The "green," and hopefully clean, produce of China

By Joseph Chaney

XIAMEN, China (Reuters) - Chen Wucheng sorts through radishes. Next to him, Cai Minhua scrapes off blemishes and dirt.

Standing all day in their snow-white sanitation suits, they represent China's lurch toward packaged, branded, quality-controlled food.

"I'm helping make the food cleaner," Chen, a 28-year-old worker, said at the China Green (Holdings) Ltd. processing plant near the port city of Xiamen.

China Green, along with Chaoda Modern Agriculture (Holdings) Ltd., is tapping into an increasingly lucrative market for food which Chinese consumers feel they can trust.

A string of scares in the last three years -- from cancer-causing Sudan IV in egg yolk to poisonous malachite green in freshwater fish -- has given birth to a new breed of food company.

China's unique "green" distinction is a quasi-organic certification dating back to 1990 which limits the use of chemicals and pesticides compared to fully organic foods grown without synthetic fertilizers or pesticides.

Sales of "green" foods leapt 18 percent in 2005 to about 100 billion yuan ($13 billion), according to investment bank Credit Suisse.

"This is trending upwards," said JP Morgan analyst Karen Li.

"More and more Chinese customers will ask for green or organic products, just like consumers outside of China. They're becoming wealthy and they're going to ask for food with better standards," Li said.

Analysts say industry consolidation -- buoyed by government support -- is helping emerging green and organic players, such as Heilongjiang Agriculture Co. Ltd.

"The Chinese government is encouraging the industrialization of the entire agricultural sector-- the market leaders will benefit," said Chuan Tang, an analyst for Daiwa Institute of Research.

"And in a fragmented market, when you get big, you can benefit more from market inefficiencies," he added.

GREEN MANIA

But industry watchers warn that the green food rush in China may run into problems.

Players in the U.S. organic market -- worth about US$14 billion in 2005 -- such as Del Monte Foods Co. and supermarket Whole Foods Market Inc., have struggled against competition from cheaper mainstream products.