05 November 2020
Author: Wen-Ke Dong*
BEIJING, China: Ornamental horticulture and landscaping in China grew from practically nothing in the early 1980s to a $20 billion industry that includes trees, shrubs, perennials, bedding plants, potted plants, cut flowers, bulbs, cut foliage, seeds, young plants and turf/sod. The unique characteristic of China’s flower and plant production system is that most ornamentals are consumed domestically, quite unlike other countries that focus on exporting ornamentals production.
Ornamental horticulture in China began to unfold its petals in the early 1990’s when the late President Deng Xiaoping launched a series of measures such as opening the country to foreign trade and investment. Deng’s reforms ushered in the growth of China’s ornamental horticultural industry into a new era with international companies such as PanAmerican Seed and S&G (now Syngenta Flowers) selling seeds and young plants through agencies, and corporations such as Dahan Group, one of China’s longest-standing plant brokers and distributors of growing media and fertilisers.
Creating an attractive marketplace
Rising incomes, increased consumer spending and horticultural exhibitions and trade shows have all helped to create a market attractive to foreign businesses.
For example, coinciding with announcements for the 1999 AIPH-approved World Horticultural Expo in Kunming, Takii Seed entered the Chinese market in 1995 and Sakata in 1998. Around the same time, US hothouse builder Fat Dragon and French greenhouse constructor Richel Sierra broke into the Chinese market in 1995 and 1997 respectively. In 1998, trading company Beijing Sunny Agriculture, which today represents several European plant breeders, first opened its doors. In the same year, the trade show Hortiflorexpo made its debut in Shanghai.
Following endorsement by the former Chinese Ministry of Agriculture and the former Bureau of State Forestry, Hortiflorexpo IPM Shanghai/Beijing is now a significant annual event. Thanks to organisers Shanghai Intex Exhibition and the country’s sole industry body, the China Flower Association (CFA), the show is a fundamental point of reference for the Chinese market as well as Asia’s leading business platform in ornamental horticulture.
It has been linking with IPM Essen since 2012 which has powered its profile. Now the annual event is rotating between Shanghai and Beijing every April or May.
“Last year, the Shanghai show attracted 52,000 trade visitors from 46 countries and 900 exhibitors from home and abroad, showcasing their latest products and services on a 50,000m² exhibit space. Hortiflorexpo serves as a great platform for companies entering the China,” says Angela Wan, Project Director of Shanghai INTEX Exhibition Co., Ltd.
In 2001, China won the bid for the 2008 Olympic Games and formally joined the World Trade Organisation (WTO). The following year, the country also won the proposal for the 2010 World Expo in Shanghai. These high-profile gatherings on the world stage proved engines for horticultural growth with city councils hiring landscape and planting designers to create urban green spaces, parks, and hotel gardens. Expos and Olympics prompted the country’s primary production to increase and improve productivity, crop health and product variety, leading to a sizeable number of China’s branches and joint ventures between Chinese and international companies. The timeline includes: Ludvig Svensson (est. 2001), Rijnplant (acquired by Dümmen Orange later, est. 2002), Anthura (est. 2005), Ball and Priva (both est. 2006), and Exotic Plant (est. 2007).
The total value of horticultural imports and exports was $262 million and $312 million respectively, according to the latest 2019 statistics, provided by CFA.
More recently, China is welcoming horticultural related companies such as the Dutch horticultural engineering company Codema which set up its office in late 2019 in Beijing.
Almost all overseas seed companies have long-standing relationships with China. Many often cite just in time delivery, the high germination rate of Chinese seeds (F1) and a legal propagation environment as the key benefits.
Some companies even used to produce F1 seeds in China, and named some varieties after Chinese landmarks, such as PanAmerican’s Tagetes Taishan series which launched to mark the Olympics in Beijing.
Furthermore, Sakata runs flower trial ins China before releasing new varieties to the market. The same applies to a 160-year old seed firm from the Czech Republic, Černý. After the company visited Hortiflorexpo IPM Shanghai/Beijing twice, it has now published its catalogue in Chinese and is ready to enter the market.
