Policy settings have both formed and responded to the industry development trajectory. For the purposes of discussion, policies are discussed with reference to Figure 2 and categorised into a number of policy (blurred) “eras”.
Market liberalisation (1980-1990). The growth of the beef industry received its initial impetus from broader economic reforms in the 1980s, especially where farmers were allocated use rights over land and ownership rights over cattle, which by the mid-1980s became categorised as a commodity allowed to be traded on the free market. State-owned enterprise reform measures liberalised the slaughter sector, where the state stripped the General Food Company (GFC) network of their monopoly status, and allowed tens of thousands of slaughter households and areas to enter the sector. However about 450 prefecture/city-level GFCs emerged intact and the GFC network retains a powerful position in the slaughter sector in terms of slaughter numbers, cold storage capacity and policy roles.
Production-push (1990s). Policy attention then turned to building the “production base” of the industry by increasing cattle numbers. This was supported by a very large state network for feed, breeding and animal health inputs. Production was fervently pushed by the Ministry of Agriculture and many local states, especially in the Central Plains under the “Straw for Beef” program. The official subsidies and “encouragement” induced millions of farmers to enter the cattle production sector. One of the outcomes – for beef and other livestock products – were periods of over-production and stagnant prices, including a sharp market correction in 1996/97. With the reported success of the program, policy started promoting downstream sectors, especially through larger modern abattoirs, and the “value-adding” of by-products.
Industry rationalisation and modernisation (2000-2010). Shifting sectoral and market trends led to the relaxation of government policy away from Chinese staple foods (grain and pork) and toward other livestock products, in the so-called “strategic adjustment of agricultural structures”. This was reflected in numerous policies (most notably the State Council “Number One Documents” including the Strategic Adjustment of Agricultural Structures of 1999). The most direct manifestation in the beef (and mutton) sectors was the “Advantaged Area” program of 2002, which can be seen as a (lower-level) continuation of the Straw for Beef program. Policy attention and subsidies were however overwhelmed by larger forces of rapid economic growth, industrialisation and urbanisation. As households increasingly valued their own labour at market rates, they questioned the value of small-scale integrated cattle production, leading to rationalisation of the sector that continues today especially in more developed areas.
Policy toward the downstream sector (slaughter, marketing and integrated structures) had been pushed in the 1990s but gained momentum in the 2000s. The most conspicuous form was in preferential policy and subsidies from local government for “dragon head” modern abattoirs, especially those that link (through contracts) with production groups and households with supporting services (feeding, breeding). This led to over-capacity in the modern abattoir sector that continues today. Partly to increase market share for larger abattoirs – and partly for food safety reasons – local governments began to apply (at their own discretion) slaughter bans on small, unregistered slaughter units, which has become widespread but not complete today.
The 2000s were defined by an increasingly sophisticated approach to industry and market development. Through a series of guiding policies (e.g. 1999 Structural Adjustment, 2007 Modern Agriculture), the State and industry sought to move the industry away from the supply of bulk, generic “beef” to more differentiated product. This includes the issue of beef grades2 and food safety standards3 and the development of wholesale markets, and price reporting systems.
Supply-side constraints, price spikes, and increased trade (2010-). Even the most optimistic Chinese policy-makers did not envision the rate of China’s economic growth – or the challenges created for the beef industry. Most notably, broad-based growth dampened incentives for small-holders to produce cattle, increased beef consumption and increased beef prices by 80% between 2010 and 2013 (see Section 10). However, small-holder cattle producers have not responded to these rising output prices through increased participation and production, partly because feed, fuel, labour and other prices increased at a commensurate rate, and partly because the nature of the cattle cycle4. Consequences include farmers selling their breeders and diminishing supplies of feeder and slaughter cattle for industry. Numbers of breeding females were reported to have decreased 10.2% between the 10th and 11th five plan (2005-2010) (China National Development and Reform Commission, 2013). Many large modern abattoirs promoted under previous policies are widely reported as operating at capacities as low as 30%.
For these reasons, industry experts (concerned about the cattle herd) and industry (concerned about cattle supply) had, since the late 2000s, lobbied government for production subsidies for breeding, that were already applied to pigs. The 2014 Number 1 Document paved the way for application to cattle, when government raised nearly Rmb1 billion for subsidies in the cow-calf sector. The subsidies are notionally available to 15 designated provinces, counties that meet criteria (more than 300,000 breeders), and cow-calf producers with 10 breeding cows. In practice, subsidies are provided on the basis of Rmb500 per cow (which would cover 2 million cattle), but in some areas this can be up to Rmb2,000 per head and scale criteria can be applied. Pastoral areas are notionally not eligible but producers of dual-purpose beef-milk cows are eligible. With pastoral areas excluded, the high costs of purchased feed in agricultural areas, and with few small-holders that raise 10 cows, there are questions about the type of producers that could be eligible. The policies appear to have been revised in 2015 and extended to all larger scale cattle producers (not just for breeding). Producers with >30 head receive Rmb50 per head, >50 head, Rmb100, >100 head Rmb200, >200 head up to Rmb500.
Food safety has been a major problem in China for many years, especially the injection of water into beef at slaughter retail levels (to increase weight and juiciness) and growth promotants (e.g. Clenbuterol Hydrochloride). Concerns about food safety are ubiquitous in China, and have been the subject of numerous public cases (meat from other animals labelled as beef, expired meat for fast food outlets). In one case in 2015, A$500 million worth of aged, thawed and rotting meat including beef smuggled through Vietnam made a link between poor food safety and illegal imports.
One powerful agency (China National Reform and Development Commission, 2013), that will guide others, plans to expand the industry to 2020 through: breed improvement (Rmb400 million from central government 2013-20); increased scale of production (Rmb1.3 billion); corporatisation and links with agribusiness; disease control and disaster management; and promotion of the industry in the Central Pains, Northeast and West China (the latter through pens and storage). This is planned to increase Chinese beef output to 7.9 million tonnes by 2020 (an average annual increase of 1.9%), increase turnoff rates to 55% and producers that turnoff 50 head or more will make up 40% of turnoff. Beef consumption is estimated as 5.49kg per capita (a yearly increase of 1.13%), and with a population of 1.45 billion people, consumption would be 7.96 million tonnes. That is, the shortfall (imports) is estimated to be just 60,000 tonnes. These measures will impact on investment and activity in the industry, but are unlikely to revitalise the industry. The measures are either not new, or the amounts are not large compared to the broader economic forces or incentives at play. Trade policy is discussed in Section 11.
2 These include: “Beef quality grades” (Ministry of Agriculture, 2003); slaughter standards (Ministry of Commerce for the General Food Company abattoirs); and the standard “Frozen Beef” by the General Administration for Quality Supervision, Inspection and Quarantine, 2004) and others.
3 These include the Agricultural Products Quality and Safety Law of June 2006, Non Public Hazard (wugonghai) Foods, Green Food and Organic Food certification schemes).
4 Even higher price rises for mutton led to increased sheep and goat production, partly because of the shorter production cycles and higher lambing rates (especially with multiple-birth breeds). Pig production are also relatively responsive.