China: Is an industry alliance a solution to the standardization of agricultural products?

Hebei province is a large producer of fragrant pears. The export volume of fragrant pears from Hebei province accounts for about 25% of the global export volume of fragrant pears. Almost 80% of fragrant pears in Chinese high-end supermarkets are produced in Hebei province. In the first 10 months of 2017 alone, the export value and export volume of fragrant pears was 430 million USD and 412 thousand tons respectively. This is an increase of export value by 11% compared to the same period in the previous year, and an increase of export volume by 15%.

The member companies of 'Choice Fruit Alliance' that participated in the Fruit and Vegetable Expo

The fragrant pear export from Hebei to European and American countries has been in gradual decline for some time since these countries introduced stricter quarantine standards in 2016. Afterwards, certain production standards were implemented. One example is the regulation of the use of chemical fertilizers. The export volume and export value of fragrant pears subsequently increased again in comparison with the same period in the previous year.

Nine enterprises that export fragrant pears to The United States, Canada, and Australia came together on September 30th, 2017, to establish the Hebei Choice Fruit Alliance Business Management Co., Ltd. (hereafter referred to as 'Choice Fruit Alliance'). This cooperation took place under the guidance of the Hebei Import and Export Office for Quality Supervision, Inspection, and Quarantine. Together they established a brand new cooperative model - the Choice Fruit Alliance model.

Fragrant pear warehouse loading bay

The establishment of 'Choice Fruit Alliance' can be seen as a milestone in the development of Hebei fragrant pear export. The accumulation of fragrant pear plantations in Hebei and their management could freely develop to its full potential under unified management. The allied businesses together forged a brand for the export of Hebei fragrant pears. They improved the influence of Hebei fragrant pears on the international market and increased their competitive power. Moreover, they avoided the rise of unfair competition or disorderly market operations.

Fragrant pear processing factory

The question is, would an industry alliance also be the solution for the standardization of other agricultural products? This is not necessarily the case.

Firstly, China is vast and has abundant resources. Numerous plantation areas of famous agricultural products are relatively scattered. When the differences between these regions are taken into consideration, then it is difficult to imagine establishing an alliance that could properly regulate and standardize operations in all member companies. 

Secondly, an industry alliance can only be established with the cooperation of each member company. When there are too many member companies or if cooperation is not properly coordinated, then it becomes easy for individual companies to operate their own business. 

Thirdly, an industry alliance can only regulate the management of member companies. There are certain agricultural products where speculation is common, such as garlic or ginger. The behavior of dealers who speculate creates market conditions that are outside the control of an industry alliance.

Publication date: 2/26/2018

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