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·         China’s consumption downgrade tastes good for fermented tofu makers

·         China’s Pork Consumption Risks Collapse as Prices Surge




China’s consumption downgrade tastes good for fermented tofu makers


o   Under pressure, consumers in China are cutting back on spending on high-end items, while sales of instant noodles are rebounding after two years of decline

o   Weakening consumer spending comes as economic growth decelerated to its lowest level in nearly three decades at the end of the third quarter


He Huifeng, South China Morning Post (China)

6 Nov, 2019


Three years ago, when Luo Zhaoliu walked away from the engineering job he had held for nine years in the prosperous metropolis of Shenzhen to return home to one of the poorest corners of China to start a fermented tofu workshop, his friends quite rightly questioned his decision.


Sentiment was running high in mainland cities just like Shenzhen, known as China’s Silicon Valley, with many middle-class households pouring money into property and start-up firms. Consumption confidence was relatively strong, with a seemingly insatiable demand for items that indicated an upgrading of expenditure, from imported avocados to yoga pants.


The fermented tofu with a local tea oil fragrance Luo planned to produce, on the contrary, was a traditional delicacy for the poor to add flavour to plain rice or instant noodles when they did not want to spend money on additional dishes. With a retail price of about 15 yuan (US$2.10) per jar, it is among the cheapest choices for adding oil and salt to a meal.


It requires far less sophisticated technology than Luo’s previous job of making electric vehicle components, and few believed that the idea was financially sensible. At the same time as Luo returned to Baoshan village in Jiangxi province, China’s total consumption of instant noodles, seen as a barometer of low-end consumption, dropped 17 per cent to 38.5 billion cases.


Luo, however, went ahead with his plan to revive a family recipe, and he now employs 20 pink-clad local female workers to produce and package the tofu, which is sold online.


According to Luo, business has been growing steadily over the past three years thanks to the quality of his product in a highly competitive market, as well as the general trend of consumption downgrading, namely consumers preferring affordable items over spending on luxurious products.


Some analysts argue that the concept of a consumption downgrade is misleading, given that Beijing’s official figures still show growing consumer spending. Retail sales in China rose 8.2 per cent to 30 trillion yuan (US$4.3 billion) in the first nine months of 2019, according to China’s National Bureau of Statistics, and President Xi Jinping is trying to convince foreign investors to put faith in China’s consumer spending power.


Unlike mature markets such as Japan, most of China’s population of 1.4 billion has a relatively modest income level – its per capita gross domestic product is only set to reach US$10,000 this year, with Japan just under US$40,000 at the end of 2018, according to the World Bank. Still, given its huge size, it is a promising market for any company.


At the same time, though, there are signs of weakening consumer spending in the world’s second largest economy, with growth at the end of the third quarter having decelerated to its lowest level in nearly three decades...


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China’s Pork Consumption Risks Collapse as Prices Surge


o   Households are counting the cost of African swine fever

o   The nation’s appetite for the meat could shrink by half


Bloomberg News

November 4, 2019


Tang Jie, who works on a pig farm, says he used to get pork from the wet market near his home every day. But he hasn’t bought any in two months. And his favorite dish, stewed pork ribs with lotus root, has been cut from the menu at his local restaurant.


“We can barely afford the prices,” Tang, a resident of the southwestern Chinese city of Chengdu, said at a hog conference last month. “Restaurants are changing the menu, and using less pork because of the high prices.”


In south Beijing, small restaurant-owner Yang Yi says he’s had to risk losing customers by raising the price of his popular braised pork dish, Hong Shao Rou, by 17% to 68 yuan. He said he can’t otherwise absorb the higher cost of the meat, which spiked nearly 70% in September after hog numbers collapsed more than 40% from a year earlier because of African swine fever.


Tang and Yang are hardly alone in counting the toll of the deadly outbreak that has devastated hog herds in China. The astonishing surge in pork prices, the staple meat for Chinese people, could yet run many more months and on the way see consumption in the world’s biggest market halved. The question is whether that demand will ever come back.


“There’s simply not enough of the meat domestically, or globally, for China,” said Ma Chuang, deputy secretary general at the Chinese Association of Animal Science and Veterinary Medicine in Beijing.


At current prices, the country’s pork consumption could fall by 50%, said Cheng Guangyan, director at the farm ministry’s Institute of Food and Nutrition Development in Beijing.


Once the cheapest meat, pork dominated Chinese tables, accounting for more than 60% of animal protein consumption. Households are now switching to other sources, putting up the price of alternates like beef and poultry, alarming the government and giving the central bank an inflation headache. Even egg futures hit a record last week.


Record domestic pork prices have also driven the nation’s meat imports to heady levels. Overseas pork purchases jumped more than 70% in September from a year earlier, while beef was up over 50%, according to customs data.


And elevated prices could yet worsen the outlook as farmers delay slaughter to allow their pigs to grow larger while retaining more sows as breeding stock, said Jim Huang, head of independent consulting firm Huang said he expects pork prices to hit 60 yuan a kilo by the end of 2019 as supply drops 70% from last year’s level...


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