With local Chinese beef producers facing many challenges, domestic production is having a difficult time catching up with demand in China’s beef market. While the Chinese government is now providing some support, the gap in productivity between China and other beef-producing countries continues to widen. According to Rabobank’s latest report, China Beefing up Imports to Supplement Domestic Production, China will need to allow a substantial increase in imports in order to cover the supply gap. Beef imports are expected to grow between 15% and 20% each year for the coming five years.“China became a huge importer of beef in 2013”, said Rabobank Analyst, Chenjun Pan. “According to official statistics, China’s beef cattle stock has been in continual decline since 2004, due to a lack of government support, low productivity, and the lack of farmers willing to invest in beef production, deterred by high costs and a shortage of labour”.Rising urban income levels and government support are expected to spur a slow recovery, but not fast enough to catch up with accelerating demand. The structural supply deficit will force an increase in beef imports, including smuggled beef, of nearly 20% - or even double the current import volume by 2018.China’s beef cattle supply shortage is a structural issue and the industry itself faces many challenges. It lags behind other major beef-producing countries in all the key aspects, such as genetics, breeding, productivity, farm management and grassland/feed resources. According to the report, the Chinese government will need to decide which agricultural products it wishes to maintain (or achieve) self-sufficiency in and which it will allow to be more exposed to imports.Beef is not a strategically important agricultural product in China, although the government needs to keep a certain ratio of self-sufficiency to ensure beef supply to the Muslim population. Support for beef producers in China will increase but will remain lower than support for other livestock sectors, leaving beef producers to face the challenges of limited land, water and feed resources.Given the great challenges facing the industry, only marginal beef production growth in 2014 to 2015 is expected.Female cattle stock will be restored to a limited extent through government support. Production will likely see further increases between 2016 and 2018, assuming that the whole herd size benefits from the recovering female cattle stock in the previous years.Even with the expected slight recovery of domestic beef supply, China will no doubt continue to increase its reliance on imports. China’s attitude towards opening markets to more countries has become more positive, and the ban on Australian fresh and chilled beef imports has just been lifted. China is likely to open the door to Brazilian beef in the coming months, and by the end of 2014, may open the market to US beef. Clearly, the Chinese government is actively seeking solutions to solve the domestic supply shortage.