Chinese state aid helps poultry firm expansion, despite pollution concern

By Mark Godfrey

- Last updated on GMT

Documents reveal some Chinese residents have been displaced over pollution fears
Documents reveal some Chinese residents have been displaced over pollution fears

Related tags: Poultry farming, Poultry

Chinese poultry giant Henan Huaying Agricultural Development Co has aggressively expanded its duck and chicken processing capacity with a package of government subsidies totalling over RMB40 million for several new plants.

However, the company’s plan to expand its duck output from 100 million to 140 million birds (it also slaughters 80 million chickens) has caused rancour among locals in Henan province, who are worried about pollution, with local government documents showing some of the subsidies were spent on relocating residents from around new breeding and slaughtering facilities.

Under an agreement for a ‘New Slaughter and Processing for 40 million Broilers’, signed by Huaying and the Huaibin County Government, the RMB40m figure includes exemptions and refunds to the company from various land and VAT taxes – for instance, the Huaibin county finance bureau this month refunded RMB3.29m in ‘land appreciation taxes’ to Huaying.

Under the plan for 40 million extra birds – which was originally published in 2009 – Huaying promised to generate work for 11,000 local farm households rearing poultry. Locals had earlier complained about the firm’s waste disposal record in a lengthy report in the Henan News on the impact of intensive poultry production on the central region which is also China’s most populous province. 

‘Dragon head’ Huaying
 
Huaying, which earlier this month also announced it had raised RMB857.1m, via private placement, has been identified as a ‘dragon head​’ or key regional enterprise by the Huaibin county and Henan provincial government – a designation which entitles it to priority government support in return for job creation and generating tax revenue for the local area.

Exports are also a priority for Huaying, which recently announced its first bulk shipment of duck to the New Zealand market and last year marked its first shipment of processed duck to the EU market. Expanding exports is a goal for the company, according to a statement from project manager Wang Junhui. The company is keen to satisfy growing demand among Chinese consumers, who see duck as a healthier alternative to chicken and other meats, said Wang. Duck sales are growing an average of 4% per year compared to an average of 3% growth for chicken according to China’s Agriculture Ministry.

Scale and standardisation

Ranked as China’s largest processor of ducks, Huaying slaughters 100m ducks per year as well as 80m chickens. The firm has operated an integrated corporate model, producing almost 1.5m tonnes of feed per year – most of which is distributed to local growers contracted to produce birds for Huaying (the firm also has its own in-house hatcheries and rearing operations).
 
China has provided subsidies to promote horizontal and vertical integration in the poultry sector as a way of guaranteeing food safety. Government payments of subsidies under the 12th five-year plan promote “scale and standardisation​” of poultry farms and, according to the Ministry of Agriculture, some 92% of birds are now produced in farms with an excess of 2,000 birds. Subsidies of up to RMB70m were available to firms building new plants while a RMB85 payment was available per grandfather bird to improve and expand poultry lines.

To support and attract poultry breeders and processors, the province of Anhui exempted firms from waste and pollution treatment fees while as well as VAT. In the three decades to 2014, average per capita consumption of poultry soared from 1kg to 9kg. Water fowl (including ducks) account for 30% of overall poultry output.

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