Market and Trade Data
Underdeveloped Market in China’s Interior
Chongqing's hilly urban center sits on the banks
of the Yangtze and Jialing Rivers.
Photos and map courtesy of USDA/FAS
Agricultural Trade Office, Shanghai, China
By Cindy Marks
Resting on the upper reaches of the
Yangtze River in Southwest China, Chongqing (formerly
known as Chungking) is famous for its hills, spicy food,
and hot weather. It is also known today as the starting
and ending point for tourist cruises that carry domestic
and international passengers down the Yangtze and past
the famed Three Gorges, the Three Gorges Dam, and a
multitude of riverside towns.
Like Beijing, Tianjin, and Shanghai,
Chongqing is an independent municipality that answers
directly to China’s central government. Its status is
somewhere between that of an independent city and a
small province. The Chongqing municipality was
established in 1997, carved out of eastern Sichuan
Chongqing and Chongqing municipality are located
at a gateway to Southwest China.
Chongqing’s population of over 31.4
million and land area of 82,000 square kilometers make
it the largest of China’s four municipalities, and
larger than some provinces. A beneficiary of China’s "Go
West" policy, Chongqing’s economy has grown steadily
over the last decade. GDP (gross domestic product)
reached $32.2 billion in 2004, an increase of 12.2
percent over 2003. Purchasing power is centered in the
city’s 6 million urban residents, whose disposable
income climbed 14 percent in 2004 to $1,115.
Long a base for heavy industry, Chongqing is emerging as an important trading center in
China’s Southwest, with imports and exports totaling
$3.86 billion in 2004. To boost this role, Chongqing’s
government has invested a growing amount of money in
training programs to help local traders learn the
regulations governing import-export transactions.
Although industrial production dwarfs agricultural
output, the municipality’s large land area also makes it
a significant producer of tubers, raw silk, and in more
recent years, processed soybean products.
Opened in November 2004, Chongqing's light rail
system provides transportation options to this
growing city of more than 6 million.
Despite its rapid growth, the city of
Chongqing remains isolated relative to its neighbor
Chengdu, underexposed to Western food products, bypassed
by traders, and underdeveloped as a food import market.
It is a viable market mainly for commodity products such
as poultry and fruit, and for those committed to
building a client base through long-term market
development and consumer education.
Chongqing’s status as the gateway to
West China has brought it abundant central government
funding through the government’s "Go West" program,
which have been used to support extensive infrastructure
projects. A new domestic terminal at Chongqing Jiangbei
International Airport has been completed, along with a
vast high-speed traffic network and a monorail system
capable of transporting 200 million passengers a year.
Most major roads in the city center are being upgraded,
and docks are being expanded. With the Three Gorges Dam
in place, large cargo barges can now make the journey
from Shanghai in 3-4 days.
Going Beyond Heavy Industry
Heavy industry has been the base of
Chongqing’s economy for decades, although the government
is seeking to diversify the economy. In 2004, industrial
production climbed 17 percent over 2003 to reach $11.2
billion, accounting for half of the municipality’s
economic growth. Also in 2004, Chongqing’s industrial
exports rose 26 percent to $1.6 billion, accounting for
over 75 percent of the municipality’s total exports.
Chongqing’s economy is growing and diversifying,
and the government has invested in training
programs to help local traders learn regulations
governing import-export transactions.
A large contributor to this was the
transportation equipment manufacturing industry, which
grew 23 percent in 2004 to $2.2 billion. The local
Changan Ford Joint Venture plant produces the Fiesta and
Mondeo models. Several major motorcycle companies also
are based in Chongqing. Chongqing also is a significant
producer of machine tools, steel, cement, and natural
gas. The government is trying to build more investment
in high technology, however, and, Sony, Ericsson, and
Nokia have plants outside the city center.
Current Market Picture
Chongqing’s imports of agricultural and
food products are difficult to pin down, because most of
the trade is cleared in coastal ports such as Shanghai
and Guangzhou, then shipped overland by truck or barge
to Chongqing, and official statistics only track these
items as far as the port of entry.
But Chongqing remains under-developed
for imports, a viable market only for familiar
commodities or those committed to building a client base
through long-term market development.
ATO’s past activities in Chongqing have
found a market that is receptive to U.S. products, once
logistical and price issues are resolved. The demand for
imported food in Chongqing currently comes from two
market segments: hotels and food retailers. The
non-hotel restaurant industry is not yet a significant
importer, being focused mainly on local cuisines, and
most international fast-food outlets source
5-Star Oases Offer Taste of Home and
High-Quality Western Foods:
Chongqing city is home
to several 5-star hotels, including Hilton, Marriott,
Harbour Plaza, and Holiday Inn. An Intercontinental
hotel will open shortly, and both Sheraton and Hyatt are
planning to build hotels. Chongqing’s 5-star hotels are
frequented by local and international business people,
government officials, expatriates working for
international companies, and a small number of students.
In inland cities like Chongqing, hotel restaurants serve
as the center for the small but loyal expatriate
communities, placing a high emphasis on authenticity in
their dishes, and making them the premier source of
demand for high-quality U.S. food products.
Intensifying competition among
international hotel chains is forcing them to cut rates,
thereby reducing budgets available to hotel chefs. For
example, the rate of a 5-star hotel room in Chongqing
can average $55 per day, about $4 of which is allocated
to the chef’s budget, whereas a similar room in Shanghai
can cost over $300. Although many high-end hotels would
like to expand their client base, their high prices
relative to local alternatives limit their appeal to
middle class consumers.
