Fruit industry groups in Chile and China have signed a memorandum of understanding (MOU) to deepen trade ties, as China looks to shore up its relationships with “pragmatic” countries amid growing geopolitical tensions with traditional trading partners such as the United States and Australia.
The Association of Fruit Exporters of Chile (ASOEX) and the Chinese Chamber of Commerce for the Import and Export of Food and Native Products (CCCFNA) signed the agreement early this week, pledging to boost exchanges of technology and technical expertise, support publicity, and improve transparency in trade and customs data to help faster exports.
“China has become a very important market for Chilean fresh fruits and we felt that it was necessary to formalise our current way of working … in these uncertain and challenging times, it has never been more important to facilitate and enhance our cooperation with China,” president of ASOEX Ronald Bown said in a press release.
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While not groundbreaking in itself, the agreement is an example of China cementing trading relationships with countries it considers reliable as geopolitical tensions with some Western nations deteriorate, a trade expert said.
I believe what we’re seeing here is China’s attempt to solidify and deepen trading relationships with what it views as stable partners
Chile’s exports to China have been growing faster than those from the US and Australia in recent years, thanks to targeted marketing campaigns and lower prices that have tapped into Chinese market trends for cheaper high-quality products.
McKinsey’s 2020 China consumer report said “most Chinese consumers are increasingly discerning, savvy, and frugal about their spending”.
Between 2017 and 2019, trade data showed the volume of Chilean fruit exports to China – both fresh and dried – grew more than 80 per cent, while Australia grew its trade by just over 60 per cent and exports from the US fell.
The export of Chilean nectarines, apples and cherries posted the biggest growth with export volumes rising by up to 600 per cent over the two year period, according to ASOEX.
In the first two months of 2020, Chile was the largest supplier of fresh fruit to China in terms of value, the association said.
Chile’s increasing market share in China has been steady since it became the first Latin American country to sign a free-trade deal with China in 2005.
Michael Harding, managing director at Chinese business consulting firm MBH Consulting Group, said the country’s success in China was exemplified by its wine exports – and fruit was the next step.
“Countries like Chile are increasing exports to China and maintaining good relationships with China,” he said. “As a result, they are penetrating into China better than countries like the US and Australia, which have historically been bigger. But that is changing.”
Harding said South American nations were “more pragmatic” in their approach to business with China and more competitive than countries like Australia on price.
The MOU showed Chile and China were moving closer together, Harding said.
For other fruit exporting nations, particularly in Australia – which share seasonal and geographical similarities – Chilean products like cherries are a threat, according to traders and consultants in China and Australia. Chilean suppliers offer not only lower prices, but flexible payment methods and more promotions, they said.
The signing of the MOU was likely a pragmatic trade move for both sides, but would also help Beijing with diversification away from unstable markets such as the US and Australia, said Bryan Mercurio, a professor of trade law at the Chinese University of Hong Kong.
“I believe what we’re seeing here is China’s attempt to solidify and deepen trading relationships with what it views as stable partners,” he said, referring to the long-standing relationship first carved out by the historic China-Chile Free-Trade Agreement.
“While I wouldn't rule out an economic-driven motive which further diversifies supply from the more unstable markets such as the US and Australia, securing the broader bilateral relationship in the face of rising geopolitical tensions is likely the primary reason for this arrangement.”
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This article China-Chile MOU deepens trade ties as Beijing looks to cement relations with ‘stable markets’ first appeared on South China Morning Post