"The beef industry provides a window on food safety issues in China's rapidly developing economy. This industry provides particularly useful insights because the government has targeted it for development and because it is dominated by household slaughtering and wet markets, making food safety concerns pervasive. " from TextFood safety ,food security ,Public health ,

Brown, Colin G.

Waldron, Scott A.

English

Research Papers in Economics

FOR FOOD,AGRICULTURE,
AND THE ENVIRONMENT
FOCUS 10  •  BRIEF 13 OF 17  •  SEPTEMBER 2003
FOOD SAFETY IN FOOD SECURITY
AND FOODTRADE
Case Study: Beef Industry in China
COLIN G.BROWN AND SCOTT A.WALDRON
T
he beef industry provides a window on food safety issues
in China’s rapidly developing economy.This industry pro-
vides particularly useful insights because the government has
targeted it for development and because it is dominated by
household slaughtering and wet markets, making food safety
concerns pervasive.
Balancing industry growth and development with improved
food safety is not a straightforward matter. Regulations and
policy initiatives aimed at modernizing Chinese beef supply
chains for the mass market along Western lines are not neces-
sarily desirable or feasible. However, greater consumer assur-
ance about the inspection of cattle slaughtering and beef distri-
bution may help grow the mid-value sector of the Chinese
beef industry, which is vital to sustainable industry and rural
development.
BEEF SUPPLY CHAINS, CONSUMER 
PREFERENCES,AND FOOD SAFETY
The Chinese cattle and beef industry is extremely diverse. (For
the purposes of this brief, only key aspects relevant to food
safety will be discussed.)  Prior to market-oriented reforms
that began in the late 1970s, beef in China came from cull cat-
tle only. A state network produced and distributed almost all
of this beef among the Muslim (mainly Hui) community.
In the 1980s, market-oriented reforms had various
impacts. First, restrictions on the slaughter of cattle were
removed and specialized beef cattle production began to occur.
Second, many households became involved in slaughtering and
selling cattle and retailing beef and offal. Slaughter households
competed with state abattoirs under the General Food
Company (GFC) network. Many county-level abattoirs were
established from the mid-1980s onward as a result of  fiscal
reforms that encouraged local investment and in response to a
growing demand for beef in China and other countries, such as
the former Soviet Union.
Although the beef industry in China is diverse, a simplified
distinction can be made between the mass market and the
remaining premium market.The mass market accounts for
almost 90 percent of all cattle slaughtered in China. Sold as
fresh, low-value, undifferentiated beef in local wet markets,
mass-market beef comes primarily from cattle killed by slaugh-
ter households. Most of these households are of Hui ethnicity
and many also operate beef stalls.The remaining beef sold in
wet markets comes from GFC abattoirs. However, the price of
beef received at these markets (around RMB14/kilogram,
approximately US$1.70 when these prices were observed) is
insufficient to maintain the viability of GFC abattoirs, which
need to sell at least some of their beef in premium markets.
Slaughter households generate modest profits of around
RMB0.32/kilogram of beef by selling in the mass market, while
GFC abattoirs incur a loss of around RMB2.53/kilogram of
beef. GFC abattoirs cannot compete with slaughter households
because of their higher overhead and labor costs.Thus many
GFC abattoirs have been  “mothballed,” operated at very low
levels of capacity, or undergone restructuring.
Hygiene in the mass market is poor, both for cattle slaugh-
tering and beef distribution.The risk of food contamination is
extremely high, but its severity is tempered by the short time
interval between slaughter and consumption (often 8 to 16
hours) and by Chinese cooking methods.Although consumers
in this low-value market may have food safety concerns, price
is paramount. Both slaughter households and markets are sup-
posed to be inspected, but this does not occur, even for beef
sold in various markets in Beijing.
About 10 percent of slaughtered cattle is sold through a
small but growing premium market. For the highest quality
beef, five-star restaurants and hotels and related outlets pur-
chase at prices of up to RMB150/kilogram.These prices apply
to specific cuts of beef that carry an assurance of safety and
such quality attributes as tenderness. Much of this extremely
limited market is supplied by overseas beef exporters, although
some comes from a select group of trusted Chinese suppliers.
Modern abattoirs have been built and some GFC abattoirs
refurbished to exacting hygiene standards with the aim of sup-
plying this high-value domestic market as well as lucrative
export markets in Japan and South Korea.
The mid-value part of the premium market is the most
rapidly growing part of the beef sector. Its prices modestly
exceed those in the mass market. Price premiums relate not
so much to quality attributes—although the beef is more dif-
ferentiated than in the mass market—but to the assurance of a
safe product. Beef sold through state stores, sourced from
abattoirs perceived to be regularly inspected, or sold in mar-
kets promoting hygiene and “guaranteeing” safe beef, serves
the mid-value market. Beef sold in state stores typically com-
mands a premium of around RMB6/kilogram over the mass-
market price. Consumers who buy mid-value beef are affluent
urban residents concerned about food safety and willing and
able to pay a premium for safe beef.
In response to food safety concerns, the Ministry of
Agriculture has established “Green Food” certification for a
wide range of foods, including beef. In the cattle production
stage, certification prohibits the use of growth promotants,
imposes withholding periods for some veterinary products,and
sets national standards that must be met on the use of feed addi-
tives and antibiotics.In the processing and distribution stages,
hygiene levels are set in conjunction with the Ministry of Health.
Surveys reveal that affluent consumers are prepared to pay pre-
miums of 20 to 30 percent for a variety of “Green Foods.”KEY REGULATORY MEASURES
