Organic process

Zhang Peiming remembers when vegetables used to taste good in China. Less than 20 years ago, he recalls, tomatoes were fresh and sweet without chemicals added to enhance their color and size.

Nowadays, Zhang, 43, is among 60% of China's 562 million urban inhabitants willing to pay more for certified green or organic produce, according to a survey by the Ministry of Commerce.

Zhang, a Shanghai-based marketing executive, buys most of his family's vegetables in the local supermarket. Nearly all the produce they consume is marked with a government-approved organic seal.

"It's worth the price when I know 100% that my vegetables have not been sprayed with chemicals or injected with antibiotics," he said.

Slow uptake

This may be easy for Zhang, who makes US$700 a month, but it could be a long time before average Chinese families can afford organic products. A pound of organic leeks, for example, can cost up to US$1.15 compared to US$0.49 for non-organic. Organic tomatoes go for US$1 per pound, compared to US$0.15. Some organic vegetables, like cauliflower, can be as much as 12 times the standard price.

China first entered the organic movement in the late 1990s as demand for the products grew worldwide. Companies such as Wal-Mart lobbied China to apply global standards from the International Federation of Organic Agriculture Movements (IFOAM), thereby enabling produce to be exported.

China's national organic standard was introduced in 2005 but, according to the US Department of Agriculture, only 1% of country's agricultural output meets a lower-tiered benchmark called the green standard, which allows some chemicals.

In 2000, Carrefour introduced organic produce at its Gubei (Shanghai) branch. It lost money at first but demand eventually began to rise and has grown 15% or more in the past two years.

"Media reports on fake food and contaminated produce has really contributed to consumer interest in organic products," said Gary Li, a Shanghai-based merchandise negotiator for Carrefour. "An increase in disposable income has also shifted our customers from just expatriates to local Chinese people."

According to government research, food-related diseases cost the country US$14 billion a year in medical treatment and lost productivity. In addition, pesticide poisoning affects half a million Chinese a year and kills more than 500.

In Shanghai, China's largest organic produce market, companies are now leasing local farms to meet the growing demand. Organic fruit and vegetables account for up to 50% of the produce section at Carrefour's Gubei branch, which is popular with foreigners.

Profit margins are also higher for organic produce as market demand remains relatively small, said Hu Dinghuan, a professor at the Institute of Agriculture, Economics and Development at the Chinese Academy of Social Sciences.

"There is no doubt organic products will gain strength within the next few years… It's a matter of how well-regulated they are," said Hu, who estimates demand has grown at least 50% in recent years.

Finding the source

The Organic Food Development and Certification Center of China (OFDC) is working toward creating a system that would allow customers to trace organic products to their origin. Some supermarkets are also looking to move away from the green standard and focus only on organic and non-organic food.

But consumption of organic products does not always go hand in hand with availability. For example, the Beijing government has made a strong push for organic products to improve its "green" image ahead of the 2008 Olympics, said Mika Yuan, of German consultancy Organic Services and a former engineer with the OFDC. Everything from organic meat to oil is available in the capital but there is still little demand for it.

"Beijing has put up the organic front just to say that they are becoming a more sustainable and environmentally friendly city. But in reality, Shanghai has a bigger market and still has not gained interest for products such as organic meat."

The price difference between organic and non-organic – which is partly caused by the need to cultivate the soil for three years to meet certification standards – is one big obstacle and more expensive requirements may be in the pipeline. Wang Ming, sales director for the Shanghai Xia Xi Yang Organic Farm said IFOAM standards and national standards may require farmers to use organic seeds.

"Farms that currently don't use organic fertilizer or have a high concentration of toxins… may be treated to more rigorous, unannounced testing," said Wang.

At the same time, as is the case with many other industries in China, organic producers are facing a rising challenge from fakes. While some multinational chains have strict policies for organic products, local supermarkets may not be able to guarantee authenticity. Furthermore, there is no specific government body supervising production. Inspections could fall under the Ministry of Agriculture, the State Environmental Protection Agency or other departments.

"Because the marketplace for organic standards is still quite lenient, it is the responsibility of individual manufacturers and distributors to adhere to strict organic standards," said Yuan.