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The Chinese agricultural products market has become another pie for the foreign investors. The Chinese companies are confronted with big challenges.
Ms. Wang, 51, an ordinary housewife in Beijing, can not remember when the bustling vegetable markets were replaced by the hawking greengrocers in the residential areas and the well-packed but expensive agricultural products in the supermarkets. Though the change doesn’t affect the quality of what Chinese eat or the income of farmers, it reflects the Chinese companies’ attitudes towards the investment in agricultural products – how could vegetables compare with the property?
But the foreign investors don’t think so. Goldman Sachs got engaged in breeding pigs, Softbank began to sell milk, Blackstone Group started vegetable dealings…. From last year, the international capital colossus invested a lot of money in China’s agricultural products market, reminding Chinese people that this market also has great profits.
Unconcealed Temptation
The traditional concept will finally be shattered by the impact from the foreign companies’ investments. Not long ago, an international consortium consisting of US-based Blackstone Group, Capital Group Co. and Atlantis Investment Management Ltd spent 600 million US dollars taking over 30% shares of Hong Kong-based Dili Holdings Co. whose core asset is the largest agricultural products dealing company in China – Shandong Shouguang Agricultural Products Logistics Park.
How can an agricultural products dealing company attract the world-leading investment companies? According to the public data, this company was founded in 2009 with the registered capital reaching 120 million yuan (USD 17.6 million). The project covered 494 acres and the total investment reached 2 billion yuan (USD 292.9 million). What’s more, the total output of vegetables in China in 2009 was 602 million tons, 8.2 million tons or 1.32% of which were dealt by this company. The investors plan to make use of this dealing company to build an agricultural products distribution network covering the whole country.
Now this company is undergoing fast expansion with the intensive support of foreign investors. Li Guoxiang, a researcher from the Chinese Academy of Social Sciences, said: “The capital always chases the profits. Though tiny profits could be seen in the scattered agricultural products dealings, the collective market is still quite lucrative with the return on investment reaching 60%.” Therefore, Blackstone Group and its peers are just attracted by the lucrative market and plan to earn a lot of money there.
Luan Yuanwei, general manager of Shandong Shouguang Agricultural Products Logistics Park, said: “The foreign consortium led by Blackstone Group wants take the project in Shouguang as main body and then waits for the opportunity to invest in the other projects.” Though China has the stipulations that the foreign investors can not completely control the agricultural products enterprises, Blackstone Group and its peers still have their own methods to have 30% shares of Dili Holdings.
Foreigners to Take Control of Seed Industry
Various clues show that China’s seed industry can not escape from being controlled by the foreign capital after beans, pork and dairy products.
Previously, a report said that a kind of corn seed named “Xianyu335” has at least taken 50% of the market in Northeast China. The developer of this seed is Pioneer Corporation, one of the subsidiary companies under DuPont. The company was founded in 1926 and was acquired by Dupont in 1999. It is the largest seed company in the USA as well as the leading company in the global corn seed market.
In 2002, Pioneer Corporation stepped into the Chinese market through the cooperation with China-based Denghai Seed Co., Ltd. In 2006, the US company founded another joint venture in Dunhuang, Gansu with another Chinese partner. According to the data, Pioneer Corporation invested 15 million yuan (USD 2.2 million) in the first joint venture in seven years and saw the return of 115.6 million yuan (USD 16.9 million) in 2009. Also in 2009, Pioneer Corporation saw the net profits of 107 million yuan (USD 15.7 million) from the sale of “Xianyu335” seeds.
The large output and excellent abilities against drought and insects have made the “Xianyu335” corn seeds popular in Northeast China, which is a major area of corn production in China.
The foreign seed companies are infringing upon the market of the Chinese domestic seed companies, which can not fight against the foreign competitors in strength, capital and products quality. A report from the Chinese Academy of Social Sciences said that the Top 10 international seed companies have already taken 35% of the global market while the Top 10 Chinese seed companies only took 0.8%. In consideration of the volume of seed market in China, you can see the large gap.
Technological Breakthrough as the Key
“The disadvantges in capital, operation pattern, logistics system and so on can be offset by mergers and acquisitions among the Chinese agricultural products companies. The largest problem lies in the technology. Farmers certainly prefer the seeds like “Xianyu335” with larger output and better ability against calamity. This disadvantage can not be offset in a short time. Though we have some hi-tech seed companies like Yuanlong High Tech Corporation, great efforts are still needed to dismiss the technological drawbacks,” said an insider from the Ministry of Agriculture.
