Another sign of an impending wave of agricultural investments?

I have blogged a few times in the past years about agriculture as the next frontier for Chinese investment abroad, but it has been slow to materialise. Over a month ago, the newspaper 经济观察 (Economic Observer) published an article that heralds the publication of a research report on Chinese agricultural investment abroad, commissioned by an interministerial committee. Such reports have been published since at least 2009, but the paper asserts that this time, the report — which has not been made public so far, perhaps because officials have not yet reached consensus about its implications — will serve as the basis of a policy shift towards making more loans available, simplifying the investment approval process, and lowering certification barriers for the import of agricultural produce (especially grain) to China. These are the factors most frequently cited by executives in the report as hindering agricultural investment outside China.

The shift would be in line with a government decree issued last year, called “Guiding opinion on encouraging agricultural investment cooperation abroad” (鼓励开展境外农业投资合作指导意见), which identified the grooming of a few globally competitive central state agribusiness enterprises as a state goal. So far, most Chinese agricultural ventures abroad are small-scale, with an average investment of $100 million as against $600 million for U.S. and Japanese agricultural investments. The article quotes Hu Hengyang 胡恒洋, an analyst with the State Development and Reform Commission, as saying that China State Farm (农垦)’s acquisition of two foreign agribusinesses this year is a sign that the government has now moved to implement this goal.

The signs are that, at the national level, China is more interested in becoming a major player in international agribusiness and breaking the monopoly of large Western traders and seed distributors than in “land grabbing” per se. The article provides an overview of major agricultural investments abroad to date. COFCO (中粮) bought Australia’s Tully Sugar in 2011, and bought a controlling stake in Nidera, a Dutch crop trader, this year. COFCO’s provincial-level equivalent in Chongqing has been a pioneer in overseas investment since 2010, setting up large soybean plantations in Brazil and Argentina and triggering legislation there restricting large-scale foreign land acquisitions, while Heilongjiang State Farm has acquired some 40 million mu (2.7 million ha) of land in Russia and Brazil. In the private sector, Tianjin-based Julong Group (聚龙集团) has over 100,000 hectares of oil palm plantations in Indonesia, accounting for 20% of the country’s annual palm oil output. Zhejiang’s Kasen (卡森) has 270,000 mu of soybean fields in Brazil, while Qingdao-based Ruichang Cotton (瑞昌棉业) and New Hope Group (新希望集团) have pioneered cotton in Africa and livestock farming investment respectively.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: