Country Profiles

International trade

Compared to the domestic sector, China has historically had a very small beef trade sector – both for imports and exports. However, the import volumes increased rapidly from 2012 to 2014 due to increased consumption and domestic beef prices (see above). Import trends are discussed here through data reported in UNComtrade data for broad categories of bovine meat (fresh/chilled and frozen, carcass forms and cuts, bone in and bone-out).

Mainland China has for nearly all of the past 20 years been a net exporter of beef Southeast Asia and the Middle East, but exports trailed off to only 7,000 tonnes in 2014. This has traditionally been low value frozen beef but has increased in value to US$9.13/kg in 2014 (possibly a niche trade).

China has historically imported only modest amounts (tens of thousands of tonnes) of beef, but volumes increased to nearly 300,000 tonnes in 2014. Of total beef imports, 99% are frozen at an average value of $US4.30 in 2014. The other 1% of fresh or chilled beef (3kt), virtually all from Australia, sold for an average of $US7.20, significantly lower than the US$18/kg in 2011. On an aggregated level, this suggests China is still a price-sensitive market and that a significant proportion of beef is destined for mass markets or processing.

Imports are limited to countries declared free of foot and mouth disease (FMD) and BSE, of which Australia, New Zealand and Uruguay are the major exporters to China, with small volumes from Canada, Argentina and Costa Rica. The application of total country bans excludes major beef producers including Brasil the US and India. In addition to 13% VAT, China applies import duties that range from 25% for frozen carcasses to 12% for most beef and offal products for countries with most favoured nation (MFN) status. These policy settings, together with high demand and prices, sets the scene for very large volumes of the informal imports, estimated at up to 1 million tonnes, and certainly higher than formal imports.

Figure 10. Beef imports and exports, mainland China and Hong Kong Special Administrative Region (SAR), 1992-2014.

figure10-chinaSource: UNComtrade (2014)

Hong Kong is major channel for informal beef imports, and volumes can be estimated through trade data. Volumes of imports into Hong Kong have increased roughly in line with direct imports to the mainland, almost all of which is frozen and from countries without access (Brazil, the US) or with partial access (Canada) to the mainland market, but which can export to Hong Kong. Part of this increase in beef imports can be explained by decreases in modest live cattle imports into Hong Kong and official re-exports of beef to other Asian countries, especially Vietnam. However, domestic consumption in Hong Kong is unlikely to have changed much (around 60,000 tonnes per year). Thus, up to 300,000 tonnes of beef imported into Hong Kong may have been smuggled from Hong Kong into mainland China in 2014 (although are reported to have declined in 2015 with the crackdown on illegal smuggling). Informal imports from Vietnam are likely to be higher as discussed below.

Beef offal is formally imported directly into mainland China (20,000 tonnes from the same countries that export beef to China) but much larger volumes flow through Hong Kong. In 2014, Hong Kong imported 300,000 tonnes of offal, re-exported 92,000 tonnes, leaving more than 200,000 tonnes of local consumption and smuggling to China (Figure 11). Offal comes both from countries that can’t export directly to the mainland (the vast majority from Brasil, but also Argentina, US, and Europe) and that can (Australia, Uruguay, New Zealand).

Figure 11. Beef offal imports into mainland China and Hong Kong, 1992-2014

figure11-chinaSource: UNComtrade accessed June, 2011

There are divergent estimates on the volume of informal import (smuggling) of beef into China but the volumes were clearly very high. Claims of one million tonnes of beef per year are common, but can range up to two million tonnes of meat (including by CAU and the China Meat Association), although these are likely to be exaggerated (Wang Jimin, CAAAS).

Beef (and in the case of India, carabeef) derive from these countries not permitted to export directly to mainland China, but are cost competitive given rising Chinese prices and appreciation of the Renminbi against the US dollar for most of 2013-14. A government document cited by Guo and Liang (2014)9 claims that Brazil’s informal exports to China in 2013 were 430,000 tonnes, India 470,000 tonnes10 and the US 90,000 tonnes (which conforms to estimates of one million tonnes of smuggled beef)

Exports are transhipped through the main intermediate countries/regions of Hong Kong and Vietnam, but also Cambodia and Laos. Importers incur import duties when entering those countries but these are lower if treated as re-exports, but smuggling circumvents VAT and import duties into China. While the costs of smuggling – transport across sometimes long distances and pay-offs to border authorities – are said to be increasing, they are still lower than import duties and taxes. Beef is distributed all over China, including into the far north.

