By Jia Hepeng (China Business Weekly)
Updated: 2004-02-11 11:36

The bird flu is unlikely to continue spreading in China over a long period, but the disease is expected to have severe and far-flung impacts on Chinese agriculture.

Financial losses due to the epidemic could total more than 100 billion yuan (US$12.1 billion), an expert with China Association of Animal Husbandry (CAAH) told China Business Weekly.

In addition to economic concerns, there is also concern that the bird flu, if not handled properly, could give rise to social problems similar to those created by SARS (severe acute respiratory syndrome) last year.

The bird flu has stricken the entire industrial chain of animal husbandry including poultry farming, poultry feed production and corn and soybean farming, said the expert, who asked not to be identified.

China on January 27 confirmed its first case of bird flu. By February 5, 27 bird flu cases had been reported in 13 Chinese provinces and municipalities, the Ministry of Agriculture indicates last Friday.

By February 4, a total of 56,417 birds were reportedly infected by the disease, which is caused by highly pathogenic H5N1 virus, Vice-Agricultural Minister Liu Jian told a news conference last Thursday.

Most experts say that given the large genetic difference between the bird flu virus and human flu virus, the possibility that the bird flu could infect human beings is not very high.

Economic losses could be enormous

So far no human infections have been reported in China, although the World Health Organization (WHO) confirmed last Thursday that human bird flu deaths have risen to 18 in Thailand and Viet Nam.

Liu said that the Chinese Government has adopted effective measures to curb the spread of bird flu in China, including slaughtering all poultry within three kilometres of bird flu cases, vaccinating all poultry within five kilometres, and closing down all poultry markets within 10 kilometres of discovered cases.

By February 4, more than 1.2 million poultry were slaughtered.

"With effective vaccination and quarantine measures and the experience we developed during the fight against SARS last year, we are confident we will win the war in controlling and preventing the spread of bird flu," Liu said.

But the battle to reduce the economic losses caused by bird flu will be much harder won.

In one bird flu prevention measure, authorities have promised to compensate farmers for their chickens slaughtered in prevention efforts. Inspection, vaccination, and quarantine of infected birds could be much more costly.

If the disease spreads further, preventive poultry slaughters could increase.

Bird flu-infected countries in Asia had killed some 50 million birds, mostly chickens, as of last Wednesday.

In some poverty-stricken regions of China, local governments might be unable to pay compensation immediately for slaughtered chickens, the CAAH expert said. Some of the payment, but not all, is funded by the central government.

But industry losses caused by dwindling domestic poultry sales and China's suspension of exports still amount to more than these government subsidies.

The production value of China's animal husbandry industry accounts for 31 per cent of China's total agricultural production value. In 2001, production value of the industry was 796.3 billion yuan (US$96.71 billion).

In 2003, the country's meat and egg output reached an estimated to have reached 68.5 million tons and 25.35 million tons respectively, ranking first in the world.

China is the world's largest exporter of eggs. Its chicken output reached 9.48 million tons in 2002, accounting for 15.7 per cent of the world's total output.

But with the advancing bird flu, nearly all poultry exports have been halted, and domestic consumers have started to shun the products as well.

Egg sales also declined in the wake of reports that they might also spread bird flu.

It has been reported that chicken farmers in northeastern Heilongjiang Province have been demanding government compensation due to the slumping sales of their poultry and eggs.

In a food market in Beijing, a city with no reported bird flu cases, egg and chicken sales slumped 50 per cent last week, vendors said.

What makes things worse for farmers is that China's agricultural sector lacks State subsidies to soften the impact of natural crises such as bird flu.

According to sources in the Ministry of Agriculture, so far the ministry has been concentrating its efforts on containing the bird flu epidemic. The ministry has yet to begin working out policies to help suffering poultry farmers.

Last year, the central government introduced policies reducing taxes and fees on the tourism, communication and accommodation industries, all of which were seriously affected by SARS.

But agriculture, including animal husbandry, might not receive the same kind of attention as did the tourism and travel industries.

Chinese people in general are less interested in losses to the poultry sector, the CAAH expert said. In China, the interests of the agriculture and animal husbandry industries are not strongly represented in the policy-making process.

Yet compared with the impact of SARS, the effect of bird flu on the Chinese economy overall should be much less severe, said Zhang Yansheng, director of the Institute of Foreign Economics under the National Development and Reform Commission.

Besides animal husbandry, tourism is another sector that could be affected by the bird flu. Some foreign package tours to Thailand this year have already been postponed.

But Liu Chenxing, a Beijing-based independent tourism consultant, said any impact by bird flu on tourism in China would be temporary.

China's appeal as a safe and hospitable tourism destination would outweigh any possible fear that bird flu might cause to foreign tourists, Liu told China Business Weekly.

The government's crisis management policies and public relations will also come into play as China faces the problem of bird flu.

While praising the transparent policies adopted by the Chinese Government for the bird flu prevention, experts say some extra measures should also be taken.

Keeping the public well-informed is essential in the fight against epidemic disease. But public fears and potential economic losses to interested sectors due to the release of sensitive information must also be considered in advance, said the CAAH expert. A wide public compensation system should be adopted to help interest losers.