Comparing apples to apples
By Craig Troianello; Yakima Herald-Republic; December 19, 2004

  GUANGZHOU, China — In his small, second-floor office overlooking the sprawling Lishui Fresh Fruit Terminal Market, Cheng Wei De offers two bowls of Red Delicious apples.
  One is Washington grown, the other is Chinese.
  The Chinese apples aren't as crisp and sweet as Washington's, but they sell for less than half the price, Cheng says. If Washington apple prices can be lowered, they'd be better able to compete, he said.
  The observation cuts to the heart of many of the issues surrounding China's emergence as the largest apple grower in the world: Its apples are cheap and plentiful. But for consistent high quality, many turn to imports from Washington.
  While Chinese apple quality improves each year, Cheng estimates it will take at least five years to reach a quality comparable to Washington's product.
  Cheng isn't a casual observer. He's been importing apples from Washington since 1993, the first year it was allowed. Last year, he purchased 103,000 boxes, including apples from Washington Fruit of Yakima and Columbia Pack of Wenatchee.
  As living standards rose for the average Chinese in the last decade, so did sales of Washington apples, said Cheng, owner of Hua Sheng Fresh Fruit Trades, which resells to small marketers and supermarkets in China.
  His sales were among the more than 1.8 million boxes of Washington apples that last year flowed into Hong Kong and China, making this the fifth-largest export market for Washington state apples. Only Mexico, Canada, Taiwan and Indonesia are larger. Consistent quality is what's promoted in China by the Washington State Apple Commission.
  And in a country regularly racked by adulterated-food scandals — earlier this year, tainted baby food killed dozens of infants in Anhui and Shandong provinces — American products enjoy a certain trust.
  "The U.S. is held in such high esteem that it rubs off on consumer products," said Tracy King, Apple Commission export manager.
  Apple importer Wong Wing Fai, who also has an office at the Lishui Market, estimates it will take far more than a decade for China's packing-line technology and capacity to catch up with the United States.
  Like Cheng, he's been importing Washington apples for years. He also brings in Washington cherries, as well as grapes and oranges from elsewhere in the United States.
  Like a number of exporters interviewed for this story, he regularly travels to Central Washington to buy apples and tour packing facilities.
  In the past decade, China has made staggering advances in production and exporting, but the nation still faces significant challenges in transportation, storage and quality control.
  In the United States, some worry that China's apple industry will follow an all-too-familiar trend, such as in furniture and textiles, in which thousands of American jobs and entire businesses have been lost to low-cost Chinese production.
  Ten years ago, cold-storage facilities and mechanized packing lines were rare in China. Now, both are being built at record rates.
  With China's apple industry growing in sophistication, Central Washington could be vulnerable. As this nation's largest apple-producing region, Central Washington grows more than half of all American apples. Tens of thousands of jobs are tied to the $1.5 billion apple industry. It is the state's single largest agricultural product.

Selling worldwide
  At C.M. Holtzinger Fruit's office on a quiet north Yakima street, men and women wear headsets and monitor market data from computers atop a large common table surrounded by chairs intended for long hours of use.
  Similar rooms — some with world maps and wall clocks reflecting time zones across the globe — can be found in packing and trading companies across Central Washington. Here in these sales rooms, deals are struck to move apples from packing rooms to wholesalers or, in some cases, directly to supermarket shelves. It's a demanding job, but the successful are well-compensated: The best salespeople can make up to $200,000 a year.
  And increasingly, they are striking deals to sell in Hong Kong or China.
  Once an agreement is struck, apples are typically placed aboard refrigerated 40-foot containers holding more than 1,000 boxes. The containers take a short ride to Seattle or Tacoma. From there, the containers make a two-week Pacific crossing to the massive docks of Hong Kong.
  Under an early 1990s trade agreement, United States growers got their foot into China's market by agreeing to ship only Red and Golden Delicious apples.
  But mysterious things happen in Hong Kong. Apple varieties not covered by the trade agreement regularly find their way north into mainland China. Sometimes box lids are changed. Sometimes a container load of apples is opened to reveal Red Delicious, but the layer behind it may be Granny Smiths, Galas or Cameos.
  There's an old expression in China: "Heaven is high and the emperor far away." And Hong Kong is 1,227 miles from the authority of Beijing.
  Officially, exports of Washington apples to China stood at a high of 49,242 boxes last year. But an estimated 70 percent of the 1.8 million boxes shipped to Hong Kong last year found their way onto the mainland.
  It's a vast gray market, one vulnerable to crackdowns or other market shifts that sometimes have sellers scratching their heads. Exports into China took a nosedive last April, for example, but no one seems to know why.
  Getting apples from Hong Kong to mainland China might involve a half-dozen different middlemen, all with their hands out, said one person familiar with the system. If even one of them feels slighted or left out, the entire network can get shut down.
Washington growers would like to export a wide variety of apples to China. But they worry any push might prompt China to work harder to get its apples into the United States.

