China has become synonymous with the purchase of natural resource firms and commodity based assets across the globe, snapping up oil and gas, minerals and metals across Africa, Asia and Latin America at an unprecedented rate.
Now Chinese firms are stepping up their presence in food related companies a major way, with deals like Shuanghui’s purchase of Smithfield Group worth US$ 4.7 billion and ChemChina’s attempted takeover of Sygenta which is currently still underway and subject to regulatory approvals but could be worth even more.
As well as wanting to develop and expand Chinese firms in the food and agricultural sector are keen to get their hands on new technology, whether that be meat processing techniques, advanced pesticides, or even the genetically modified (GM) seeds produced by Sygenta. ChemChina already has a track record in this area having brought Israeli company Makhteshim Agan and French Adisseo both of which have expertise in GM.
These moves have given Chinese firm’s access to new European and US markets and much new expertise, but they have also given the country as a whole a new window to GM technologies. Much of the Chinese population and government view GM with suspicion, some see it as US controlled bio-weapon, while others are more positive and see it as an opportunity to improve crop yields in China and boost food production.
Food security is high up the list of government concerns particularly as much arable land has been lost in recent years thanks to pollution and urban sprawl. It is also a country in which widespread starvation is a living memory so ensuring the populace are well fed is an obvious national priority. Assuming ChemChina take control of Sygenta it will be interesting to see whether they are able to push through widespread GM crop use in China.
In other parts of world such as the Congo and the Ukraine stories regularly crop up which depict Chinese firms buying up huge acreages of land which is explained as China wanting to feed its domestic market. These stories nearly always turn out to be exaggerated, a small leasing deal is written up as a mega deal. In one report a Chinese firm was buying 5 percent of Ukrainian arable land – despite the fact that the country has laws restricting foreign ownership. The truth was that Chinese companies were hammering out a deal which would provide it with long term supplies of agricultural produce for the home market.
This is not to say we will not see further Chinese forays into agricultural land, as its firms expand abroad – but the idea that these will feed China is rather far-fetched.
Very true.