs duties of 5-8% for shrimp and sales tax of 13% can be avoided, plus Chinese buyers can get kickbacks by re-exporting smuggled shrimp—smuggled shrimp is passed off as domestic product to benefit from government subsidies worth 13% of the value of exported goods.
Moreover, smuggling shrimp has become “relatively easy to do”, said another source, who did not want to be quoted by name.
Expediting smuggling—not just of shrimp but all manner of goods—is an army of logistics companies and customs advisers. Locals have built private toll roads solely to ease the passage of smuggled goods across the border, local media report.
When will it come to an end? According to the third source, Beijing has said it will start to clamp down on smuggling trade in mid-2018.
But the truth is very few—if anyone—knows for sure. Meanwhile, incentives to find backdoor trade routes into China will increase as China’s consumer boom continues and prices for shrimp (and other meats and grains) continue to rise above those in neighboring countries.
This high-risk trade will likely heat up before it cools—or crashes—down