Was it wise to allow the Chinese to purchase Smithfield Foods? At first glance the answer seems obvious, but is it really?
In 2013, Shuanghui Group (renamed WH Group), a Chinese company, purchased Smithfield Foods. The deal happened because the Committee on Foreign Investment in the United States (a government panel that reviews national security implications when foreign entities purchase U.S. companies) and the Smithfield Foods shareholders approved the $4.72 billion purchase.
At the time of the purchase, some Washington lawmakers expressed concerns that the purchase by a Chinese company could squeeze the U.S. pork supply and make the U.S. susceptible to food safety concerns that have plagued Chinese companies. They also expressed concern that this acquisition would set a precedent for the Chinese to takeover other U.S. food companies.
People on the other side argued that once Smithfield became a Chinese owned company, the U.S. would sell more pork to China. This would occur because the Chinese government could change its import duties without altering its policy goal of Chinese food self-sufficiency and protection for domestic producers.
Also, the WH Group is the largest pork producer in China. It’s distribution network could significantly help increase the sale of U.S. pork products in China.
In addition, this alliance would help the U.S. get rid of more pork byproducts. Feet, ears, stomachs, livers, and intestines are widely used in Chinese cuisine. They are not popular in the U.S.
At this point, it is hard to tell whether the sale made any difference on U.S. pork imports in China. The market for U.S. pork in China declined for a number of years after the Smithfield purchase and then spiked in 2020 when the Chinese producers has issues with the African swine fever. As would be expected, exports to China dropped after China was able to get that problem under control. We do not know for sure where U.S. exports will level off.
It is interesting that the WH Group began the process of taking Smithfield public again this summer. As part of the Initial Public Offering (IPO), they will sell 20% of the shares. WH Group will maintain the other 80%, so the company will still be controlled by the Chinese.
Only time will tell if the sale of Smithfield to the Chinese increased pork exports or just put the US food supply at risk.
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