Chinese farmers seek land abroad

By Zhang Lulu
0 Comment(s)Print E-mail, January 8, 2014
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"I am a Chinese and a farmer in America." This is how Zhang Renwu introduced himself at a Chinese annual agriculture meeting last December.

Zhang, director of Beijing Lvtianyuan Ecological Farm Co. Ltd, has bought two farms in Utah over the past two years, to grow alfalfa, which is used as feed for dairy cows. As the head of the largest alfalfa pellet supplier in China, Zhang is acutely aware of the nation's alfalfa shortage. He closely monitored farm sales in the United States for several years, and eventually bought one in northern Utah in 2011, paying more than US$10 million for the 130,000-mu (approximately 8667-hectares) farm.

An increasing number of Chinese enterprises have gone to farm abroad due to challenges in China's grain production. []

An increasing number of Chinese enterprises have gone to farm abroad due to challenges in China's grain production. []

Zhang is one of a growing number of Chinese who are looking to buy farms abroad. Liu Chuanzhi, the legendary founder of the computer giant Lenovo, is currently looking for a farm in Chile to grow fruit.

In fact, China's agriculture has entered into an unprecedented era of going global.

The burden of China's agriculture

China may still be threatened by inadequate grain production, according to Zhang Hongyu, director of the Department of Sectoral Policy and Law of China's Ministry of Agriculture.

China's self-sufficiency rate of grain -- based on rice, wheat and corn yields -- fell from 100.5 percent in the 1990s to 97.7 percent in 2011, but was still above the baseline of 95 percent.

But, taking into account soybean and other yields , the rate falls to less than 90 percent. The rates of most countries, except some in Africa, are above 90 percent.

China is facing formidable grain production challenges. Its industry, agriculture and the majority of the Chinese population are all concentrated in coastal and riverside areas, which has put great pressure on local water and land resources. In addition, demand for grain is still on the rise as China is undergoing rapid urbanization, which will bring millions of farmers to the cities and will add 20 percent more grain consumption as the farmers' food structure is set to be changed.

A poor agricultural productivity also strains grain supply. China's agricultural productivity by the year 2008 was only 10 percent of total industrial productivity, according to the "China Modernization Report 2012: Research on Agricultural Modernization" released in 2012. If agricultural added value, the labor force and productivity are taking into account, China's agricultural output in 2008 was equivalent to that of Britain 150 years ago, the United States 108 years ago, and South Korea 36 years ago.

The current agricultural system is lagging in terms of productivity, according to Yang Yiyong, director of the Research Institute for Social Development under China's Development and Reform Commission. The fact that China's rural land is not transferrable puts a cap on agricultural production.

The lack of integration among different links in the agriculture chain, and the lack of star enterprises and capital investment is also hampering the development of China's agriculture, said Li Zhongzhi, deputy general manager of the Ping An Smart Fortune Investment Company.

Moving abroad

To address these problems, Chinese enterprises have set their sights on the United States, Australia, Chile, Argentina and other agriculturally developed countries, which enjoy sparse land, rich soil and a favorable environment.

"Central Chile has a very favorable natural environment," said Liu Dan, vice president of Joyvio, Lenovo's agricultural subsidiary. At present, Liu Chuanzhi is in Chile and may sign a rent or purchase farm contract, in addition to a strategic partnership the company already established with a Chilean fruit company and an Australian company.

In addition to their land, the high productivity in these countries also appeals to Chinese enterprises.

Zhang Renwu, who bought the farm in Utah initially for its rich land and water resources, found out that it only took four people to grow, harvest, and process the crops, while it would take 200 to 300 farmers back in China.

The journey is just beginning

"There are 100 million rich people in China who drive in limousines, live in mansions, use luxury goods, but eat junk food." said Li Zhongzhi. As long as quality food is available, they are ready to pay high prices.

At present, two business patterns are in operation in Chinese agricultural companies. Some companies, like Zhang Renwu's Beijing Lvtianyuan Ecological Farm, sell grain or raw feed back to Chinese companies (B2B), while some, like Joyvio, sell fruit, medicinal materials and others directly to high-end individual consumers (B2C).

The Chinese government is also addressing food security against the backdrop of globalization. "We have to resolve the food supply issue mainly within China, and make proper use of the international market." Han Changfu, China's Minister of Agriculture, remarked on a press conference held in Dec. 6, 2013.

China still has a long way to go in making use of international agricultural resources. Its neighbor Japan set up farms in southeastern Asia in as early as the 1940s, and extended its agricultural network to China in the 1980s. It is now in possession of 12 million hectares of farmland outside Japan, three times its domestic farmland.

But it is not the best time for China to expand its agriculture abroad. For one thing, some countries have imposed limits on foreigners buying local land.

Nonetheless, entrepreneurs like Zhang Renwu are upbeat about China's agriculture going abroad -- his two farms in the United States are operating well. "China's agriculture must go abroad, so it has more room to develop," Zhang said.

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