From Vietnam, the main smuggling route is through Mong Cai, which lies over the Beilun River from Dongxing in Guangxi Province. Mong Cai is only 135kms from Hanoi and Hai Phong international port, and is reportedly one of the wealthiest cities in Vietnam. Along with a large number of other products, frozen bovine meat is taken across the narrow river crossing by small boats and picked up by a plethora of Chinese traders in small cars and vans. Product can be plain packed in India, or re-labelled in Vietnam or China. Smuggling requires the direct or tacit assistance of authorities from both countries.

In one highly-publicised raid on smuggled beef from Vietnam, 100,000 tonnes was seized said to be worth $0.5 billion in 14 provinces (from Guangxi and Guandong to Jiangsu, to Chongqing and Hunan) involving 20 smugglers (CCTVNet, 2014). In another small but unusual case, 100 tonnes of beef from Japan was smuggled through Cambodia and Laos to Yunnan and Shanghai.

The informal cattle trade. As recently as 2008, live cattle flowed out of China, but the flow has since reversed at scale. Feeder and slaughter cattle enter China especially from Vietnam, Burma and Laos. Estimates below suggest that in recent years 100,000 cattle may have entered China from Vietnam in 2014, 100,000 directly from Burma and perhaps 150,000 indirectly from Burma through Thailand and Laos. If 350,00 cattle entered China through border trade, at (a generous) assumption of 200kgs carcass weight, this may equate to 70,000 tonnes of beef (bone-in), which is clearly much smaller then grey trade for beef.

As overviewed in the Vietnam profile, the main border post in Vietnam is in Cao Bang City on the Bang Giang river, about 30 km away from the border with China. Cattle are sourced from Tra Linh market and walked across the border (nearby to the official border post). For an idea of the magnitude, Tra Linh market trades 500 to 1,800 cattle per market day, open eight days per month (so perhaps 50,000 to 170,000 head per year)11. Many of the cattle are from Laos and Cambodia, and are trucked to Cao Bang through provinces like Nghe An and Thanh Hoa.

It is probable that larger numbers of cattle are sourced from Burma. According to a feedlot company in Malong County in Yunnan, more than 100,000 head were sent directly across the border at Ruili into Yunnan in 2013. Thailand officially imported 204,000 head from Burma in 2013 (see Burma profile). According to one report (Ainsworth, 2015) about 120,000 head of cattle and buffalo passed through Mae Sot on the Burma/Thai border. Large numbers are transported to Vietnam (through Cambodia and Laos) but probably the majority are re-exported to China, through the Mekong to Xishuangbanna in Yunnan Provinces. Other cattle enter through Laos.

Crackdowns on the informal trade. China has sporadically considered and actually interrupted the informal beef and cattle trade for years, but not in a concerted way, possibly due to price inflation concerns. However pressures to act mounted due to high profile food safety cases and the anti-corruption campaign of the Xi regime, which extended to border and inspection authorities. Crackdowns on smuggled beef (and other goods) were conducted on the Hong Kong trade (January 2015) and then Vietnam (April 2015) in an environment of strained relations between Vietnam and China. The crackdowns extended from border areas to domestic wholesale markets. The trade of live cattle from Burma and Thailand is also periodically interrupted due to prices, crackdowns and the security environment.

9 The document was a joint report of the Anti-Smuggling Bureau of China Customs, MOFCOM China Chamber of Commerce of Foodstuffs and Native Produce Import and Export Association and COFCO.
10 Tariffs on products from India to Southeast Asia including buffalo meat were eliminated under the India-ASEAN Free Trade Agreement came into effect in January 2010. India exported 248,000 tonnes of bovine met to Vietnam in 2012, 533,000 tonnes in 2013 and 622,000 tonnes in 2014. The bulk of this was destined for China. India also exports hundreds of thousands of tonnes to Thailand and Malaysia.
11 By 2015, the volumes had increased up to 1,800 per market day and remained uninterrupted. In addition to Cao Bang, there are two other crossing borders including Quang Ninh and Lang Son that trade mostly buffaloes and pigs, and smaller number of cattle.

