Cutting fuel subsidies marks major step in fisheries reform
[By Zhou Wei]
The provinces of Shandong and Fujian recently announced that they would start paying out “fishery management” subsidies to owners of fishing boats based there this year. These will replace the fuel subsidies that have been paid to Chinese coastal fishermen for the past 15 years.
These fuel subsidies were seen as a “blood transfusion” for the fishing industry. But since they were available to all ships, they encouraged overfishing and were seen as an inefficient fossil fuel subsidy.
During the World Trade Organization (WTO) talks on fisheries subsidies, China said it supports a ban on harmful payments that encourage overcapacity and overfishing, and wants negotiations to be concluded by the 12th WTO Ministerial Conference in June.
China is shifting from subsidizing fuel to rewarding responsible behavior as part of efforts to make fishing sustainable. But as we will see, fiscal and financial policies such as subsidies require constant monitoring and evaluation to ensure that their results are in line with objectives and the overall goal of sustainability.
Why a Stewardship Grant?
Details from Shandong and Fujian indicate that the new grant will include two equal components: one for respecting closed seasons and another for responsible fishing.
In 2017, China extended its closed seasons by a month to better protect fish stocks, but there were shortcomings. The subsidy will mitigate the associated revenue declines and make fishers more likely to comply.
Awarding the responsible fishing grant depends on a wider range of factors: port entry and exit reports (in and out reports), location monitoring data, fishing logs, use of designated landing ports, protection of marine wildlife; Fujian adds an additional factor: the percentage of juvenile fish in the catch. These indices reflect the main problems China faces in managing its fisheries sector and respond to calls from the 14th Five-Year Plan to improve governance and modernize coastal fisheries.
Designated ports, incoming and outgoing calls, fishing logs and location monitoring are all part of a catch management system the government is working on. Its objective is to better monitor fishing vessels, to set up a catch traceability system and to guarantee the application of stewardship measures, while reinforcing the safety of maritime traffic.
The designated landing ports system was first tested in 2017, to better manage stocks and fishing quotas. So far, the Ministry of Agriculture has approved 107 nationally designated ports. Once the port designation process is completed, all large fishing vessels, 12 meters in length or more, will be required to use them. There are more than twice as many smaller boats as there are larger ones, but the biggest hold seven times the horsepower and take the lion’s share of fishing capacity in Chinese waters.
The incoming/outgoing call system requires large fishing vessels to report certain information to port authorities before arriving or leaving port, giving ports a role in managing vessels and their catches. The protection of rare marine fauna and juvenile fish must also be addressed. Fishing boats and nets that clutter China’s coastal waters pose a threat to protected animals, such as sea turtles, seahorses, Chinese horseshoe crabs and whale sharks. Despite bans, the deliberate capture of protected species continues. And with stocks of larger fish in decline, anglers are turning to juveniles. In 2017, Greenpeace released a report highlighting that almost 30% of China’s coastal catch was low-value or young “trash fish”, representing huge damage to fish stocks.
The stewardship grant depends on the size of the vessel and the type of fishing it engages in. There is also an annual cap. For boats under 12 meters, the limit is between 9,000 and 15,000 yuan ($1,400 to $2,300). For larger ships, it ranges from 16,000 to 306,000 yuan ($2,400 to $46,800). Baitboats do not need to observe the closed season and will therefore only be eligible for half of these amounts.
The annual limits are in line with those for fuel subsidies after the cuts made in 2019. This will keep subsidy levels stable and avoid impacting fishermen’s incomes.
The contribution of grants to revenue varies. A study looking at trawler finances in Rongcheng in Shandong Province, Xiangshan in Zhejiang and Beihai in Guangxi found that 5-12% of revenue came from subsidies in 2018. This percentage made up the difference between profits and losses. Small boats are often owned and operated by a single family who depend on fishing for their livelihood. Larger boats are still usually owned by an individual who serves as captain and is responsible for profits or losses.
The fuel subsidy is running out
The steps taken by Shandong and Fujian aim to implement plans in the 14th FYP on fisheries subsidies. These plans also include the removal of fuel subsidies for fishing vessels, which have been in place since 2006.
The fuel subsidy has its origins in the reforms carried out between 2006 and 2009 to align oil prices in China with the international market and to move from taxes such as the road tax to taxes on fuel consumption. This has caused fuel prices to rise, and as fishermen use fuel without using the roads, many have had to stop working due to the higher costs. The government has introduced subsidies to get fishermen and fishing companies back to work.
At that time, the subsidy was designed to kick in when oil prices exceeded the 2006 baseline, and then fluctuate with fuel prices. The subsidy mitigated the impact on fishing and fishermen, but also encouraged more intensive operations, worsening overfishing and stock depletion in China’s coastal waters.
These problems have become more apparent over time. In 2015, the government announced changes to fuel subsidies for the fisheries and aquaculture sectors. He said that by 2019, fishing fuel subsidies would fall to 40% of the 2014 level, to ensure that the number of vessels and total horsepower would be halved, to further improve the structure of the fishing and to control the intensity of the fishing.
Further changes came in May 2021 with the announcement of the Stewardship Grant. They added targets and deduction rules that hadn’t been in place from 2015 to 2019, meaning ships had to tick certain boxes to get the full amount. And to get the grant, fishers will need to know and follow fisheries management systems.
Continuous improvements needed
The change in subsidies is not only driven by the need to make China’s fishing sector more sustainable: it is part of a global process. But it will still require ongoing monitoring and evaluation to ensure it promotes stability and that issues are spotted and addressed quickly.
First, some issues with the fuel subsidy carry over to the stewardship subsidy. For example, how does the grant interact with the 14th FYP objectives of encouraging fishers to change occupations? Does this raise income expectations and discourage them from making this change? Moreover, as the subsidy is paid to vessel owners, complementary measures are needed to protect the interests of disadvantaged groups and fishers who do not own vessels, so that the subsidy does not merely increase income disparities. and cause conflict.
Second, subsidy indices such as use of designated landing ports, incoming/outgoing radio reports, fishing logs and location monitoring should be continuously monitored via technology and linked to subsidy mechanisms, so that fishermen proactively follow the rules.
Fishermen should also be fully aware of the objectives of the subsidy, so that they understand the differences with fuel payments and how it changes over time, to avoid any misunderstandings. China is constantly improving its management of the fishing industry and stewardship measures are beginning to bear fruit. But fish resources continue to decline. We still need to explore possible changes to fisheries subsidies, to eliminate excess capacity and avoid damage to the ocean environment and biodiversity; improving fisheries management systems; ensure that catches are consistent with scientific surveys and stock assessments; and to help fishers transition to other work.
Zhou Wei is an independent commentator with years of experience working on marine conservation issues in China. She is based in Beijing.
This article appears courtesy of China Dialogue Ocean and can be found in its original form here.
Top image: Siyuwj / CC BY SA 3.0
The views expressed here are those of the author and not necessarily those of The Maritime Executive.