Domestic demand for better food standards drive China’s $17 billion halal sector

Photo: Xian, China-August 7, 2013: A woman sells street food in the Muslim district in Xian / Angela Ostafichuk / Shutterstock.com

China's estimated $17 billion halal food sector is growing fast with  demand primarily driven by Chinese consumers placing greater trust in halal food following recent food scandals, especially in milk. As new players enter the market, and Malaysia seeks to develop China’s halal capabilities, what opportunities are there for new players to enter the halal industry in China?

MARKET OVERVIEW

China is not considered a major halal food manufacturing hub but in recent years halal food and drinks production has surged to an estimated $17 billion in 2015, placing China just behind Indonesia, with sales of $18 billion, according to Euromonitor. The halal food sector is slated to grow by 6.4 percent per year to reach $19.4 billion by 2020, projects Euromonitor. 

The primary reason for China's unassuming position as a halal food giant – unlike in nearly every other economic sector – is that 90 percent of the sector is focused on domestic sales, according to Abdullah Guangyu, a senior partner at Al-Sadiq Consulting in Beijing.

“China's halal food industry is already a big market due to the 1.3 billion population, but so far halal food development is for domestic consumption, not export,” Guangyu told SalaamGateway.

China has an estimated 21.6 million Muslims, according to an official census, while independent estimates are as high as 100 million. According to the government, China will have 30 million Muslims by 2020. But with just 2 to 3 percent of China's population Muslim, and minimal exports of halal food, how can the sector be so large?

“Because there is a crisis in food security, which is prevalent throughout the country, halal food lifts the profile and credibility of a business as non-Muslims automatically believe halal is safer,” explained Guangyu.

“Meat for instance is injected with water, especially beef, so people like to buy halal,” he added.

Indeed, the Chinese characters for halal are 'pure' and 'true'.

Due to such food safety concerns, there has been a “massive increase” in Chinese Muslims opening restaurants over the past five years, Guangyu added, estimating there are 40,000 halal restaurants in the country, with revenues of some $50 billion. Such a statistic is reasonable, given there are over 20,000 restaurants in Beijing alone, while the revenue of the Chinese catering sector was estimated at $494.6 billion in 2015, according to Ibis World figures.

HUGE DAIRY DEMAND

What has really driven demand for halal packaged food is the dairy sector, which accounts for 86 percent, or $14.3 billion, of the total halal market.

Demand has surged following the 2008 Melamine milk contamination scandal, which affected some 300,000 babies and prompted 11 countries to stop the importation of Chinese milk.

“What makes China different from other (halal food producing countries) is that halal is used as a kind of safety claim. In the wake of the scandals it was Malaysian halal-certified products that were suddenly a hot commodity as they were seen as safe when Chinese products were going through the wringer,” Alan Rownan, an Ethical Labels Analyst at Euromonitor, told SalaamGateway.

“So I think there could be a trend in reverse, that halal Chinese products have a good export opportunity due to that authenticity,” added Rownan.

CHALLENGES

The take-up and acceptance of halal dairy products in China is a huge boon for the sector, but the country lacks a national certifier while stories abound of mislabeling of halal products as well as pork being passed off as halal, whether deliberately or due to producer ignorance.

“A challenge is certification as it is mostly at the province level. There is also mis-use of halal brands, which is quite common. Some restaurants and companies put halal logos to boost sales,” said Guangyu.

With different halal standards in each province, there has been a great deal of confusion at the national level about what is required.

To address such concerns a draft law on a national regulation for halal food was proposed in 2002. At this year's National People's Congress (NPC) it was hoped that the draft law would be passed, but the legislation was dropped in April. Opponents cited the need for a separation between the state and religion, and for food safety laws in general to be improved, which would correspondingly benefit the halal sector.

“If you develop a special law for Muslims what about other religions? It is a complex issue and there is concern about the re-Islamization of China. But without this legislation we have no chance of exporting halal food, and if there's no law on halal production, anybody can put a halal label, which will hurt Muslims’ feelings and damage China's image in the halal sector,” said Guangyu.

Rownan said that a national standard is not necessarily needed but greater transparency in the food sector would help boost it, while a universally accepted halal standard would be of benefit to China.

 “It is not the be all and end all if a national legislation exists or not, but something concrete definitely has to be done to achieve the opportunity for halal food. Even if there is (a national) halal standard, it is meaningless if it is just a label on products. Look at other labels like Fair Trade, which is not tied to national legislation, but has meaning within the industry and with consumers,” he said.

In the meantime there appears to be a move towards adopting Malaysian halal standards.

In May, it was announced that a state-backed halal hub is to be established in Shaanxi province, with the backers proposing that Malaysia’s Halal Development Corporation Sdn Bhd (HDC) help in its development and the establishment of a halal certification unit.

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