A potent mix of forces have led China to liberalise the beef trade, though in a strategic way. As established above, forces includes stagnant domestic supply, increased consumption especially from out-of-home consumption, leading to rising prices, and measures to address food safety problems, corruption and smuggling. At a broader level, broader economic growth patterns (Figure 1) means that government faces fewer pressures to support rural industries, employment and incomes. This especially the case for beef that is not a staple commodity (except of some minority areas on the consumption side) and, unlike wool, is not important to the livelihoods of ethnic minorities on the production side.

While China has adopted a more liberal approach to beef and cattle trade for several years, this was ratified at the highest levels in September 2014, when the State Council – led by Premier Li Keqiang – announced that China will increase imports of beef and mutton.12 This coincided with a series of bilateral measures, especially related to disease protocols. China only permits imports of beef from countries (on a national basis) that have freedom from FMD status with the World Organisation for Animal Health (even though FMD is endemic in China and very large volumes of beef from these countries enters China informally). China appears to be taking measures to relax these policies, including permitting imports from zones where disease is “free with vaccination”.

Brasil’s formal access to the Chinese market was embargoed during the boom import years, due to disease status. Brasil has traditionally been blocked from exports due to incidence of FMD in the main production areas. By 2012 these major areas were declared FMD-free zones with vaccination, but vaccinations stalled in some areas in the drought of 2012 and FMD appeared near the Brasil-Paraguay border. There were cases of atypical BSE in 2012 and 2014. One (small beef producing) state is declared FMD-free without vaccination and Brasil aims to become FMD-free on a national basis. Brasil was said to gain access to the Chinese market in mid-2015 with up to 26 plants to be accredited (Beef Central, May 21 2015), but there have been ongoing delays, raising some claims of delay on non-scientific grounds (in a more deflationary price environment). When and if significant plants are accredited, Brasilian imports could be expected to be rechannelled from the informal to the formal trade.

In May 2013, China and India countries signed a memorandum of understanding (MoU) to facilitate the export of buffalo meat from India to China, although no tangible measures appear to have emerged. India is classified as FMD endemic and controls the disease by vaccination, but is reported to lack sufficient vaccine and programs (International Meat Secretariat, 2012). In 2014 India was the world’s largest bovine meat exporter with 1.5 million tonnes.

Australia has been a major beneficiary of China’s liberalisation policy in the sector. In the China-Australia Free trade Agreement signed in 2015 a relatively liberal final position was reached for beef, where tariffs of 12-25% are to be eliminated over nine years with safeguard trigger of 170,000 tonnes. Beef and mutton were not major sticking points in the decade-long negotiations compared to some other agricultural commodities (wool), where Australian wool is imported at a scale that is perceived to pose a threat to the domestic production sector, located predominantly in ethnic minority areas. The negotiations were also conducted in a period of rising prices (2014), although Chinese agencies started reconsidering positions when prices moderated.

The long-awaited slaughter and feeder cattle protocol with Australia also signed in 2015, especially with measures to manage bluetongue risks (quarantine rules based on source, destination and season). Some stakeholders in China endorsed the protocol on the grounds that it would reduce pressure on slaughter of China’s breeding herd, while others were alarmed about (over-stated) reports from Australia that the agreement could lead to the import of one million head per year. The commercial feedlot and abattoir sector is also very interested in live cattle imports to increase supply and capacity-utilisation of facilities. Animal welfare / ESCAS systems that will be imposed in the trade will mean that large certified plants will capture supply, and not compete with smaller slaughter units as they do for domestic cattle. However, few current large feedlots or abattoirs are located close to ports and quarantine facilities.

12 An announcement was made by the State Council, which coordinated between relevant agencies including the Ministry of Commerce (MOFCOM), the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the Ministry of Agriculture (MOA). A government communiqué said that the meeting discussed ways to “determine the import policy measures to strengthen and promote the further opening [of trade]” and that import promotion strategies needed to “strengthen technology, products and services imports…meet the demand of domestic production and consumption, improve product quality, and promote entrepreneurship and innovation” (Reed and So, 2014).

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