Economy - December 12, 2023 | 05:00 pm PT

Billion-dollar China market promised land for Vietnamese farm exports

Vietnamese agricultural exporters have seen a surge in demand from China and are striving to improve their produce quality to establish a more robust presence in that multibillion-dollar market.

As Hoang Phat Fruit CEO Nguyen Khac Huy reviewed the figures for this year, he found that shipments to the E.U. and Japan combined for the whole year equated to only two days’ worth of exports to China.

The company, one of Vietnam’s biggest fresh dragon fruit exporters, has been shipping around 10,000 tons annually for several years and to many markets.

In past years Japan and South Korea were often its main markets, but this year China has surged to the top.

Huy said: "China is the leading market in terms of revenues. We have exported hundreds of tons of banana, jackfruit, dragon fruit, and durian there this year."

Doan Nguyen Duc, chairman of agriculture giant Hoang Anh Gia Lai, which has been shipping bananas to China for four years, hailed China as "a wonderful market."

Speaking to VnExpress, he said: "China imports the biggest amount of agriculture produce globally. If Vietnam can provide goods with consistent quality, they will never refuse."

Vina T&T, a major exporter which focuses on the U.S., also considers China a key market thanks to its 1.4-billion population.

The company’s CEO, Nguyen Dinh Tung, who had worked in China for 20 years, said Chinese importers would buy Vietnamese products as long as the quality is good.

"No other market consumes Vietnamese produce as much as China."

Vietnam’s agricultural exports to China nearly doubled in the last decade from $3.8 billion in 2013 to $6.8 billion last year.

The number rose to $7.5 billion in just the first 10 months of this year.

Fourteen kinds of fresh produce, including nine fruits, have been approved by China for official imports from Vietnam. Over 2,900 processed items have also got the green light.

Durian has been the main export item this year with China buying $2 billion worth of the fruit in 11 months.

Vina T&T received an order for 1,500 containers from Chinese buyers but could only ship 30% of that due to a supply shortage.

The company’s exports to China grew by 70% year-on-year in the first 10 months, and China is now its largest market, accounting for 35% of its revenues.

Agriculture produce is only part of a bigger picture. China is Vietnam’s largest trading partner with bilateral trade reaching $235 billion last year after quadrupling from 2014.

Why China?

China is increasingly buying Vietnamese produce thanks to the free trade agreements they are both part of, such as the ASEAN-China Free Trade Agreement and the Regional Comprehensive Economic Partnership , Dang Phuc Nguyen, general secretary of the Vietnam Fruits & Vegetables Association, said.

They have also established several bilateral protocols to push agricultural trade.

This and an improvement in quality has sent Vietnam climbing to second place in durian exports to China behind only Thailand, he said.

Vietnam shares a land and sea border of 1,450 kilometers with China and this brings down transportation costs compared with other countries.

Nguyen said Chinese buyers have set up many wholesale markets near the Vietnam border to help preserve produce quality.

But the fact that China has a population of 1.4 billion is what makes it a lucrative market, he said.

"Even countries far away like the U.S. and Chile want to have a bigger piece of this market."

ASEAN countries have also been working hard to satisfy China’s hunger for produce. Thailand for example exports most of its coconut, dragon fruit, banana, and durian to China.

Last year, China imported $15 billion worth of fruits from other countries, up 8% from 2021. Exports of agriculture produce by ASEAN member countries to China rose by 10% in the first 10 months of this year, according to market data platform Produce Report.

Workers process prepare fruits for exports. Photo courtesy of Hoang Phat Fruits

No longer easy

But exporters have found that as China’s appetite increases so does its quality standards.

Early last year thousands of Vietnamese containers, most of them carrying produce, were stuck at the border on their way to China as the country tightened its quarantine regime.

China also recently stopped importing lobsters from Vietnam after setting new quality and origin regulations.

Bananas produced by Hoang Anh Gia Lai are sold at Chinese supermarkets. Photo by VnExpress/Thi Ha

"Low-quality products no longer have a chance to enter China," Duc of Hoang Anh Gia Lai said, adding that the country now has pesticide and weight requirements for each produce that are as stringent as Japan’s.

Chinese buyers also pay less than their U.S. and Japan counterparts, and this means lower profits for Vietnamese exporters.

"One container to the U.S. equals 10 to China in terms of profits," Tung of Vina T&T said.

Border infrastructure has not kept pace with bilateral trade, and bureaucracy is another dampener, exporters said.

Exports by rail are low with only around 1,000 tons of goods transported to China each day.

Another concern is rising competition in China as domestic farmers have been able to produce the same tropical fruits as Vietnam like dragon fruit and sell them locally at lower prices, Nguyen said.

Competition from other ASEAN member countries such as Malaysia, the Philippines and Thailand also pose threats to certain fruits like durian, he added.

Exporters expect the Ministry of Industry and Trade to restructure agriculture to improve quality as China is no longer "an easy market."

But regardless of the difficulties, Huy of Hoang Phat Fruit said he would continue to work hard to ship his produce to China.

"China is our biggest market and it grew by 30% in the first 10 months."

Vina T&T also hopes to expand its China market and Tung said Vietnamese farmers would become much richer by aiming for this market.

A village with 20 households, for example, might find it difficult to export all its produce to the U.S. due to low demand whereas China would buy all of it and pay a reasonable price for their efforts, he added.

Story by Thi Ha, Hoai Thu

Graphics by Do Nam