China clarifies its beef import investigation

On Dec. 27, China’s Ministry of Commerce (MofCom) issued a notice announcing an investigation into beef imports. It’s a rather unusual move, being only the third since China joined the WTO.

It’s noteworthy that the notice was accompanied by several official releases that sought to clarify the move, including from the Ministry of Agriculture and Rural Affairs (MoA), which will conduct the investigation in conjunction with MofCom. On top of that, state news agency Xinhua also releases an interview with an expert at an official institution painting the backdrop of the decision.

These concerted efforts paint a holistic picture of the thinking behind and process leading up to the decision and offer transparency in a move that has international ramifications.

This newsletter will list the official releases in the order they are released, and highlight the most important bits.

I. The MofCom Notice

On the afternoon of Dec. 27, MofCom releases the notice.

It says on Nov. 22, it received a joint application from 10 industry associations related to beef production calling for an investigation into beef imports. The 10 associations include the China Animal Agriculture Association (CAAA) (a Reuters report seems to have erroneously translated the group into China Animal Husbandry Association) and livestock groups of Jilin, Liaoning, Guizhou, Sichuan, Hebei, Inner Mongolia, Shandong, Henan, and Xinjiang. Except for Guizhou, all other provincial groups represent top-10 beef-producing provinces in China.

The applicants state that

Beef import has sharply increased from 2019 to the first half of 2024. In 2023, it grew by 64.93% compared to 2019, and in the first half of 2024, it grew by 106.28% compared to the first half of 2019. From 2019 to the first half of 2024, imported beef’s share in the Chinese market rose from 20.55% to 30.90%, and the proportion relative to China's total production rose from 24.87% to 43.87%.

The sharp increase in the import quantity of beef has impacted domestic industries in China, causing serious damage to these industries, and there is a causal relationship between the increase in beef import and the severe damage to the domestic industries.

申请调查产品进口数量在2019年至2024年上半年急剧增长。2023年比2019年增长64.93%，2024年上半年比2019年上半年增长106.28%。2019年至2024年上半年，申请调查产品进口数量占中国市场份额由20.55%上升至30.90%，相对于中国总产量的比例由24.87%上升至43.87%。

申请人同时主张，申请调查产品进口数量的急剧增长对中国国内产业造成冲击，中国国内产业受到严重损害，且申请调查产品进口数量的增加与中国国内产业受到的严重损害之间存在因果关系。

MofCom says it has determined that the applicants have submitted sufficient material to warrant a probe that it has decided to launch a requested investigation starting Dec. 27.

The probe will focus on beef products listed under China import tax codes 02011000, 02012000, 02013000, 02021000, 02022000, and 02023000, imported from Jan.1, 2019, to June 30, 2024. Relevant parties may submit their opinions to MofCom and the probe is expected to last 8 months, which may be extended under special conditions.

II. The MofCom Q&A

15 minutes after MofCom put up the notice, it released a Q&A, attributed to a MofCom spokesperson.

In the Q&A, the spokesperson primarily made three points.

First, laying out the background, which largely reiterated evidence submitted by the 10 industry associations.

Second, it provided the legal basis for conducting the investigation, saying such actions are in accordance with Chinese laws and WTO rules. It says:

According to Chinese law and in accordance with WTO rules, in the event of an increase in the number of imported products and serious damage or the threat of serious damage to domestic industries producing similar products or directly competitive products, the investigating authority may, at the request of the domestic industry, initiate a safeguard investigation in order to safeguard the legitimate rights and interests of the domestic industry.

根据中国法律并遵循世贸组织规则，在进口产品数量增加，并对生产同类产品或者直接竞争产品的国内产业造成严重损害或严重损害威胁的情形下，调查机关可以应国内产业申请发起保障措施调查，维护国内产业的合法权益。

Third, it stressed that the action does not target any country or origin of beef and that normal trade will not be affected for the duration of the probe. Also, China is willing to maintain channels of communication with all relevant parties to resolve the matter in a friendly manner.

