China's Fishing Subsidies Are Offsetting Rising Tuna Fishing Costs But Also Driving Other Fishermen Out Of Business

China is spending about $4.1 billion a year subsidizing its state-backed fishing enterprises, which offsets the rising costs of fishing tuna but also makes it difficult for fishermen from other countries as well as smaller Chinese fishermen who do not benefit from state subsidies to survive, and it encourages rampant overfishing around the world.

China has the biggest distant-water fleet in the world, pulling in an estimated 5.1 million tons of fish, worth around $10 billion each year, Quartz reported on Wednesday, though the country reports catching around 12 times less than that. Tuna, which is pricier and more in demand, made up an estimated 15 percent of China’s total catch by volume in 2010.

But the success of the Chinese fishing fleet is based on an unfair advantage – the government heavily subsidizes the industry, in particular the large state-owned fishing companies.

“[W]ithout that subsidy [China Overseas Fishing Company (COFC)] simply could not exist in the Pacific fishery at all,” said Charles Hufflet, head of the Pacific Tuna Industry Association (PTIA). China’s fishing fleet in the South Pacific consists of 1,300 boats, according to the Australian Broadcasting Corporation (ABC).

COFC is a publicly traded subsidiary of Chinese National Fisheries Corporation (CNFC), a massive state-owned enterprise. CNFC’s operations cover the globe, and it is licensed to export to the U.S., Europe, Japan and other major fish markets. The company makes up about one-third of China’s deep-water fleet, the rest comprises other state-owned enterprises, and smaller non-state-owned regional and coastal Chinese companies.

The state-owned firms receive most of the $4.1 billion subsidies from the government. As the world’s tuna supply diminishes, it is now more expensive to catch tuna. Since the subsidies offset those rising costs for China’s state-backed enterprises, these companies are able to offer lower prices, making it difficult for fishermen from other countries to compete, according to Quartz.

Smaller Chinese fishermen, who don’t benefit from state support, are similarly suffering; an estimated 80 percent of them have recently gone out of business due to rising costs of fuel and labor -- costs that they must bear without any state aid.

China’s rationale behind subsidies for fishing and other struggling sectors is expansion. The government plans to put 2,300 official vessels to sea by 2015, 300 more than today, which would hikereported output by 51 percent to 1.7 million tons, worth about $2.6 billion. Against charges that its subsidies promote overfishing, China claims they are the right of a developing nation, even though its illegal fishing practices threaten the livelihoods of Indian and West African fishermen.

But even with the subsidies, COFC is struggling along with other companies receiving the Chinese government’s help. In the first half of 2012, COFC claimed $3.0 million in profits for those six months, having received $7.8 million in subsidies. For the first half of this year, the company received $5.35 million in subsidies, and projects a net loss of $2.1 million. Subsidies in the form of tax cuts and fuel offsets have risen to make up around half of CNFC’s profit by 2008, according to Tabitha Grace Mallory, an expert on China’s deep-water fleet.

With such unsustainable fishing practices, China’s fishermen have long ago stripped their own coastal waters clean of fish, according to Quartz.

“About 10 years ago when you put a bucket into the sea, you could probably catch three fish. Five years ago, you could catch maybe one or two,” one fishing-boat owner told the China Daily. “Now you barely stand a chance of catching any.”