Docks are starting point
  More than three-quarters of all fruits imported to China arrive at Guangzhou's docks, after a 100-mile boat ride up the Pearl River from Hong Kong. From there, most of it is trucked to one of two sprawling wholesale markets.
  The Lishui Market is one. The other is the 10 million-square-foot Jiangnan Wholesale Fruit Market that opened last December. Both offer a vast, and almost bewildering, array of fruits from around the world.
  At the Jiangnan Market, vendors sell their fruit beneath towering, open-air steel sheds. Around them, forklifts compete with hand trucks and even bicycles in moving everything from oranges and melons to grapes and onions.
  From here, apples might get shipped across town or be loaded aboard a non-refrigerated truck piloted by three drivers who will take shifts on a nonstop, five-day, 2,500-mile delivery to northern China.
  Each day, an average of 67,000 boxes of imported and domestic apples are sold here. Buyers stroll through the aisles of boxes comparing prices, looking over the fruit and chatting with vendors. Larger sales are typically conducted in the nearby offices of the bigger vendors.
  Sales typically pick up in the weeks prior to Chinese New Year and other holidays when fancy apples are traditionally presented as gifts and served more often. During those times, as many as 209,000 boxes of apples will change hands in a day.
  A visitor can quickly spot apples from Borton Fruit and Washington Fruit, both of Yakima. There's Cariboo brand from Brewster, Starr Ranch of Wenatchee, and others from across Central Washington.
  About 40 percent of the imported apples come from Washington, according to Robin Chung of Marketing Plus, a Hong Kong-based company representing the interests of the Washington state Department of Agriculture and the Washington Apple Commission.
  The other 60 percent of imported apples are split between New Zealand and Chile.
  Similar statistics are reported at the region's other, and older, Lishui Fresh Fruit Terminal Market in nearby Nanhai City.
In mid-October, a box of Washington Red Delicious was selling for the equivalent of $24.39, down from $31.70 during National Day, a weeklong holiday earlier in the month celebrating the founding of the People's Republic of China. A box of   Chinese Fujis might sell for less than $12.

Overwhelming array

  When operating at full throttle in the morning, the Jiangnan Market can nearly overwhelm the senses. There's simply too much to absorb. Aisles of boxes stretch out for hundreds of yards.
  It seems the world's inventory of fruit is on display: kiwis, pears, oranges, plums, bananas, star fruit, melons of all kinds and the durian — a spiky, bowling-ball-sized fruit with a flesh tasting of pudding and a smell likened to an outhouse.
  Forklifts roar, vendors shout, trucks echo under the loading of cargo. And at a quick glance the distinctive red, white and blue labels denoting Washington apples appear legitimate.
  But a closer look reveals otherwise.
  The printing is so blurry that the word Washington is barely legible.
  The labels are fake, says Victor Wang, a Guangzhou-based marketing manager for the Washington Apple Commission. He does not seem surprised by the discovery.
  Like DVDs, CDs and software, counterfeit apple labels and boxes regularly surface in China.
  "We get copied all the time," said Tracy King of the Apple Commission. "It's a big concern, but frankly there's not much we can do about it. If Microsoft and Disney with their lawyers and millions can't solve their problems, then the Washington Apple Commission can't do much."
  "It's a huge problem for some growers, but over time the problems will take care of themselves," he said.
  It's already less of an issue in larger cities. Rural consumers might not be able to spot the difference, but sophisticated urban consumers aren't fooled, King said.