China's investment abroad in agriculture is picking up momentum, boosted by a big endorsement from the highest levels of Chinese officialdom this year.
In August, the Ministry of Commerce announced that 300 Chinese companies had undertaken overseas investment in agricultural, forestry, and fishing projects in 46 countries and regions on all five continents in recent years. The article said officials are actively evaluating opportunities and formulating supportive policies for investment in crops, livestock, and seed industries.
The pace of overseas investment in agriculture has picked up following the endorsement in a paragraph of the January 2014 "Number 1 Document" which called for accelerating the "go global" (literally, 走出去 or "go out") strategy as a way to "rationally utilize international markets." The Commerce Ministry cites the document's endorsement and emphasizes that the 300 investors are utilizing overseas markets and resources, a reflection of the incorporation of "go global" into China's food security strategy which calls for utilizing "two markets and two kinds of resources."
An official from the Ministry of Agriculture's "agricultural dragon head enterprise association" said that the 300 companies had laid a foundation for the investment strategy, but acknowledged that Chinese companies are far behind those of developed countries in overseas investment. He regurgitated another part of the "go global" strategy from the Number 1 document: to nurture large internationally competitive Chinese grain, cotton and oils companies engaged in processing, marketing and trading commodities.
In August 2014, a training course was held in Shandong Province for Chinese companies considering overseas investment in agriculture. Shandong alone has 42 companies that have invested abroad, "looking for land to plant," and "developing new resources and markets."
A Shandong company is engaged in a rice project in Cambodia. Like many Chinese investment projects, it seems to mix objectives of projecting soft power abroad, making money, and supplying food to the Chinese market. The company plans to build a "rice industry park" that eventually will encompass 300,000 hectares in Battambang Province. Using the Chinese "company + household" model, the company has rented 1200 hectares of land for a farm where it will grow rice seed from a variety developed by China's superstar rice breeder Yuan Longping and set up a "demonstration farm." It will supply seed and technical assistance to raise yields. The rice will be processed by a company mill. The project is said to "lock in grain resources" from farm to processor. A company representative says the Cambodian government has welcomed the investment funds, planned water management facilities, and prospects of higher rice yields. The project is supported by loans from China Development Bank, a government policy bank that supports overseas investment by Chinese companies.
As part of the August propaganda blitz, Farmers Daily ran an article outlining the "go global" strategy and stressed that companies are the main players (i.e., not investment by the government or individuals). An "expert" said that "going global" must be accelerated to meet China's urgent need for food security in view of the "risk of dependence on imported grain and other commodities" which "grows year by year." The article said projections indicate China will need to import 30 million metric tons of grain, 2 mmt of beef and mutton, and 3 mmt of hay by 2020.
The Farmers Daily article said the "going global" strategy is necessitated by China's rapid urbanization, extensive use of land, increased pollution of water and soil, degradation of grasslands, and severe depletion of coastal fisheries due to long-term over-fishing. According to "experts," developing overseas resources by Chinese companies "going global" is a critical part of China's food security strategy since its own farmers will not be able to supply the country's increasing demand.
The agricultural "go global" strategy has been endorsed by Xi Jinping. In 2013, central government authorities surveyed big Chinese companies about "going global" and offered suggestions for policy support. Xi's endorsement of the push for agricultural "going global" intertwined food security and foreign policy objectives by endorsing it as a means of both "preserving national food security" and "supporting foreign relations strategies." As with many other policies, Chinese companies are used as tools to carry out objectives of the State. Thus, domestic, foreign affairs, and commercial objectives are intertwined and it is difficult to discern what these investors are really up to.
Farmers Daily said officials are contemplating policies to support companies "going global." As an example of past support, Farmers Daily cited subsidies introduced about five years ago for fishing boats, diesel fuel, and subsidized loans "to promote rapid development of ocean fishing." Other possibilities are a special fund for overseas agricultural investment, subsidized loans, training for personnel, and setting up information exchange platforms. The government plans to help companies acquire overseas registrations, trademarks, and to help them develop internationally-recognized brands.
A description of Jilin Province's "going global" development strategy was presumably offered as a model for support. Jilin began in 2006 by forming a coordination group that orchestrated company, bank, insurance and government resources to develop farming abroad. It set up a company called Jilin Foreign Agricultural Development Group to invest in farms growing rice, corn, and soybeans in Siberia. The government designated import quota for the company so it could import grain (private companies have to apply for scarce quota and hope for the best when the government doles it out). In December 2013, the first 30,000-ton shipment of rice arrived in Jilin from a farm set up in Russia. This was said to be the first-ever shipment of rice from a Chinese-owned overseas farm and was described as a great breakthrough. The provincial branch of China Development Bank has set up a Jilin "going global" fund for agriculture to promote more investments.
Farmers Daily warns that Chinese companies have learned that renting land and investing are sensitive in some countries. Companies are urged to seize opportunities in countries receptive to technology and investment where they are more welcomed.
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