How China Is Picking Up Part of Your Sushi Dinner Tab

State subsidies are helping the country's industrial fishing companies expand and putting smaller scale operations out of business.
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Fishermen are seen on their fishing boat at a fishing village in Tanmen town, Hainan province. (Aly Song/Reuters)

China's fishing vessels dominate the planet's seas -- in fact, it has the biggest distant-water fleet in the world. That fleet is pulling in an estimated 4.6 million tonnes (5.1 million tons) of fish, worth around $10 billion annually, though it reports catching around 12 times less than that. Tuna's a big chunk of it, given its value (a Pacific bluefin tuna went for $1.76 million at a January auction in Tokyo). The pricey fish made up an estimated 15 percent of its total catch, by volume, in 2010.

But even as the world's tuna supply has grown scarcer, China has ramped up its fishing fleet in the South Pacific, now 1,300 boats strong, says the Australian Broadcasting Corporation (ABC), most of them in pursuit of tuna. What's more, Chinese fishing boats there are getting an unfair advantage -- $7.05 million in subsidies, including $1.7 million for diesel fuel, Charles Hufflet, head of the Pacific Tuna Industry Association (PTIA), told ABC. "[W]ithout that subsidy [China Overseas Fishing Company (COFC)] simply could not exist in the Pacific fishery at all."

The target of Hufflet's ire, COFC, is a Shenzhen-listed subsidiary of Chinese National Fisheries Corporation (CNFC). A massive state-owned enterprise, CNFC's operations span the globe, and it's licensed to export to the United States, European Union, Japan and other major fish markets. Despite its size, CNFC itself makes up only about one-third of China's deep-water fleet (the rest is non-state smaller regional and coastal Chinese companies). In addition to CNFC's subsidiary operations, other state-owned enterprises tend to dominate China's global tuna-fishing industry.

And those state-owned firms are the chief beneficiaries of considerable state largesse. After Japan, China is the biggest subsidizer of its fishing fleet, spending about $4.1 billion a year, by the latest calculation. Here's how China stacks up :

​Pew Environment Group

Here's why this is a problem for everyone else. There are fewer and fewer albacore tuna in the fishery in question, which covers Hawaii, American Samoa, Guam, the Northern Mariana Islands and the U.S. Pacific Islands. In fact, the global tuna regulator deems the area "likely to be overfished." That means it takes more labor and fuel to land each tuna. And Chinese government subsidies offset those rising costs, making it difficult for fishermen from other countries to compete.

Smaller Chinese fishermen who don't benefit from state support are suffering as well. Rising costs of fuel and labor are pushing an estimated 80 percent of them out of business.

But even those that the government does prop up are struggling. COFC is a case in point. The profits from catching tuna, which made up about 38 percent of COFC's 2012 revenue, are clearly falling: ​

And that's with subsidies. In the first half of last year, COFC received $7.8 million from the government, allowing it to to claim $3.0 million in profits for that period. For the first half of this year, with $5.35 million in subsidies, COFC projects a net loss of $2.1 million.

This isn't exactly new -- it's just that the company hasn't been so transparent before. But as Tabitha Grace Mallory, an expert on China's deep-water fleet, told the U.S. Congress last year, the subsidies in the form of tax cuts and fuel offsets to CNFC have risen sharply since 2006, making up around half of the company's net profit by 2008.

Gwynn Guilford is a reporter and editor for Quartz.

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