Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security under a plan being considered by Beijing.
A proposal drafted by the Ministry of Agriculture would make supporting offshore land acquisition by domestic agricultural companies a central government policy. Beijing already has similar policies to boost offshore investment by state-owned banks, manufacturers and oil companies, but offshore agricultural investment has so far been limited to a few small projects.
If approved, the plan could face intense opposition abroad given surging global food prices and deforestation fears. However an official close to the deliberations said it was likely to be adopted.
“There should be no problem for this policy to be approved. The problem might come from foreign governments who are unwilling to give up large areas of land,” the official said.
The move comes as oil-rich but food-poor countries in the Middle East and north Africa explore similar options. Libya is talking with Ukraine about growing wheat in the former Soviet republic, while Saudi Arabia has said it would invest in agricultural and livestock projects abroad to ensure food security and control commodity prices.
China is losing its ability to be self-sufficient in food as its rising wealth triggers a shift away from diet staples such as rice towards meat, which requires large amounts of imported feed.
China has about 40 per cent of the world’s farmers but just 9 per cent of the world’s arable land. Some Chinese scholars argue that domestic agricultural companies must expand overseas if China is to guarantee its food security and reduce its exposure to global market fluctuations.
“China must ‘go out’ because our land resources are limited,” said Jiang Wenlai, of the China Agricultural Science Institute. “It will be a win-win solution that will benefit both parties by making the maximum use of the advantages of both sides.”
In the first quarter of this year, food prices in China rose 25 per cent from a year earlier, the highest level of farm inflation since the early 1990s, said UBS.
China is still a net exporter of agricultural commodities but is increasingly reliant on soybean imports and is about to become a net buyer of corn.
It imported up to 60 per cent of the soybean it consumed last year and the crop would be a focus of policy support for companies acquiring land overseas, along with bananas, vegetables and edible oil crops, said an official familiar with the ministry’s proposal. The ministry is already talking to Brazil about the possible acquisition of land for soybean, according to this official.
Some countries would find it particularly problematic if Beijing supported Chinese firms to use Chinese labour on land bought or rented abroad – common practice for most companies operating overseas.
(FT)
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