February 16, 2018

THE CHINESE EMBARGO ON FRENCH BEEF WILL BE LIFTED WITHIN 6 MONTHS

Chinese people are getting ready for the dog’s year, French President Macron offered a horse to his Chinese counterpart, yet another Chinese sign is drawing the attention of French exporters to China: the beef. During his official visit, Emmanuel Macron announced the total lift of the Chinese embargo on bovine meat “within six months”. The Beijinger wrote that this decision was welcomed by the F&B industry in China as well as all the meat lovers.

Origin (and end?) of the embargo

In 2001 while Europe was facing the crazy cow outbreak, China decided to shut its market to all European beef importers, then American, as a protection measure. In March 2017, the Chinese market slightly opened itself to French beefs: only deboned meats coming from beefs under 30 years old could be imported in China. Eventually, Emmanuel Macron announced a total lift of the embargo during his visit to China in early 2018, in a speech punctuated with some sentences in Cantonese, much appreciated from the Chinese audience.

An expanding market

This decision comes at the right moment. Many studies emphasize the current evolution in the habits of the 1.4 billion Chinese consumers, especially regarding the consumption of meat. As a result, the market is booming (it was multiplied by 10 between 2010 and 2015) while the French beef market is decreasing by 5% per year. Pork meat still makes the bulk of Chinese meat consumption, accounting for 60% of it. Yet, beef consumption is increasingly growing mainly because of the growth of the middle-class: in 2016, a Chinese would eat on average 4 kilos of beef when it was only 3 kilos in 2005, according to OECD figures. For comparison only, French consumption of beef is four times higher than the Chinese one.

The meat market is all the more attractive for exports that prices have been quadrupled in 15 years (3.5 euros per kilo today). Chinese growing middle class is now looking for quality. Thus, according to a note from the Dutch bank Rabobank, they tend to prefer to import meats despites the price.

Opening of the Chinese food sector to importations

If the Chinese food market used to be difficult to access, this situation changed since the 13th Five-Year Plan (2016–2020). Indeed, the Chinese government officially opened China to the international food markets to ensure its food security. Today, China is a net importer of food with a deficit of 34 billion euros in 2015, according to Chinese custody. Every year 1.7 million tons of meat are imported to China, accounting for 20% of total food imports, as a result of the Chinese thirst for imported products in this domain. Food is also the third-largest sector for French exports to China, although meat only accounts for 9% of all exports. As China is about to become the largest importer of beef worldwide, before the United States, meat’s share in French exports to China is expected to increase in the future Franco-Chinese trade balance.

A high level of foreign and local competition

This decision is following the lift of the embargo on American beef last June. In Europe, France is the third country benefiting from it, after Ireland and the Netherlands. The lift regarding French beef was actually decided on March the 3rd. 2017 but it was in a stalemate because of Chinese health requirements.

For the 150,000 French farmers raising beef (a sector worth 6.6 billion euros), the lift is a real opportunity, yet not a given one. Indeed, about 90% of the Chinese beef market is owned today by Australian, Brazilian and Uruguayan importers, and Chinese beef cattle is about 10% of the world cattle, five times more important than the French one.

Yet, unique French assets

French exporters are expecting about 50,000 tons of beef to be exported at first, which would amount to one fifth of all nowadays French beef exports. The market targeted in China is the high quality and high standing food market, but there is also an opportunity in the sale of unwanted meat pieces in France, such as beef tails, a piece mostly appreciated in China. In the 6 months needed for the lift to be effective, France has the opportunity to promote its French beef for its quality (sanitary traceability), for its specific cattle breed, or as a part of the French art de vivre.

Will poultry be next on the list? Discussions are still undergoing for a lift of the embargo that was imposed by China in 2015 following a bird flu outbreak.

To sum up

The beef market in China has been multiplied by 10 between 2010 and 2015, and still increasing. Both consumption and prices are on the rise in China, due to a growing middle-class. On this market, Chinese people particularly prize imported beef. Within 6 months from January 2018 on, it will be possible to export French beef in China.

By Manon Bellon

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