Cathy Li, Vice GM of Flower Sales Dept., Sakata Seed, says, “Vegetative Impatiens SunPatiens Series created a stir at the Expo Shanghai. Since 2015, an increasing number of vegetatively propagated and PBR protected bedding plant varieties from different companies with PBRs have entered the Chinese market.”
Meanwhile, famous ‘vegetative’ companies such as Suntory Flowers and Terra Nova Nurseries have been doing business during this period.
Michael Zhu, Area Sale Manager of Benary Seed, says: “China is our third-largest market in the world, seed sales by agencies are 40 times higher compared to 15 years ago. We set up a joint venture very recently in Chengdu with local companies so that we can better understand the production and sales of vegetative varieties.”
Young plant industry
The 2019 value of imported and exported young plants is worth $23 million and $38 million, respectively. Among them, unrooted cuttings (URC) play a prominent role, both in terms of imports and exports. Yunnan province, for example, hosts the propagation greenhouses of Beijing Landscape and Benary’s joint venture. Yunnan-based rooting stations grow 40 per cent of China’s imported starting material, predominantly sourcing from East Africa (Uganda) and Europe (the Netherlands). Meanwhile, China’s Guangdong province accounts for 40 per cent of nationwide young plant production and sells 60 per cent of its output to export markets in the USA, Japan, and the Netherlands.
It appears that foreign companies can easily do business with their F1 seeds, vegetative varieties, and technologies in China. But the total imports fell by 8.39 per cent in 2019. The most significant decline, minus 20 per cent, was noted in imported pot plants and garden plants, the first decline seen in the past decade. At the same time, exports of the same products rose by 29.5 per cent.
Reflecting on imports is Sheng-De Jiang, CEO of Hongyue Horticultural Flowers Co., Ltd., garden plants and horticultural trade company in China. “With the ongoing professionalisation of local production, we’re gradually decreasing our dependence on imports. We can be self-sufficient in the near future.”
For landscaping purposes, especially in subtropical and temperate regions, native tree and shrub species and cultivars and imported cultivars will be the primary trend in China. Industry professionals anticipate a modest import peak for specialty garden trees and shrubs shortly. Still, they do not expect this to last for long as China’s mass production of a wide range of nursery stock products will continue to grow.
A reshuffling of flower bulbs on the horizon
Last year, China imported flower bulbs for a value of $111 million, making flower bulbs China’s primary import product in ornamental horticulture, both in terms of value and volume. Official data reveal that 85 per cent of imported bulbs originate from the Netherlands.
Lily and tulip top the list of imported bulbs. Last February, the National Administrations of Finance, Customs, and Taxation published a joint statement about the elimination of quantity control for imported seeds and bulbs.
This decision can reduce taxes and lower production cost.
Meanwhile, the first industry law case about smuggling lilies has been ongoing for the past 30 months – and there is no verdict on the horizon. It is against three of the largest bulb import companies who together hold eighty per cent of the market share in China
This case is already causing a rippling effect in the industry, such as vanishment of long-term cooperation between home and abroad companies, disruption of the sector market structure, the decline in prices, profits, and quality of lilies, and withdrawals from production by some smallholdings.
Substantial losses can inflict even the market of cut and pot lilies in China since many cut flower growers also purchase bulbs for flower forcing and pot plant production. Some bulb producers in the Netherlands are also affected by this case. So, we can guess, there is going to be a reshuffle in this sector soon.
Cut flower and foliage trade
In 2019, the value of China’s imported cut flowers, cut foliage, and branches was $68.5 million which makes this segment the second-largest in China’s ornamental horticulture. It is worth mentioning that the value of imported cut foliage and branches has increased up to 24 per cent, while the export value of cut flowers, and cut foliage was $114.5 million, with the most significant portion of products destined for exports to Japan, Korea, SE Asian countries, and Australia. Roses and chrysanthemums top China’s export list for cut flowers with a 25 per cent and 11 per cent increase in export sales, respectively.