In accordance with the law, China's investigating authorities examined the domestic industry's application, found that the conditions for filing a case were met, and decided to initiate a case for investigation. It should be emphasized that safeguard investigations do not target specific countries and regions, do not distinguish between the places of origin of products, and do not affect normal trade during the investigation. The investigating authority will carry out the investigation in accordance with the law, fully safeguard the rights of all stakeholders, and make a judgment objectively and impartially based on the results of the investigation. China is willing to maintain communication with all parties on this case, engage in friendly consultations, accommodate each other's concerns and work together to maintain a healthy and stable international economic and trade environment.

中国调查机关依法对国内产业申请进行审查，认为符合立案条件，决定启动立案调查。需要强调的是，保障措施调查不针对特定国家和地区，不区分产品来源地，调查期间不影响正常贸易。调查机关将依法开展调查，充分保障各利害关系方权利，并根据调查结果客观公正作出裁决。中方愿就此案与各方保持沟通，进行友好磋商，照顾彼此关切，共同维护好健康稳定的国际经贸环境。

III. The CAAA interview

About half an hour after MofCom’s Q&A, China Rural News, a news outlet affiliated with MoA, published an interview with an unnamed CAAA executive, who answered two questions in response to the MofCom decision. Less than 10 minutes after Rural News published the interview, it appeared on the official MoA website. Given that CAAA is also a MoA-affiliated group, there seems to be a high level of coordination within the MoA system to provide detailed background and justification for MofCom’s move.

Below is the English translation of the interview.

Q: What is the overall situation of beef imports in China?

A: In recent years, the living standards of urban and rural residents have continued to improve, and there is a strong demand for beef consumption. Due to the large gap between domestic and foreign beef prices, stimulating beef imports continues to increase. 2013 beef imports were less than 300,000 tons, 2023 has reached 2.74 million tons, an increase of more than 8 times, equivalent to 36.4% of domestic production, beef has become the largest imports of meat products that year. Even as the domestic beef industry is sustaining heavy losses, beef imports have surged in 2024, with 2.6 million tons imported from January to November, up 4.3 percent year-on-year.

问：我国牛肉进口的总体情况是怎样的？

答：近些年，城乡居民生活水平不断提高，对牛肉的消费需求旺盛。由于国内外牛肉价差距大，刺激牛肉进口量持续增加。2013年牛肉进口量还不到30万吨，2023年已达到274万吨，增加了8倍多，相当于国内产量的36.4%，牛肉已经成为当年进口规模最大的肉类产品。在国内产业严重亏损的情况下，2024年以来牛肉进口激增，1—11月进口260万吨，同比增长4.3%。

Q: What is the impact of large-scale beef imports on domestic beef cattle farming?

A: Since June 2023, monthly beef imports have exceeded 200,000 tons for 18 consecutive months, dealing a severe blow to domestic cattle farming. With the domestic beef cattle market already in a deep slump, and most farms operating at a loss, this surge in imported beef has only made matters worse. The most immediate impact is widespread losses among farms, which affects farmers’ incomes. Under pressure from imported beef, domestic prices for both beef and live cattle have dropped sharply; beef prices are at their lowest in nearly five years, while live cattle prices have reached a ten-year low.

Data shows that in November of this year, the average loss per slaughtered beef cattle was over 1,600 yuan, marking eight consecutive months of losses greater than 1,000 yuan per head; more than 65% of farms are currently operating at a loss. Moreover, many farms are financed by loans. With cattle selling at such low prices, these loans cannot be repaid. Even if farmers manage to repay their loans, they are left heavily in debt and often have no choice but to leave the industry.

More seriously, a large number of breeding cows are being sold for slaughter, jeopardizing the security of the cattle industry. Industry insiders report that excessive beef imports have already caused substantial harm to China’s beef cattle sector. Our research in major production areas shows that current calf prices are insufficient to cover the feeding costs of brood cows; in some places, brood cows are being sold by weight at low prices, and many cows with breeding potential are ending up at slaughterhouses. According to monitoring, the current inventory of breeding cows is down more than 3% from its historic high in June 2023, and from January to November this year, the number of newborn calves dropped by over 8%.

