Editor's note: The following article is part of a special report from the USDA's Economic Resource Service called "China's Volatile Pork Industry."
China’s potential to affect the world pork market derives from the size and volatility of its domestic pork market. China accounts for nearly half of the world’s pork production and consumption. Its annual pork output is four to five times that of the United States and more than double that of the European Union.
According to official Chinese statistics, China slaughters over 600 million hogs annually—one hog for every 2.2 Chinese people. Historically, China has been a mostly self-sufficient pork economy. Mainland China traditionally imported modest amounts of pork offal and muscle meats and exported a similar amount of pork and live hogs to Hong Kong (a separate customs territory from mainland China).
Some pork shipments from other countries to Hong Kong are re-exported to mainland China through “gray” market channels, but the amount is unknown. While Hong Kong is a short distance from the country producing half of the world’s pork, most of the territory’s imports come from Europe, the United States, and Brazil. From 2000 to 2006, China and Hong Kong combined to import between 500,000 and 600,000 metric tons of pork and pork products annually.1 These amounts were a significant share of world pork trade but equated to less than 1 percent of annual pork consumption in China-Hong Kong.
China and Hong Kong pork imports surged in 2007 when a shortfall in Chinese pork production led to record Chinese pork prices. That year, Hong Kong-China pork imports nearly doubled to just over 1 million metric tons (mmt), then rose to over 1.9 mmt in 2008 (fig. 1).
According to the U.S. Meat Export Federation, the 2008 total far surpassed the previous pork-import record of 1 mmt set by Japan in 2005. In 2009, China-Hong Kong pork imports fell to about 1.5 mmt—still nearly three times the pace of imports earlier in the decade—but rebounded to 1.8 mmt in 2010.
The 2010 import volume was equivalent to 3.6 percent of China’s domestic pork output. The United States supplied about 20 percent of China-Hong Kong pork imports in recent years.
For the U.S. pork industry, China-Hong Kong has been one of the leading export markets since 2007. During the peak import period of 2008, U.S. sales to the region accounted for over 18 percent of U.S. pork exports, about double the annual share exported to China-Hong Kong during 2000-2006.
Monthly statistics on mainland China’s pork trade reveal a link between imports and domestic pork prices (fig. 2). High domestic prices during 2007-08 reflected short supplies in the Chinese market and prompted a surge in pork imports.
The average domestic hog price in China doubled from about $.52 per pound in the first 4 months of 2007 to a peak of $1.08 per pound in April 2008. Monthly imports by mainland China grew rapidly as prices rose, reaching a peak of 119,000 mt in June 2008, up from 15,000 to 30,000 mt during 2004-06. Imports were boosted by a temporary cut in the country’s pork tariff and a state-owned company’s contract to purchase U.S. pork to build up reserves ahead of the Olympic Games held in Beijing in August 2008.
After peaking in April 2008, Chinese pork prices fell until early 2009. China’s monthly pork imports also fell to under 40,000 mt during the first half of 2009. The decline in prices reached a low of $.61 per pound in May 2009, about a year after the peak.
A combination of factors helped drive down prices during this period: a buildup in production capacity that increased the domestic supply and a temporary decrease in demand due to concerns among Chinese consumers that the H1N1 influenza virus (swine flu) could be transmitted by eating pork.2 While no link between pork consumption and H1N1 transmission was scientifically established, Chinese authorities still banned imports of pork from North America to prevent the spread of the disease to China.3
The ban remained in place for the remainder of 2009 and stopped direct imports of U.S. pork for nearly a year until June 2010. Chinese pork prices began another run of monthly increases in the second half of 2010 and reached new highs during 2011, 3 years after the sharp increase in prices during 2007-08. With domestic pork prices rising, less expensive foreign pork was more competitive in the Chinese market.
Chinese customs statistics revealed that China’s monthly pork imports during late 2010 and 2011 surpassed the record pace set in 2008, rising as high as 150,000 mt during September 2011 (see fig. 2). Imports from the United States accounted for most of the import growth during 2011.
1We combine trade statistics for mainland China and Hong Kong since industry sources say that some pork imported to Hong Kong is re-exported to mainland China. Also, Hong Kong’s pork imports shift away from mainland China to other suppliers when Chinese prices rise.
2According to Zhang (2010), the pork price dropped dramatically during the H1N1 (swine flu) crisis, but consumer confidence recovered rapidly after China’s vice minister of agriculture made an announcement to reassure the public that pork was safe to eat.
3Chinese authorities also quarantined large numbers of travelers from North America during this period.
About the Authors: Fred Gale and Daniel Marti are agricultural economists with USDA’s Economic Research Service. Dinghuan Hu is a professor with the Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences.