China has of course undergone an economic transformation of historic proportions. With an average annual growth rate of 9.5% sustained over the last two decades, and a population of 1.3 billion, there have been major ramifications domestically, internationally and for the agricultural sector. Macro indicators of change in agriculture are shown in Figure 1. Economic growth has rapidly increased average incomes for both rural and urban residents (although rural residents’ wages are just 33% of urban compatriots and China ranks 91 in the world in inequality (UNDP World Development Indicators, 2015)). Growth has also increased food prices at a rate above CPI, especially in 1994-5 and 2008-9. As elaborated in Section 10, beef (and mutton) prices have outstripped general food prices as superior products (where proportions in the diet increase with rising incomes).

Figure 1. Indicators of agricultural transformation in China 1995-2014.

Source: Calculated from data reported in World Development Indicators (accessed 8/10/15) and China Statistical Yearbook (various years).

China also conforms to the “Iron Law of Development” which stipulations that as an economy develops, the proportion of the working population in agriculture and the proportion of GDP derived from agriculture diminishes (Schultz, 1968).
These economic trends are the primary drivers of change in the Chinese beef industry. Increasing urbanisation and urban incomes have increased demand and prices of beef, more so than other inputs into production like corn (see Figure 9). However, these favourable alignments have been outstripped by even higher relative increases in the value of rural labour i.e. the opportunity costs of labour for cattle production. Together with resource constraints (grazing land) and long cattle cycles (compared to smaller animals), the supply response to higher beef prices has been muted, especially from small-holders and in the cow-calf sector. There has, however, been a response from the feedlot sector and no shortage of investment and preferential policies in the slaughter and retail sectors. The diminishing role of agriculture (including cattle) in the rural economy, price inflation for beef (and mutton) and over-capacity in the feedlot and abattoir sectors, have meant that China has liberalised trade policy, and increased imports significantly.

Change in the Chinese beef industry into the future will be forged by macro developments (including revision to a more “normal” levels of growth”) and a series of more “meso” level developments discussed in this section. The Chinese industry development trajectory may provide lessons for other countries that are undergoing rapid industrialisation and growth (like Vietnam) but there may be limits to the applicability of the China experience to other countries in the region.

In the pre-1979 central planning era, China already had a large cattle herd. Cattle were owned by communes for draught purposes in agricultural areas, with bans on the slaughter of productive animals leaving only sick or injured animals available for consumption. Cattle were raised in larger herds in extensive pastoral systems in Western China (e.g. Inner Mongolia) for ethnic minority populations and cities in northern China. Decollectivisation in the 1980s – where households were able to lease land and own and sell animals – released pent-up resources and incentives. Households responded by raising cattle for their own draught purposes in small-scale crop-livestock systems (average of one hectare per household) but also to periodically generate cash income.

Whereas growth was facilitated by liberalisation measures of the 1980s, it was driven by pro-active industry policy in the 1990s. The “Straw of Beef” program was introduced to utilise China’s 500 million tonnes of crop residues (especially straw) as feed for cattle (Waldron et al., 2003). The program aimed to increase the incomes of farmers (by raising cattle), increase food supply for China (produce beef without displacing grain for human consumption) and bring environmental benefits (less burning of straw, more manure). Notwithstanding the low efficiency of conversion by which straw – even if ammoniated or ensiled – is converted into beef, the program was implemented across vast areas of China and millions of households.

Figure 2. Production trends and policies in the Chinese beef industry, 1979-2013

Source: China Livestock Yearbook (various years) and authors

Caught up in the fervour of the Straw for Beef program, and to increase their chances of promotion, local officials reported inflated output figures. In China’s “bottom-up” statistical collection system, this fed up into inflated national level statistics. The extent of the over-reporting was revealed in the First National Agricultural Census conducted in 1997, when survey teams descended down to the villages to independently collect data. In the wake of the census, cattle numbers were revised downward by 16.5%, turnoff by 28% and beef by 23%. The census figures were then used to retrospectively revise statistics for the preceding three years. Upward trending production indicators in the 2000s were revised down to an even greater extent in the Second National Agricultural Census of 2007, by 26% for cattle numbers, 20% for turnoff and 19% for beef. There are important implications for assessment of the international livestock sector, especially as the “international livestock revolution” (Delgado et al. 1999) was premised to a very large extent on inflated growth figures from China.

Figure 3. Composition of the Chinese bovine herd, 2000-2013

Source: China Livestock Yearbook (various years). Yak, buffalo (from 2008) and draught cattle (from 2012) were excluded from reporting. The large decrease in beef cattle numbers in 2007 was due to the revision in the 2006 Agricultural Census and the large decrease in 2008 was due to a reclassification of “yellow cattle” to “beef cattle”.

One of the trends that emerged from (post-census) data is the declining bovine stock numbers, which by 2010 were back at around the levels of 1990. In addition to statistical anomalies, the declines are also real, as agricultural households that had entered the industry in the 1990s left in the 2000s and farm mechanisation reduced the need for draught cattle. The number of draught animals (of all types) in China dropped from 71 million in 2002 to 43 million in 2009 (China Livestock Yearbook 2010). Urban and work migration had a large effect on the industry – while 74% of China’s population lived in rural areas in 1990, only 46% did in 2013 (NBS, 2011). Most working age farmers in eastern and central China have access to off-farm work in other sectors of China’s burgeoning economy. Becoming increasingly conscious of the (opportunity) cost of their labour, households increasingly value the time they put into livestock production, which makes cattle production in small-scale systems unviable (Longworth et al. 2001; Waldron 2010). Of the 15.5 million households that turned off 1-10 head per year, one-quarter exited the cattle production sector between 2003 and 2013 (China Livestock Yearbook various years).

Table 1. Key industry indicators for China 2000-2013

Source: China Livestock Yearbook, various years

Importantly the cattle production sector that has emerged from the rationalisation is becoming more commercialised. Although bovine numbers decreased by an average of 1.6% per year between 2000 and 2013, bovine turnoff increased by 1.5% per year, up from 31% in 2000 to 46% in 2013. Similarly, beef production also increased by an average of 1.8% per year over in the period (to make up 8% of total Chinese meat production), higher than the rate of growth of turnoff due to increased beef yields (carcass weights, bone-in). However, average carcass weights in China are still low (139kgs) and have plateaued since 2007. The data suggests that producers have increased calving and survival rates and responded to economic incentives to turn cattle off at younger ages and lighter weights for slaughter or for fattening in more efficient households or feedlots.