Hotels import products to obtain
Western-style foods that meet their own internal
standards, satisfy customer demand for foods not readily
available elsewhere, and fulfill food safety
requirements. Five-star hotels sell meals and prepared
food in bars, coffee shops, and restaurants. Some also
provide breads, cheeses, and other hard-to-find Western
items at retail counters.
While catering mainly to the
international business community, hotels hold promotions
to lure local customers by offering a unique dining
experience and a taste of Western food. Chongqing hotels
have found that promotions can also be helpful in
developing supply chains for new products. Promotions
push product through the supply pipeline, building the
links needed to source product later on, as well as
giving suppliers the chance to meet with the end users.
Promotions give suppliers the chance to build a direct
relationship with local distributors, thus allowing them
to ship direct to Chongqing instead of through a long
chain of regional distributors.
is home to several international hypermarket chains:
Carrefour (with three outlets), Metro (one outlet), and
Wal-Mart (one), all of which have plans for expansion in
the region. Chinese retailing giant Hualian also has a
number of supermarkets in the city, as do local chains
like Xin Shiji and Chong Bai Hou.
June 30, 2005, 27,000 people visited the Chongqing
Wal-Mart on its first day of business.
Despite the presence of these stores,
U.S. product presence remains relatively limited.
Larger, newer stores, particularly international
hypermarkets, tend to sell more U.S. products, but the
variety falls far short of more developed interior
cities, such as neighboring Chengdu. Products that do
best in retail tend to be those that are easily
recognizable to consumers, such as poultry, or high-end
gift products like wine.
Challenges in Getting the Goods
Hotels, distributors, and exporters all
face significant challenges in marketing imported foods
The level of consumer understanding and
appreciation for high quality products tends to be low.
Consumers often can’t tell the difference between the
genuine article and a cheaper substitute. As a result,
hotels sometimes use expensive imports for promotions,
but later switch to cheaper local substitutes later to
help their bottom line. Consumer education programs are
therefore needed to develop more understanding and
appreciation of fine imported foods.
In order to cover high transportation
and transaction costs, distributors often require hotels
to order large quantities of a single item to guarantee
supply, but hotels’ limited space makes storage of large
quantities difficult. In other cases, hotels order
relatively small amounts, requiring distributors to
build a large base of clients to make trading
profitable. Direct communication between hotels and
traders is rare, as most products are shipped indirectly
through a chain of sub distributors. As a result,
misunderstandings and missed signals are common.
ATO-sponsored chef seminars and menu promotions help
address these problems by putting Shanghai-based
importers in direct contact with hotel buyers.
Although there appears to be fairly high
demand among hotels for imports such as frozen salmon,
frozen poultry, dry spices, condiments, pastry products,
baking ingredients, purées/frozen berries, wines, corn
chips, salsas, tomato-based products, chocolate
products, and baking components, few traders have
stepped in to supply the goods. As a result, hotels must
often improvise. Some fly in fish and fruit from coastal
cities. Most 5-star hotels offer at least a few U.S.
wines, but U.S. wines face stiff competition from
Chilean, New Zealand, and European counterparts. Food
safety and freshness are major concerns for
international hotels, so some produce perishable goods
like ice cream on their premises, and most have on-site
Chongqing: Best U.S. Product
Baking Ingredients, Bread Bases
Baked goods are an important staple
for Western hotels, so demand for baking ingredients
should increase as more 5-star hotels open.
Dried Fruits and Nuts
Common as snacks and as ingredients
in Western pastries and other dishes, dried fruits
and nuts have excellent potential. Local substitutes
are available, but usually have a significantly
different texture and taste.
Although Western hotels use tomato
bases for multiple dishes (pizza, pasta, basic
sauces), few high-quality products are available.
Fish and Seafood
Several hotels and traders import
fish, including Norwegian salmon. U.S. seafood
producers must differentiate their products from
local and other foreign competitors.
Canned goods have already reached
the market (nonperishable items do better in
interior cities). Traders are advised to investigate
taste preferences to determine which products fit
well with local palates.
Condiments and Sauces
International hotels frequently use
imported condiments and sauces to offer
international guests a flavor from home, so growth
in the hotel sector could benefit U.S. producers.
Meats (Pork, Poultry, and Beef)
Logistics remains the primary
barrier for these sensitive products. Chicken
wingtips and paws are popular throughout China, and
likely to do well in Chongqing. U.S. pork has done
well in neighboring Chengdu, which bodes well for
Prospects for the Future
Even in this challenging environment,
traders have found success selling several U.S. products
such as canned goods (sweet corn, beans, beets, fruits,
and peas), tomato products, nuts, dairy products,
condiments, and sauces.
As in most other large Chinese cities,
Chongqing is home to a growing cohort of middle and
upper-income consumers. The expatriate community is also
expected to grow as international companies expand their
operations in Chongqing. More and more business people
are traveling through and living in Chongqing. Massive
new villas are being built outside the city center,
indicating the presence of a small but extremely
high-end niche market. These high-income residents could
potentially develop into a sizeable market for U.S.
goods, much like their counterparts in other major
Chinese cities. The growth of the city as a business
center also augurs well for U.S. products, as Chinese
business culture places a high value on gift-giving.
High-quality imported wines and other products make
ideal gifts, having already found good markets in
ATO Shanghai (the FAS Agricultural Trade
Office in Shanghai) is continually working on market
development in Chongqing, the Yangtze River area, and
Southwest China. For more information, contact that
Cindy Marks is a market researcher
in ATO Shanghai.