The continuum of actors in the Chinese slaughter sector includes: uncertified individual slaughter households; certified centralised slaughter points; and modern mechanised abattoirs.
Liberalisation in the 1980s and 1990s saw the proliferation of uncertified household slaughtering in backyards and courtyards throughout peri-urban and rural areas of China. As late as the mid-2000s, there may have been 40,000 slaughter households in China that slaughtered the majority of China’s cattle (although there are certainly many less than that that now). The slaughter households played an important role in providing low cost services to meet the demands of mass markets in short and direct supply chains (through family and kinship members) with a very large number of participants, the majority of which belong to the Hui ethnic minority. Slaughter households are generally viable under a range of scenarios.6
However household slaughtering can be rudimentary (bed slaughtering, poor water and drainage facilities, absence of cold chain facilities, materials that are not easily cleaned or sanitised) and policy-makers are increasingly concerned about effluent, food safety issues (diseases, residues, parasites and bacterial infection). Although slaughter fees have been abolished in most cities, business registration enable local government to tax economic activity and allow larger plants to capture cattle supply and markets. As a result, municipal officials in particular have increasingly applied national standards (designed for pig slaughter) required for registration (capital registration requirements, basic infrastructure and inspection regimes).
Thus, there has been a large shift toward slaughter into what are known as “designated slaughter points”, of which there were about 2,000 at county level and below (China Meat Association, personal communication, 2004). There are many different forms of certified slaughter units. Most cities (including Beijing) have large but basic state or collective facilities where butchers slaughter for a service fee, and then sell into wet markets in the cities. Certified plants also include larger corporate abattoirs with mechanised slaughter lines, cold storage, water treatment facilities, where the company takes ownership of the cattle. Many of the plants are state-owned or reformed companies that come under the General Food Company system, still overseen by the China Meat Association and the Ministry of Commerce.
However one of the features of the Chinese beef industry is the investment in modern mechanised plants that take ownership of cattle and beef. There are perhaps 20 large modern abattoirs in China that are large by Chinese (but not world) standards, and use international-level technology.7 To build agro-industrialisation and dragon head enterprises, the sector has since the 1990s been heavily promoted by the state through numerous preferential policies. This has laid the foundations of a strong modern abattoir sector.
Budgeting of a representative modern abattoir in the mid-2000s revealed several major determinants of profitability including capital costs (for investment and working capital in cattle) and labour costs (which are increasing). Favourable input-output price relativities (access to higher value markets) are required for profitability. The ability to value higher-value beef to the domestic HRI trade on a consistent basis is a challenge for many Chinese abattoirs, and is major source of competitive advantage for imported (Australian) beef. Successful Chinese abattoirs seek to differentiate product and reputation through branding (rather than standards). Finally, capacity utilisation and therefore overhead costs are critical. Modern abattoirs have for decades operated well under capacity (20-80%) for the underlying reasons mentioned above. Low capacity utilisation is exacerbated today by limited supply (i.e. high price) of slaughter cattle. The import of Australian cattle is seen by industry in China as way of alleviating this constraint.