Economy in a flap over bird flu

The fast spread of a new strain of bird flu has put Peng Jinming, a poultry breeder in China's central city of Wuhan, on the grill. His misery is not caused by infection concerns, but frustrations at lost business.

What was felt as a bad omen when he first saw the H7N9 avian influenza reports has become a nightmarish reality. One week on, prices for eggs at his local market slid from 8 yuan (1.2 U.S. dollars) per kg to to 6.4 yuan per kg, a level that hardly covers costs, as demand suddenly dropped.

"I used to have an insatiable desire for more eggs from my hens. But now what I hate most is they are so productive," said Peng.

Annual egg output on Peng's farm can reach 3,600 tonnes, 70 percent of which is sold to neighboring cities. But the target seems unrealistic this year, an issue also troubling another 2,700 breeders who reside in the same poultry farming area as Peng.

The fear of contracting H7N9, which was first confirmed in Shanghai and Anhui, has quickly spread across the nation, shattering demand all the way down the poultry industry chain -- from restaurants to farms, as consumers became more alarmed each day.

China's meat sector, until recently growing at a rate of knots, has recorded losses of more than 13 billion yuan in sales of live poultry over the past two weeks since the first report on the emergence of the virus, data from the National Poultry Industry Association showed on Tuesday.

With one more person tested positive for the H7N9 virus on Thursday morning, the number of infections in China has risen to 83 and the death toll to 17, according to official data.

In the six provinces that have reported infection cases, the government has moved to slaughter birds and close live poultry markets to reduce contact with poultry, the only acknowledged source of the virus so far.

The consumer fear has added further troubles to catering businesses, an important contributor to domestic consumption. They were already being buffeted by the government's recently launched frugality campaign, which has depressed high-end dining.

Latest official data indicated that the catering industry grew 8.5 percent year on year in the first quarter of 2013, down from the 13.3 percent-pace recorded last year.

Liu Xizhen, finance director of Wuhan Jingwurenjia Duck Production Co., a popular Wuhan firm known for its duck neck products, said the company's single-day sales have decreased by as much as 40 percent, although no local infection case has been reported.

"We have trained store managers and salespeople, hoping they can educate our clients on the safety of our products. But some consumers dare not come inside at all," she explained.

Big catering companies have also found it hard to stay away from the swirl. Diners at a roast-duck restaurant operated by China Quanjude Group in downtown Beijing have not had to wait for tables, as is usual, even during the peak evening dining time.

Yum! Brands, the parent company of KFC, said in a statement last week that publicity of avian flu has had a significant and negative impact on KFC sales within the past week, with China sales decline projected at 16 percent.

"Since the puzzle of how the flu is transmitted is still unsolved, we can not be overly optimistic about its impacts on the economy," said Qiao Xinsheng, a professor at the Wuhan-based Zhongnan University of Economics and Law.

According to Qiao, the lack of knowledge about the cause of the virus leaves the country no options but to slaughter poultry. However, technology investment should be increased to help identify the root cause, or government finances may be hit as the economy is further affected.

The one small crumb of comfort for now is that H7N9 has so far been found in only a few Chinese regions. If the situation remains stable, the poultry and catering sectors are unlikely to suffer any major losses, and the retail sector will also stay on course, analysts believe.

"Panic over what has so far been a local epidemic is uncalled for," said Zhang Liqun, an analyst from the State Council's Development Research Center, adding that though the flu's impact can be visibly felt in poultry-related industries, it will not affect the general economy in the long run.

In terms of the damage it has inflicted on the dining sector, the H7N9 phenomenon pales compared to similar incidents like the SARS outbreak of 2003, when the brakes were slammed on China's economic growth, said Bian Jiang, assistant to the president of the China Cuisine Association.

That's because the areas affected by H7N9 are smaller, and the government is more transparent and has acted in a much faster manner this time. Moreover, poultry meat takes up only a minor part of most restaurants' menus, so catering sales may stay stable, Bian said.

Meanwhile, Liu Guoliang, head of the Wuhan Catering Association, suggested that governments and food companies should endeavor to boost public confidence by being strict with their quality checks while avoiding excessive publicity that might generate panic.

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