Because beef cattle have a long production cycle and low reproductive efficiency, once the foundational breeding-cow capacity undergoes a sharp decline, it can take four to five years to recover. If no immediate measures are taken, the hard-won herd of high-quality brood cows will shrink, undermining the foundation of the beef industry. Therefore, the industry is strongly calling on the government to implement control measures on beef imports in order to protect farmers’ livelihoods and ensure industrial security—an action that is also consistent with WTO rules. The release of MofCom’s announcement helps stabilize expectations within the domestic beef cattle industry.

问：牛肉大量进口，对国内肉牛养殖有何影响？

答：2023年6月以来，进口牛肉连续18个月单月进口量超过20万吨，对国内养牛业冲击十分严重。在国内肉牛养殖行情已经十分低迷，大部分养殖场户处于亏损的情况下，大量进口牛肉的冲击无疑“雪上加霜”。最直接的是造成养殖场户大面积亏损，影响农民收入。在进口牛肉的冲击下，国内牛肉和活牛价格快速下跌，目前牛肉价格已跌到近5年最低，活牛价格更是跌到近10年的最低水平。有数据显示，今年11月份出栏一头肉牛平均亏损1600元以上，连续8个月亏损超过1000元，65%以上的养殖场户处于亏损状态。同时，很多养殖场户都是贷款养牛，牛卖不上价，贷款就没法还，即便勉强还上，也是负债累累，不得不退出这个行业。更严重的是母牛被大量出售屠宰，影响产业安全。行业反映，牛肉过度进口已对我国肉牛产业造成实质性损害。我们在一些主产区调研时发现，目前犊牛价格已经抵不上母牛的饲喂成本，有的地方母牛按斤低价甩卖，不少有繁殖力母牛被送进了屠宰厂。据监测，当前基础母牛存栏量比2023年6月的历史高点下降超过3%，今年1—11月份新生犊牛同比降幅超过8%。肉牛生产周期长、繁殖效率低，一旦基础母牛产能大幅下滑，没有4—5年时间难以恢复。如果不尽快采取措施，好不容易发展起来的优质基础母牛群体将面临萎缩，动摇肉牛产业根基。所以，行业强烈呼吁国家对进口牛肉采取管控措施，保护农民生计和产业安全。这也是符合世贸组织规则的一个措施。这个公告的发布，对国内肉牛产业来讲，起到了稳定预期的作用。

IV. The Xinhua interview

Hours after the MofCom and MoA released their pieces, state news agency Xinhua published an interview with CUPL law professor Shi Xiaoli discussing MofCom’s decision.

On top of repeating previously mentioned points on the pressure of the domestic beef industry and that the action is in accordance with WTO rules, Shi stresses that China has always been “very cautious“ in conducting such investigations.

Shi said that from 1995 to 2024, 55 WTO members have launched investigations, totaling 437, while the investigation on imported beef has only been the third such investigation by China. The previous two are against imported steel in 2002 and imported sugar in 2016 (protective measures were taken after both investigations, see here and here).

Shi also noted that for agriculture products, MofCom and MoA will jointly conduct the probe.

V. The MoA talk show

On Dec. 28, a news outlet affiliated with the MoA aired a talk show featuring a MoA official and an industry expert in cattle breeding.

The show mostly covered the status quo of China’s cattle breeding industry and its challenges.

The guests said production of beef can not meet the increasing demand in China, and that foreign beef often costs less than half of domestic beef. The MoA official said

Imported beef costs about 34 yuan (4.7 USD)/kilo pre-tax, while domestic beef costs 70 yuan (9.6 USD)/kilo. Foreign cattle are often grass-fed, with minimal labor cost. By comparison, there are 7.4 million cattle farms in China, with 6.7 million producing less than 10 cattle/year. Farms that produce more than 50 cattle/year only make up for 37.2% of all production, the lowest among all livestock industries.

VI. The Foreshadows

Low beef prices have hurt domestic cattle farmers for months now. In June, Xinhua published a weighted piece discussing the persisting low price of beef. The piece listed fast-growing imports as one of several reasons contributing to the low price.

In response to the hardships facing cattle farmers, MoA and six other government agencies rolled out a policy to help. Measures include boosting milk and beef consumption, and providing loan support for farms “facing temporary hardships”.