July 15, 2003

An Exclusive eFeedLink Interview with Mr Liu Tong-zhan, Secretary-General of China Association of Feed Industry


An eFeedLink Exclusive Report


Electronic Commerce is The Way Ahead for Enterprises

eFeedLink conducted an exclusive interview with Mr Liu Tong-zhan, Secretary-General of China Association of Feed Industry, during

his recent visit to Shanghai to attend the 4th General Meeting of

the Shanghai Association of Feed Industry.


The interview begun with the discussion on a topic, appropriately,

related to eFeedLink's operations-information and electronic commerce. In Secretary-General Liu's opinion, within China's animal production and feed industry, the more likely candidates for electronic commerce would be the industrialized and information-inclined enterprises in the feed production and processing related sectors. By comparison, it would be some time before the technology is embraced by the livestock and animal husbandry sectors which have traditionally relied on information to a lesser extent.


Liu is convinced that from a long-term perspective, electronic commerce is the correct way to go. He said that the outbreak of SARS has clearly illustrated the advantages of electronic commerce in enhancing efficiencies of enterprises.


He noticed that eFeedLink started operations during the downturn of the IT industry. While recognizing the importance of electronic commerce for the future, he felt that current conditions in China are still not fully ripe for electronic commerce. Herein lies the dilemma on the route to take in the development of electronic commerce whether to wait passively for all the necessary conditions to be ready, or to take proactive action to create the required conditions and environment for electronic commerce to flourish. He would support the latter option, citing this may a difficult and only choice to make headway. He compared the latter option to the analogy of getting a fully-inflated basketball on hand, ready to be thrown into the net as soon as there is an opportunity to score.


Secretary-General Liu commented on the special features of several well-known websites within China's feed industry. He also commended eFeedLink's initiative in tapping the uniquely available resources of different Asian countries and from the Western world, and utilizing them to effectively provide an online English platform for the transmission and exchange of information between China and the rest of the world. He encouraged all the website operators in China's feed industry to effectively develop their potentials and use their websites to the advantage of their own enterprises as well as the industry. In this regard, he emphasized the importance of mutual cooperation among enterprises, not just competition; as in his view, China's feed industry has sufficient room for all the players to grow and develop their potentials.


China Feed Industry Suffered Double Setbacks-SARS & High Soybean Prices

On the topic of SARS, Secretary-General Liu said that during the months of February and March, when the outbreak of SARS was at its peak, chickens were in such poor demand that even at the dismal price of 2-3 cents each, there was hardly any buyer. He stressed that SARS' impact on the livestock industry is very significant, and consequently the impact on the feed industry.


In Beijing, feed production was not affected, but showed an increase instead, during the second half of April when the outbreak of SARS was at its peak in the city. This was due to the frantic buying and stocking up of feed by livestock enterprises, who were worried by the SARS outbreak. The situation took a turn during May, when the people in different parts of China started to take preventive actions to control the spread of SARS. The traditional method of door-to-door delivery of feed to customers was affected by the restrictions and preventive measures imposed by towns and villages, causing transportation charges and delivery costs to rise.


From actual market development, it would appear that SARS' main impact were on the export of livestock and aquatic products. Any effect of SARS on China's domestic market had been relatively minor and short-term. While its domestic sector is showing signs of recovery after SARS, China's export market continues to suffer from import restrictions imposed by various countries after the outbreak of SARS, some of which have yet to be lifted. Hence, outlook for livestock and aquatic products industries for the second of this year is not very optimistic.


In addition, the feed industry has to deal with a new problem this year - the high prices of soybean and soymeal. At its peak, the price of soymeal exceeded RMB 2600 /ton. Their impact on China's feed industry is long term and more severe than those of SARS. The high prices of soybean and soymeal are detrimental to the feed industry.


Enterprises Are Encouraged To Strengthen Themselves Through Mergers & Corporate Restructuring

Since the 1980s, when China's feed industry took off, feed production enterprises adopted a market approach in their operation. Through the natural process of survival of the fittest, weaker operators began to disappear from the industry; as mergers, acquisitions and corporate restructuring continued to work their way through the industry. This was especially so during the 1990s, when big groups and conglomerations like "Sichuan Hope Group" "Tong Wei" "Guangdong Heng Xing" and "Shangdong Liu He" emerged. Despite all these, there is still a total of more than 13,000 enterprises of different sizes operating in China's feed industry today, way too many, in the opinion of Secretary General Liu.


Liu encouraged the larger enterprises to continue their acquisition of smaller ones and to optimize their respective industrial structures and organizations. To this end, the China Association of Feed Industry organized a social gathering of large feed production enterprises in Guangdong in October last year.


China Is Closing The Gap With Other Countries In Feed Production

Viewed objectively from an overall perspective, the developmental gap between China's feed industry and those in the US and EU countries is closing steadily, especially in product development. In fact in many aspects, there is hardly any gap. It is certainly no easy task that China had taken only slightly more than twenty years to achieve what took Western countries 100 years to reach.?These achievements had been possible because of China's opening and economic restructuring policies.


Prior to China's opening and restructuring, many people were apprehensive about the possible massive inflow of foreign enterprises into China, crippling the interests of domestic Chinese enterprises. This, however, had not been the case. After more than twenty years, not only did domestic Chinese enterprises survive, they grew and expanded steadily, some of which are well-known in the global feed market, like "Hope Group", "Liu He", "Tong Wei" etc. The production of these enterprises has turned China into the second largest feed producing country in the world, standing only behind US. In fact, these large Chinese enterprises have overtaken many of the reputable International producers in their feed production.


In the area of production technology, there are also significant advancement and achievements. Before 1997, most of the additives used by China's feed industry were imported from overseas. Today, China has become one of the world largest exporter of vitamins and calcium monophosphate.


Many university professors and experts have done well in their development of feed formulation, achieving standards which are comparable to those of other countries in the world. In this regard, various centers of technology for the feed industry have been set up in Beijing and Shangdong province in the north; in Shanghai on the east; to the west, in Xian and Chengdu; in Guangdong province in the south; and in the northeastern region, in Heilongjiang as well as Liaoning provinces.


In the weaker area of amino acid production, China is encouraging active investments from local and overseas investors to participate in its development.


China's Feed Industry Need To Resolve Its Fundamental Problem On Feed Safety

The main issue confronting China's feed industry today is that of feed safety, because of abusive use of additives by feed producers. Fundamentally, it involves food safety, and will ultimately affect the interests of the feed industry. So long as the question of feed safety is not resolved, consumers would refrain from eating livestock and aquatic products. This will not only affect the interests of livestock and aquatic product enterprises but also down the line, the business of feed producers.


Secretary-General Liu said that to get to the root of the problem, the Feed Industry Association has been actively collaborating with the Government to implement regulations and punitive measures to stem the violations of governmental regulations over the recent years. In addition, he said that the Association also encouraged enterprises to improve the quality of their products by participating in ISO 9000 certification. Enterprises have also been urged to adopt an effective marketing strategy to promote the quality of their products and enhance awareness of their respective brand, in their fight against counterfeiters.