The Chinese government’s response to public concerns over the
safety of meat products encompasses many segments of the
beef marketing chain,making inspection mandatory from the
ante-mortem to the retail outlet stages. At the beef distribution
stage,the intent has been to close down smaller,less hygienic
markets and restrict the sale of beef to larger wholesale and
retail markets that have higher standards and are regularly
inspected.However,many smaller beef dealers remain outside
the practical control of local government health and hygiene
authorities.
Another important regulation has been the restriction of
livestock slaughter activities to designated locations.These meas-
ures have their origins in 1992 rules that initially targeted the pig
industry but which were implemented more widely and forcibly
in 1997.Despite efforts at enforcement over several years,there
is still a great deal of variation in the way this regulation has
been interpreted in different regions.Some regions have banned
household slaughtering.Others have decided that designating
slaughter points does not prohibit household slaughtering—it
only requires that slaughtering occur at designated and inspect-
ed facilities.The regulation seeks to ensure proper ante- and
post-mortem inspection of cattle and more hygienic slaughter-
ing,but the reduction in number and the centralization of
slaughter points also facilitates the collection of slaughter and
product taxes.
IMPROVING FOOD SAFETY AND RURAL 
DEVELOPMENT
Linkages between the beef industry’s development and food
safety vary among different value segments of the beef market.
In the low-value mass market,the upgrading and centralization
of markets and slaughter facilities will increase costs in what is
an already competitive food market in which consumers resist
higher prices.Introducing more stringent hygiene standards for
beef marketing may increase supply costs beyond those that
consumers are willing to pay,pricing beef out of local markets.
Many GFC abattoirs see food-safety regulations as advanta-
geous because they restrict competition from household slaugh-
tering.However,even if some regions do interpret regulations in
a way that effectively bans household slaughtering,GFC abattoirs
are unable to profitably supply low-value mass markets.
One way to achieve the multiple objectives of maintaining a
vibrant household slaughter sector,improving inspection and
hygiene,and utilizing existing GFC abattoir facilities is to operate
GFC abattoirs as designated slaughter points that offer slaughter
facilities.Slaughter households could use the facilities for a fee
but retain ownership of the beef and by-products.If centralized
abattoirs facilitate timely and efficient distribution of wet beef to
consumers,they will reduce both risk (through greater inspec-
tion and cleaner facilities) and hazard (through more timely dis-
tribution).However,in rural areas where designated slaughter
points are not available, systems must be put in place to ensure
efficient redistribution of beef to local wet markets.Otherwise
centralization of slaughtering will increase the hazard and be
counterproductive in terms of food safety.
For slaughter households,designated slaughter points may
overcome some of the problems of a fragmented system by
providing access to centralized cold storage and distribution
facilities as well as to a more competitive and larger trading
environment for beef and by-products.Such facilities come at a
cost.Given the already low margins of slaughter households,
they are unlikely to slaughter at these points.If public benefits
arise from designated slaughter points—be they health- or tax-
related—there might be grounds for subsidizing and promoting
these facilities and services.Such investments may be better for
local governments than large-scale,top-down projects if the goals
are to provide the local mass market with safer beef while main-
taining participation from local slaughter and trading households.
The situation for premium markets is very different,because
efforts to assure safer beef are likely to grow the premium mar-
ket. A system that enhances consumer knowledge and belief in
food safety will facilitate the payment of premiums by more afflu-
ent consumers—premiums needed to ensure a more sustainable
cattle production and slaughter sector in China.By not being able
to guarantee product safety through the market, up-market
hotels and restaurants have been forced into making direct
arrangements with particular beef suppliers.The costs to enter
these barely competitive direct marketing arrangements can be
significant, especially when hotels are trying to decrease their
food storage capacity.Thus measures aimed at developing greater
safety assurance may also expand this up-market segment.
CONCLUSIONS
Following rapid,production-driven growth during the 1980s and
1990s,the cattle and beef industry in China is now entering a
phase of modernization and maturation.A key facet of this mat-
uration is attention to food safety and development of quality
assurance systems.Although such attention is warranted and
desirable,food-safety measures carefully targeted to each mar-
ket segment are needed to avoid unintended adverse effects and
to meet industry and rural development objectives. ■
For further reading see C. G. Brown, J.W. Longworth, and
S.A.Waldron.“Food Safety and Development of the Beef
Industry in China,” Food Policy 27 (2002): 269—84; J.W.
Longworth, C. G. Brown, and S.A.Waldron, Beef in China:
Agribusiness Opportunities and Challenges (St. Lucia:
University of Queensland Press, 2001); and S.A.Waldron, C.
G. Brown, and J.W. Longworth, Rural Development in China:
Insights from the Beef Industry (Aldershot, UK:Ashgate
Publishing, 2003 forthcoming).
Colin G. Brown (colin.brown@uq.edu.au) and Scott A.Waldron (scott.Waldron@uq.edu.au) are senior lecturer and research officer, respectively, at the School
of Natural and Rural Systems Management,The University of Queensland,Australia.
International Food Policy Research Institute
2033 K Street, N.W. •  Washington, D.C. 20006-1002  •  U.S.A.
Phone: +1-202-862-5600  •  Fax: +1-202-467-4439  •  Email: ifpri@cgiar.org
www.ifpri.org 

Case study beef industry in China

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