China’s nation-wide poverty-alleviation program may benefit tree nut growers

China’s exports of walnuts are estimated to drop in MY 2018/19 as result of reduced domestic production. China has been a historical export supplier of walnuts over the last century. Over the past decade or so, China has nearly faded out as a supplier to the world market due to strong domestic demand. Nevertheless, China’s walnut exports rebounded significantly in MY 2017/18 as a result of sharp increases in production. China exports mainly shelled walnuts to Europe, Japan, and Kyrgyzstan. Exports of in-shell walnuts also picked up dramatically last year to neighboring countries, including Pakistan and Kyrgyzstan.

China imports in-shell pistachios and almonds for processing and re-export (in-shell pistachios and shelled almonds) to the U.S. and EU markets, but the volume is limited and declining. Likewise, China imports in-shell macadamia nuts and re-exports kernels mainly to Australia and the volume remains quite stable.

Policy

The Chinese central government is enforcing a targeted nation-wide poverty-alleviation program which may benefit tree nut growers in less developed regions. For instance, in conjunction with the private sector, the county government of Yecheng in Xinjiang plans to invest a total of RMB100 million ($14.7 million) in buying walnut cleaning, shelling, and grading machinery to help farmers improve walnut quality and increase employment. As one of the three major walnut-producing counties in China, Yecheng accounts for more than one-third of Xinjiang’s walnut supplies.

On November 25, 2017, the State Council Duty Committee (SCDC) announced that import tariffs for 187 products, including Brazil nuts, cashew nuts, macadamia nuts, and pecans, would be temporarily lowered on December 1, 2017 (see GAIN report CH17063). However, the U.S. nut industry has been

targeted in China’s additional tariffs enacted in response to the U.S. 232 and 301 measures. Specifically, China’s SCDC announced additional tariffs of 15 percent (see GAIN report CH18017) and 25 percent (see GAIN report CH18034) on U.S. products, including tree nuts with effective dates of April 2 and July 6, respectively. The following table provides detailed tariff rates for different tree nuts from the United States and other trading partners.

Following value-added tax (VAT) reductions on agricultural products from July 2017, the Chinese government again lowered the VAT, for primary agricultural products and processed products from 11 to 10 percent and 17 to 16 percent, respectively, effective May 1, 2018 (see GAIN report CH18022).

Tree Nut Import Tariff and Value-added Tax (VAT) in 2018

Note: *Indicates a temporary rate for 2018

Marketing: 

Consumption of nuts is a traditional part of Chinese culture and high-quality imported tree nuts have long enjoyed a strong customer base throughout the country. In recent years, demand for high-quality nuts has been especially robust, backed by rising disposable incomes and consumer preference for healthy and natural foods. Two of the largest tree nut associations in China, the Nuts and Roasted Seeds Division of the Chinese National Food Industry Association and the South China Tree Nut Association, have strongly contributed to this nation-wide robust demand through consumer education on the health benefits of nut consumption.

The United States is the largest supplier of tree nuts to the Chinese imported tree nut market. The top two most popular U.S. nuts in China are almonds and pistachios, both of which have experienced strong import growth over the past three years. Other popular imported tree nuts include macadamias, hazelnuts, pecans, and walnuts.

A significant amount of imported U.S. nuts are sold as bulk product to various Chinese roasting factories and wholesale markets that have developed their own brands. These Chinese nut brands that utilize

imported product are sold in all types of retail outlets, ranging from “mom & pop” stores, franchised outlets, convenience stores, supermarkets, and hypermarkets. The types of packaging in these outlets range from bags and cans to large boxes. In addition to single variety packages, mixed nuts and seeds, and mixed nuts and dried fruits are also popular snack foods in the retail markets.

Founded in the early 1900s, Yidelu wholesale market in Guangzhou is a key imported nut marketing hub for the entire country. Retail outlets, other wholesale markets, hotel and restaurant chains, and the food manufacturing industry all source from Yidelu market. According to contacts at Yidelu, demand for high-quality imported nuts in traditional and high-end retail outlets continues to grow.

With tremendous development in the online retail sector, Chinese e-commerce is now an important marketing venue for imported tree nuts. Due to their long shelf life, convenient packaging, and long- distance shipping suitability, nuts perform especially well in this sector. All major online retailers in China offer a range of nut products and some Chinese processors have even developed nut brands exclusively for e-commerce, one of which reached a sales volume of over $1 billion in 2017. Multiple

U.S. tree nut brands are also increasingly available directly from online retail venues.

Retail contacts report in-store promotions and food festivals in 1^st and 2^nd tier city retail stores highlighting U.S.-origin nuts as safe, healthy, and convenient snack foods have been extremely successful in increasing sales. Consumer promotions timed with Chinese holidays are especially effective as nuts such as pistachios are in high demand as Mid-Autumn Festival and Chinese New Year gifts and snacks. Trade association contacts also report that public relation activities and media campaigns have also played important roles in educating consumers on the quality of U.S. tree nuts.

Imported tree nuts are also used in the Chinese baking industry. U.S. almonds, walnuts, pecans and pistachios are now commonly included as ingredients in bakery chain breads, cookies, cakes and pastries. In 2018, the Agricultural Trade Office (ATO) in Guangzhou launched a USA Pavilion at the Guangzhou Bakery Show, offering an ideal platform for multiple U.S. trade associations to showcase high quality tree nuts to the South China baking industry. Blue Diamond Growers, American Pistachios Growers, the U.S. Pecan Growers Council, and the California Walnut Committee all participated in this heavily attended event. ATO Guangzhou and other ATOs across China plan to implement similar events in 2019.