China: direct trade with Chongqing means opportunity for California

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China: direct trade with Chongqing means opportunity for California

With the gray channel through Hong Kong planned for closure, 2014 is seeing more and more Chinese inland cities being approved for direct food and produce imports. Among them is Chongqing, a city located in southwestern China with a municipal population of over 29 million.TonyYung

While the newly approved direct route comes with a comprehensive agreement that encourages direct imports from all over the world, the U.S. state of California is among the first to benefit from such efforts.

At, we spoke with Sacramento trade office’s envoy to Chongqing, Tony Yung, on what this move means and how Sacramento, the "food basket" of California, will position itself to tap into China’s vast second and third tier markets.

"The agreement is at a very high level," Yung said.

"It was approved by the Chinese central government and Chongqing municipality government to take effect in January right before Chinese New Year."

Yung described this comprehensive agreement as a "significant step" because it means foods once imported through Qingdao, Shanghai or other coastal cities may now go directly to central China.

"The short-term benefit is definitely availability. We no longer have to clear customs in Beijing or Shanghai, taking the cargos out for inspection then shipping it again," Yung said.

In fact, since last year, the trade routes from California to Chongqing have already seen significant improvement.

There are now direct flights from San Francisco and Los Angeles to Chongqing, with a brief stop in Beijing; the San Francisco-Chongqing flight doesn’t even change planes.

"Although those are passenger flights, they do have quite a bit of cargo capacity for cherries and small items, some of which are highly perishable goods. That is very good news for us," he said.

The new protocol will ensure the continuous opening of transportation routes directly from the west coast of California into southwestern China.

"Eventually, as the volume goes up, we will have direct cargo flights flying into the region," Yung said.

There will also be fewer middlemen touching the products.

"Right now, you probably have to go through multiple levles because that's needed. There's no infrastructure. So we see with Chongqing- Californian food trade in particular, that products are probably priced higher than in coastal areas, which is understandable because it’s further away and needs more handling," he said.

"You want to go as directly as possible not only because of pricing, but also logistics – the sooner you can get it to the consumers, the fresher and the better the quality. It doesn’t mean you wouldn’t have any partners, but you need to kind of clean up your channel."

Yung believes the cost will naturally come down.

"It’s driven by volume and there will be less people handling it. I’m not too sure if in the short term there will be a huge price difference, but it will definitely come down," he said.

As a food-production powerhouse in California, Sacramento has long enjoyed the reputation of pioneering "farm to fork" culture. Yung has similar plans for Chongqing.

"One of our visions is we’d like to make Chongqing the capital of 'farm-to-chopsticks' in China. That's definitely the direction we want to go," Yung said.

Yung said it is expected that California will start shipping through the new channel in March.

"That’s the time we’ve been given. We do have an agreement that as soon as the custom area is ready to clear food and produce, we will start shipping," he said.

"We are waiting for it to be ready because there are cold chains and logistics involved. We don’t want anything to sit there and not be fresh."

Yung said there will be fruits coming in by air. Nuts, dry food, and non-perishables may still come by sea.

"We will be facilitating Californian products to be imported directly into Chongqing. All the 'suitable' Californian products are going to use this pipeline, and among those products we believe food and produce is a strong area for California," he said.

"Our staff is constantly in touch [with the relevant parties] and works with them closely here. As soon as they are ready, we will start shipping from California directly into southwestern China."

Yung said the trade office is looking at a variety of what it’d like to call "life-style products" from California to promote to consumers in southwestern China. These products could then be used as a base to go all over China.

"Sacramento is probably the largest supplier of almonds to China. So we will be shipping nuts and in particular almonds, also value-added products like almond drinks and almond paste," Yung said.

"Walnuts, pistachios and pecans are all on the initial list.

"Even things like olive oil, health drinks and health supplements are all on the list."

From the fruit side, Yung said cherries are the most popular and most requested product according to the market research and direct communication with the consumers and distributors.

Californian cherries currently hold a relatively small presence in the Chinese market, partly due to high domestic consumption and hefty prices, according to Yung.

"My understanding is that domestic consumption is very high. And regarding exports, a bigger market for us is in Japan, where people are a little bit less price sensitive," he said.

"Also grapes [have potential], although now it's a little early in the season. In the Chongqing area, those are highly demanded products.

However, Yung said the product mix is determined by the market place.

"We are very careful in using the trade office to figure out what would be the right product, who will be the right partner. Sometimes the regional background and regional knowledge will determine its success. We don’t believe that everything is competitive and has a niche here," he said.

"I often hear 'let's show them what we have' and I often think it's a very uneducated perspective from people or businesses over here. It's not so much about introducing the products to the Chinese consumers, because a lot of times I think they do understand what the product is with some education level.

"It's not about exhibition anymore; it's rather about actual projects: how do we get it there safely, quickly and cheaply? That’s more important."

The trade office will work on one product at a time with importing partners, while simultaneously establishing separate license approvals for each item.

Yung stressed the importance of government support in opening up this platform in China.

"One of the reasons China has grown so fast in the past 25 years, as I have seen in front of my own eyes, is because of government involvement. We learned from the Chinese that government and official involvement is very valuable," he said.

Currently, the trade office is working very closely with the Chongqing municipal government, in particular with COFTEC, Chongqing’s foreign trade commission, as well as China’s CFTA to start opening up the channel directly to sales.

CFTA’s own importing company, CFTA International Trading Co. Ltd, is the trade office’s major importing partner at this stage.

"It has all the licenses and understands all the procedures. Right now, they are taking the lead as the importer to clear all the hurdles. I will assume that as time goes on there will be more," Yung said.

"In the farm and clean energy side in the U.S., we also have more government involved than in other businesses because of policy, food safety and new technology. So we are working very closely with the government on the U.S side as well."

In the mean time, the Sacramento trade office is aiming to engage major local Californian players in farming, logistics, packaging, transportation, cold chain management and food safety.

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