Beijing’s beef and dairy subsidy boom
how direct payments reshaped PRC protein security—and why structural struggles persist
Tariffs and subsidies, left and right hands of industrial policy, will roil the trade policy community for the foreseeable future.
As industrial policy goes global, we examine how subsidies, a familiar story in agriculture, are shaping one specific sector: PRC beef and dairy. As we see it, PRC direct subsidies are not unlike the brash US Farm Bill with headline payments, price supports, and strategic interventions. Meanwhile, indirect subsidies—R&D funding, preferential loans, strategic procurement—appear to channel Beijing’s inner Brussels. Taken together, they massively distort the market.
Economic downturn is punishing the PRC agriculture sector; a subsidy surge is keeping beef and dairy afloat amid oversupply and import threats. Yet despite billions in direct financial support and stepped up trade-defence measures, the beef and dairy sectors remain fragile. Ever optimistic official Current pressures offer a critical window to reposition these strategic sectors from volume-based laggards to high-quality leaders, argues International Livestock Technology.
tale of two crises
Historically outranked by grains and pork, dairy and beef rose sharply in prominence after two major crises.
The 2008 melamine scandal shattered consumer trust in domestic dairy, sparking a decade of consolidation under national champions (Yili, Mengniu), stringent quality controls, and regulatory tightening, codified in the 2018 Dairy revitalisation plan.
Between 2008 and 2018 the industry share of mega farms (≥100 cows) jumped from ~15 to ~60 percent. The top 20 firms comprised over 55 percent of the industry.
This shift was summed up in slogans about firmly grasping the ‘milk bottle’, echoing long-established grain security rhetoric centred around holding the national ‘rice bowl’, clearly promoting dairy within Beijing’s food security strategy.
Similarly transformative was the 2018–19 African swine fever epidemic, which nearly halved the national pork herd and prompted a strategic pivot towards beef, explicitly outlined in the 2020 No.1 Document.
Echoing the dairy story, beef underwent targeted state-backed consolidation through investments in large-scale ranches and feedlots to achieve economies of scale and lower production costs.
The state response to these two crises was to catapult dairy and beef into pillars of national food security and rural livelihoods, prioritised in No.1 Documents and the 14th 5-year plan.
They subsequently started sinking under oversupply and plunging prices. State Council issued a multi-agency notice in October 2024, to stabilise beef and dairy base capacity with subsidised loans and feed cost support.
protection to the fore
The strategic positioning of dairy and beef led to trade defence actions in 2024.
Retaliating against EU tariffs on PRC EVs (announced the previous day), MofCOM started an anti-subsidy probe into EU dairy imports (milk powders, cheeses, creams) on 21 August.
Justified by claimed ‘unfair’ EU subsidies harmful to PRC producers—not least premium categories dominated by European firms—the timing was clearly geopolitical, underscoring growing EU-PRC tensions.
Launched December 2024, a separate safeguard investigation targeted spiking beef imports, surging over 65 percent since 2019.
The influx coincided with PRC price falls from some C¥90/kg in 2021 to C¥70/kg by late 2024, plunging 65 percent of cattle farms into financial losses despite state-backed herd expansions.
Positioned by policymakers as a ‘defensive’, not ‘protectionist’ move, the stress was on adherence to WTO and domestic regulatory frameworks.
A ‘prudential safety valve’, the probe steadied markets, buying time for needed structural adjustments, explained Shi Xiaoli 史晓丽, WTO Law Research Centre (China University of Political Science) in December.
Yet delegates to the 2025 Two Sessions admitted deeper structural stresses were at play: surging per-head cattle costs, driven by soaring forage prices, mounting indirect costs, and growing debt: issues entailing policy remedies beyond ‘trade defence’ alone.
all in on protein
On promotion of dairy and beef to food sector champions, central and provincial authorities have seriously boosted direct subsidies, stabilising producer incomes and stimulating domestic output.
At the central level, payments explicitly tied to output, e.g. per-head cattle or per-litre milk subsidies, risk WTO Amber Box sanctions, despite their classification entailing notification and debate.
Central direct subsidies include a 2024 pilot scheme offering dairy processors C¥0.3–0.5 per kilogram for milk powder and cheese production, explicitly linked to processed volumes.
Further cases in point, genetic improvement subsidies provide producers C¥1,000–5,000 per imported cow or embryo (above all for breeds like Holstein and Simmental), rewarding productivity upgrades.
Henan’s 2020 subsidy program alone funded imports exceeding 10,000 cows: targeted payments exhibiting both scale and specificity.
Industry analysts reported that reserves loaded up with some 40K tonnes of skim milk powder at above-market prices to support processors, amid oversupply. This chimed with a July 2022 MARA statement that Beijing was evaluating a national milk powder reserve to regulate seasonal imbalances.
Whole mink powder imports fell sharply from ~845 kt to ~430 kt in 2023, widely deemed a result of state-led procurement, noted DairyReporter.
Central direct subsidies combine WTO-compliant risk management with pilot credit support, such as low-interest loan guarantees. Production-linked supports meanwhile, remain prominent. As officials try to balance short-term stability with long-term resilience.
