Zhu Renyong, general manager of Hong Kong-based China Animal By-products Auction Co Ltd (CABAC), has been shuttling between Hong Kong and Beijing in the past month.

Although overworked, he feels gratified.

To promote the fur and leather market in North China, Zhu, and managers of large-scale fishery companies in China and China National Native Produce and Animal By-products Imp & Exp Corp (CNNPAB), last March proposed the establishment of the Animal By-products Auction Co Ltd in Beijing.

Their efforts have been supported and applauded by CNNPAB, local government officials and animal raisers across China.

Officials of the State-owned Assets Supervision and Administration Commission (SASAC), under the State Council, the national cabinet, also think highly of it.

"SASAC is ready to provide preferential policies," Zhu said.

The auction company should be established by the end of next month.

It could be operated as a stockholding company, Zhu said.

Transactions of commodities such as fur, buildings, antiques and writings and drawings are generally conducted in auction houses.

Fur is usually divided into three categories, based on quality.

Fur from minks, foxes and Persian lambs constitute the cornerstone of the global fur industry.

Unable to scientifically identify the quality of fur, international traders prefer to buy and sell at auctions.

During international fur auctions, fur processors bid on the items on display.

Fur auctions are convenient for fur manufacturers, and they also benefit the animal breeders.

Auctions ensure fur producers have a long-term, direct and stable sales channel.

The auction company in Beijing could help bring together fur producers and processors from across China, Zhu said.

"It could also be a platform to normalize the fur market, protect the resource and improve the quality of the fur," Zhu added.

The International Fur Association (IFA) says 90 per cent of the fur worldwide is sold through auctions.

Regional fur markets have sprung up across China since the late 1970s when the country adopted its reform and opening-up policies.

For example, Haining, in Zhejiang Province, has become one of China's largest - nearly 100,000 fur pelts are traded daily - raw materials markets.

General Administration of Customs statistics indicate the net volume of China's fur imports and exports was US$997.6 million, up 42.5 per cent over 2002, between January and November.

China imports 5 million mink pelts and 1.5 million fox pelts - which amounts to 40 per cent of the transactions at the world's auction companies - each year.

However, Cheng Fengxia, a professor with Shaanxi University of Science and Technology, suggests there are three huge problems within the fur industry: Inferior quality, lack of competitive prices and bad environment.

Surveys indicate China's animal breeders lack information about the international fur market, and, as a result, they have been blindly selecting and raising breeds of animals.

Subsequently, the quality of the fur cannot be guaranteed and, in many cases, the fur is being wasted.

Price wars have resulted.

"Pollution caused by inappropriate processing, especially coloring the fur, has also become a headache," Cheng said last week during the 30th China Fur & Leather Products Forum in Beijing.

Zhu said the auction company in Beijing, after its establishment, could help domestic breeders avoid price wars.

It could also help them improve fur quality and enable them to meet international standards, Zhu added.

Chinese animal breeders participated in a fur auction for the first time in February 1985. The auction was held in Hong Kong, which is the world's fur trading capital.

CABAC in 1987 established the China Fur Auction Co Ltd in Hong Kong, which broke the fur monopoly long held by international fur companies.

More than 20 successful auctions had been held until 1998. That year, however, China's animal breeders were affected by the oversupply of mink fur. As a result, many stopped raising animals.

CNNPAB then had a difficult time collecting enough fur for the auctions, and it close the China Fur Auction Co.

But skyrocketing demand for fur in recent years has changed the situation, Zhu said.

People in the industry from around the world are again paying attention to China's fur market.

Fur supplies are no longer a problem, Zhu said.

In 2002, IFA and SAGA Furs, a joint marketing organization formed by Scandinavian fur breeders, jointly proposed the popularization of furs in China.

Afterwards, SAGA established the Beijing-based Fur Design Centre.

Representative offices of auction houses from other countries have also been established.

"This will enable us to operate our auction business more easily," Zhu said.

(Business Weekly 01/20/2004 page9)