Overview-China’s halal food market

Photo: NINGXIA PROVINCE, CHINA - JUL 11, 2011: Yinchuan Nanguan Mosque is one of the largest mosques in North China with a history of hundreds of years. It has a high status among the Hui people / Katoosha / Shutterstock.com

China’s contribution to global halal food exports is currently low but with a government push to re-establish the Silk Road trading routes, the establishment of halal industrial parks, and a certification scheme in the country, China could become a major player in the global halal food industry. What opportunities exist for mainstream food companies to enter this lucrative market?

Consumers in China spent $798 billion on food and beverage in 2014 and this is projected to grow by a Cumulative Annual Growth Rate (CAGR) of 11 percent to reach $1.5 trillion by 2020. Of this aggregate, China’s estimated 26 million Muslims contributed around 0.1 percent, or $10 billion, estimates the State of the Global Islamic Economy 2015/16 report.

China is also a relatively small player in the halal export market, accounting for 0.1 percent of global halal food exports, according to statistics issued by the China Council For the Promotion of International Trade, with the largest exporters in 2014 including Brazil and the U.S.

However, China seeks to enhance its global presence in the halal food industry and there is significant opportunity to grow the market in the mainland.

HALAL MARKET DEVELOPMENTS

China is considered the world’s manufacturing hub and is seeking to expand its participation in the growing halal food sector. The Chinese government has sought to improve trade with Organisation of Islamic Cooperation countries through its “One Belt One Road” initiative, with several companies in China’s Gansu province signing trade agreements with Turkey and Kazakhstan to export food products. This is supported by several initiatives to establish a halal-friendly ecosystem inside the country.

These initiatives include the Wuzhong Halal Industrial Park, which to date houses over 200 companies. The Park was established in the Northwest of the Ningxia Hui autonomous region, where over 50 percent of the city’s residents are Muslim.

According to the Mayor of Wuzhong in an interview with China Daily in 2015, the Halal Industrial Park  would support international trade, with an emphasis on setting a “high and strict bar to produce halal food products…. in line with international standards.”

Progress has also been made in the area of halal certification. China’s first halal certification center was established in 2009 in Ningxia, with over 100 local businesses now certified and mutual recognition of the region’s halal standards established with Egypt, Malaysia, and Saudi Arabia .

LANDSCAPE AND MAJOR PLAYERS

China’s halal food industry is fragmented, with the lack of national household names, although experienced local players such as Arman and Jingyitai have potential to grow rapidly.

The State Ethnic Affairs Commission surveyed 2,400 cities and counties in China and found that over 95 percent of respondents had local halal food industries.  However, most of the players were local and there is a lack of nationwide household names.

In Ningxia in particular, which has a high Muslim population, there were over 190 halal food manufacturers, most of which had fewer than 100 employees.

There are, however, notable halal players in Xinjiang that could have the potential to address the demand for halal meat in particular, on a national scale.

Arman Muslim Foods Industrial Group is one of the leading manufacturers of halal food in the region, with 14 supermarkets in Urumqi, the capital of Xinjiang. Arman also distributes to over 2,700 Arman franchise chain stores and over 10,000 other stores throughout Xinjiang province. Through its recent partnership with TPM Biotech of Malaysia, the company is aiming to raise its adherence to halal and the quality of its manufacturing processes to access the broader global halal markets.

The Jingyitai Halal Food company is a major player in the Ningxia Hui Autonomous Region, with plans to build a halal food factory in the UAE. If Jingyitai’s plans materialize it will be the first Chinese halal food manufacturer to invest directly in the MENA region.

However, larger domestic conventional players are emerging and taking interest in the sector.

Shineway Group, one of China's largest processed meat companies, entered the market in 2009 through a $310 million investment in a halal meat production base.

Beijing Shunxin Agriculture Co. Ltd, a national diversified food products manufacturer with revenues of RMB 6.8 billion in 2014 ($1.8 billion) acquired Linxia Qingheyuan Halal Food Co. Ltd. for $220 million in 2015. Linxia is a vertically integrated meat processer, with in-house husbandry and slaughtering and is a key player in Gansu province, which has a sizeable Muslim population.

CHALLENGES

However, despite the opportunities, there are several challenges limiting the growth of the halal food industry in China that need to be addressed.

China lacks national-level halal certification. While the certification center in Ningxia is a promising development, it has no national level certification, which limits its credibility in international markets.

A recent partnership has been announced between the Gulf Halal Center and the China International Trade Promotion Center that will help develop a national scheme.

China has been involved in halal food scandals, harming consumer confidence and raising the need for closer regulation. Notable scandals include a Chinese food processer in 2013 selling 22 tons of pork as halal certified beef, harming consumer confidence in China as well as in OIC markets.

There are ideological differences between China and the broader Muslim world, with manufacturers needing to understand nuanced different consumer tastes in other countries. Muslims in China had been somewhat isolated from the international Muslim community, with greater onus on Chinese halal food manufacturers to better understand the needs of Muslim consumers abroad, which may differ substantially from the local market. 

"The truth is that China is a non-Muslim country and its ruling party promotes atheism. Despite our assurances that we are a Muslim company and that we closely follow the doctrines of the Quran during our manufacturing process, they distrust us and doubt our piety," said Zhang Hongyi, Manager of Jingyitai Halal Food Company, to local newspaper The Global Times in 2015.

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