Sustained intervention using input subsidies and reserves may, warns the OECD-FAO Agricultural Outlook, entrench overcapacity and distort price signals. The risk is heightened by Beijing’s lack of transparency in WTO subsidy notifications, particularly as regards implicit or provincial-level support.
big bets, wide spreads, safe plays
Regional subsidies in Inner Mongolia, Xinjiang, and Ningxia reflect tailored approaches: driven by local fiscal capacity, geography, processor influence, and industry structure.
Inner Mongolia: volume‑driven
Largest dairy province, Inner Mongolia mobilised C¥14 bn in dairy relief over 2023–24, deploying the most aggressive local subsidies in the country
Measures have included
C¥8,000/t for whole‑milk powder production
10 percent spray‑dry bonus (capped at C¥1,000/t; Mar–Aug 2025)
feed incentives: C¥1,000/mu for alfalfa (regional top‑up of C¥400 atop central C¥600/mu) and C¥50/t for silage storage
loan interest subsidies: 70 percent of LPR, capped at C¥2 million per farm
Shaped not only by fiscal bandwidth, the measures display coordination of regional authorities with such top processors as Yili and Mengniu, reliant on stable raw milk supply and large-scale powder conversion.
Funding blended regional budgets, provincial guarantee support, and C¥9.5 bn in central transfers earmarked in 2025 for pasture and feed infrastructure.
Xinjiang: comprehensive cattle & dairy incentives
In August 2024, Xinjiang rolled out its ‘Nine Measures’, offering broad support across livestock categories
C¥2,000/head premium dairy cow subsidy (≥100‑cow herds, ≥9 t lactation)
C¥500/head beef calf subsidy (raised >3 months)
C¥4,000/t bonus for fresh milk converted into powder or cheese
This was underpinned by a C¥10 bn loan interest subsidy (70 percent LPR, capped at C¥2 million/farm or C¥10 million/agribusiness), and some C¥2 bn for feed subsidies, livestock insurance, and beef reserves.
As in IMAR, subsidies here were co-financed via regional fiscal authority, rather than solely city-level budgets, enabling greater program scale and multi-year duration.
Ningxia: targeted, fiscally constrained support
Ningxia, by contrast, pursued narrow, city-led subsidies. Yinchuan issued a C¥1,000/t whole milk powder subsidy in 2024, capped at 25,000 tonnes, to encourage local processing.
No broader provincial-level livestock subsidy exists, reflecting limited fiscal headroom and the region’s modest dairy industry footprint. Ningxia’s program was entirely city-financed, without central or regional matching funds.
the quiet provinces
For all their strong livestock output, neither Heilongjiang nor Henan launched new provincial-level direct payments 2019–25. They rely on central schemes such as livestock insurance and reserve procurement.
Their conservatism may reflect tighter provincial budgets and/or weaker vertical integration with processing firms, easing pressure to intervene during market downturns.
heavy support, fragile sectors
Despite unprecedented direct subsidies, both dairy and beef sectors remain structurally vulnerable. Industry delegates to the 2025 Two Sessions highlighted continued sectoral distress.
Citing persistent ’supply-demand imbalance' and low industry resilience, Mengniu’s R&D Director Shi Yudong 史玉东 insisted that intensive financial injections alone cannot sustainably stabilise the sector.
Shi urged deeper structural reforms: expanding into higher-value dairy categories such as specialised cheese and functional dairy ingredients, reinforcing consumer education to boost dairy nutrition awareness, and enhancing resilience via tech innovation and IT.
He proposed boosting strategic milk reserves and systematically improving national student milk programs needed to raise dairy consumption and market stability.
Beef faces like pressures. Industry data from early 2025 indicates widespread financial distress, with 70 percent of cattle farms incurring losses and farm-gate beef prices plunging nearly 26 percent since 2023.
Zhang Li 张莉, Anhui Livestock Technology Promotion Centre, explicitly called for reopening livestock transport ‘green channels’ to cut logistical costs, alongside comprehensive value-chain interventions to lower producer burdens.
Urging calibrated trade measures and stricter import quality standards, Professor Zan Linsen 昝林森, Northwest A&F University, cited reliance on low-cost imported beef directly undermining the industry
Compounding domestic challenges, MofCOM’s safeguard probe hearing detailed severe impacts from imported beef.
Domestic industry delegates cited depressed prices, falling profitability, and declining capacity utilisation—explicitly attributing losses to surging, low-priced imports. Despite subsidies, etc., competitiveness gaps remain.
These gaps reflect deeper structural inefficiencies in fragmented livestock production and high production costs in global terms.
beyond cash: ESG on the horizon
Yet direct subsidies characterise Beijing’s response to only a limited extent. Central and local authorities rely ever more on indirect support: insurance, preferential financing, R&D investment, justified in environmental, social, and governance (ESG) terms.
Positioned not merely as tools to stabilse the domestic market but also as internationally defensible subsidy frameworks, ESG-style policies are becoming central to Beijing’s actions to deal with external scrutiny and secure industry resilience.
Next time out we’ll explore in depth these emerging indirect subsidy models and their role within PRC strategic agricultural policy.