But the path to bloom is not sprinkled with roses alone. Jian-Ping Xue, GM of Kunming Hongzhihua Horticulture Co., Ltd. the leading cut chrysanthemum export company in China, points to the increase in labour costs. He says, “Nowadays, the production cost is higher than that in foreign countries, such as the Netherlands, especially with the added cost of water and electricity.”
Mr Bei Nan, the assistant to CEO of Kunming Yang Chinese Rose Gardening Co., Ltd., adds, “China’s RMB exchange rate has been rising for years, export profits are squeezing. So, we have not relied on cut flower exports since 2013.”
However, in Kunming there is also room for bloom with the country’s epicentre of cut flower production, hosting half of China’s cut flower production due to its advantages in climate and soil. And with more PBR protected varieties and higher quality standards this province is only at the beginning of its flower peak.
How has Covid-19 shifted the landscape?
It is no surprise that following the outbreak of the Covid-19 pandemic, 2020 will be one of the toughest years for the global industry at large. China’s total value of imported and exported ornamentals in China will undoubtedly decrease a lot in the coming years. So, to anyone who wants to maintain a competitive advantage in the Chinese market; it will be challenging to invest more time, money and energy in marketing and sales than before.
In China’s ornamental horticulture industry, one can observe the differences in impact during the first half of the year. At the time there was a relatively adequate inventory of flower seeds available, so the effect was not so profound at first. However, the outbreak of the coronavirus coincided more or less with the Spring Festival which is the most crucial holiday in terms of potted plants and cut flower sales in China. The government ordered all markets to shut during this period, and many companies lost $0.1 – $0.2 million or even more.
Especially those growers in Guangdong and Yunnan provinces. Bei Nan notes, “We lost $0.3-$0.4 million directly in the first two months. Jian-Ping Xue adds, “We lost 70 per cent to 80 per cent in exports revenues to Japan and Korea.”
Luckily, the pandemic seems to be easing in China, and the lockdown of Wuhan, the city which serves as an essential non-airfreight logistical hub, has been stopped. “The volume of imported flowers in March was almost four times more than the one from February,” explained Katherine Fan Young, the Operations Manager of Holex China, “In my observations, around 90 per cent of the flower sales outlets in China have resumed their business.”
Meanwhile, Covid-19 continues to rage outside of China. Zheng-Bing Huang, CEO of China Flower Media Co., Ltd. says, “Cut flower imports are mainly affected by logistics. The main source countries, such as Colombia, Ecuador, and the Netherlands are gradually returning to normal. However, South Africa is still closing its doors. And cut flower exports are severe atrophying in Southeast Asian countries.”
In early June, some signs pointed to a renewed surge in Covid-19 cases. Many reports indicate that so much is still unknown of this invisible virus and that the threat will last a long time. So, it is incredibly difficult to predict what will happen after the sluggish summer sales.
Wen-Hao Chen, CEO of Kunming Hongcai Hongyue Flowers Co., Ltd, says, “We estimate that we can continue to support production goods right up until September.”
Shelf life of bedding plants is relatively short and less sustainable. Perhaps there will be a need for more perennials, especially ones with first-year flowering. These products are popular in China, and domestic sales would be more important soon. Plus, thanks to the Domestic Agriculture Aid Programme, companies were given subsidies if purchasing locally-produced flowers, free marketing, and cheaper logistical methods.
“However”, adds Katherine Fan Young, “People tend to look for better quality products, such as imported Holex products.”
In China, there will be a trend towards more home grown and sustainable production, no-fuss plants and tougher negotiations. The demand for perennials and more mainstream bedding plants is on the rise among landscape customers and event businesses due to tight fiscal revenues while the expanding community of home gardener is asking for a more diverse and high-quality product portfolio tailored to their personal needs.
Just as in the rest of the world, Covid-19 will change China’s entire horticultural supply chain. Change is challenging but not always wrong, and industry insiders believe that ultimately the pandemic will take China’s ornamentals sector to the next level.