Now there are 8,700 seed companies registered in China, but only 200 of them have the amount of registered capital over 30 million yuan (USD 4.39 million). The number of companies having independent research and development ability is smaller than 100. In comparison of the forerign giants’ R&D funds taking 10% of their income, the proportion for Chinese companies is only 1%.
“Apart from the enhanced market management and harder access standard for foreign companies, how to improve the competitive power of Chinese companies are what the relevant government department needs to think carefully. Now, a contest of agricultural innovation is going on in China, aiming at introducing more people with talents into the agriculture and agricultural companies. To change the adverse situation of the Chinese companies needs several years’ efforts,” said the aforementioned insider.
Ms. Wang, 51, an ordinary housewife in Beijing, can not remember when the bustling vegetable markets were replaced by the hawking greengrocers in the residential areas and the well-packed but expensive agricultural products in the supermarkets. Though the change doesn’t affect the quality of what Chinese eat or the income of farmers, it reflects the Chinese companies’ attitudes towards the investment in agricultural products – how could vegetables compare with the property?
But the foreign investors don’t think so. Goldman Sachs got engaged in breeding pigs, Softbank began to sell milk, Blackstone Group started vegetable dealings…. From last year, the international capital colossus invested a lot of money in China’s agricultural products market, reminding Chinese people that this market also has great profits.
Unconcealed Temptation
The traditional concept will finally be shattered by the impact from the foreign companies’ investments. Not long ago, an international consortium consisting of US-based Blackstone Group, Capital Group Co. and Atlantis Investment Management Ltd spent 600 million US dollars taking over 30% shares of Hong Kong-based Dili Holdings Co. whose core asset is the largest agricultural products dealing company in China – Shandong Shouguang Agricultural Products Logistics Park.
How can an agricultural products dealing company attract the world-leading investment companies? According to the public data, this company was founded in 2009 with the registered capital reaching 120 million yuan (USD 17.6 million). The project covered 494 acres and the total investment reached 2 billion yuan (USD 292.9 million). What’s more, the total output of vegetables in China in 2009 was 602 million tons, 8.2 million tons or 1.32% of which were dealt by this company. The investors plan to make use of this dealing company to build an agricultural products distribution network covering the whole country.
Now this company is undergoing fast expansion with the intensive support of foreign investors. Li Guoxiang, a researcher from the Chinese Academy of Social Sciences, said: “The capital always chases the profits. Though tiny profits could be seen in the scattered agricultural products dealings, the collective market is still quite lucrative with the return on investment reaching 60%.” Therefore, Blackstone Group and its peers are just attracted by the lucrative market and plan to earn a lot of money there.
Luan Yuanwei, general manager of Shandong Shouguang Agricultural Products Logistics Park, said: “The foreign consortium led by Blackstone Group wants take the project in Shouguang as main body and then waits for the opportunity to invest in the other projects.” Though China has the stipulations that the foreign investors can not completely control the agricultural products enterprises, Blackstone Group and its peers still have their own methods to have 30% shares of Dili Holdings.
Foreigners to Take Control of Seed Industry
Various clues show that China’s seed industry can not escape from being controlled by the foreign capital after beans, pork and dairy products.
Previously, a report said that a kind of corn seed named “Xianyu335” has at least taken 50% of the market in Northeast China. The developer of this seed is Pioneer Corporation, one of the subsidiary companies under DuPont. The company was founded in 1926 and was acquired by Dupont in 1999. It is the largest seed company in the USA as well as the leading company in the global corn seed market.
In 2002, Pioneer Corporation stepped into the Chinese market through the cooperation with China-based Denghai Seed Co., Ltd. In 2006, the US company founded another joint venture in Dunhuang, Gansu with another Chinese partner. According to the data, Pioneer Corporation invested 15 million yuan (USD 2.2 million) in the first joint venture in seven years and saw the return of 115.6 million yuan (USD 16.9 million) in 2009. Also in 2009, Pioneer Corporation saw the net profits of 107 million yuan (USD 15.7 million) from the sale of “Xianyu335” seeds.
The large output and excellent abilities against drought and insects have made the “Xianyu335” corn seeds popular in Northeast China, which is a major area of corn production in China.
The foreign seed companies are infringing upon the market of the Chinese domestic seed companies, which can not fight against the foreign competitors in strength, capital and products quality. A report from the Chinese Academy of Social Sciences said that the Top 10 international seed companies have already taken 35% of the global market while the Top 10 Chinese seed companies only took 0.8%. In consideration of the volume of seed market in China, you can see the large gap.
Technological Breakthrough as the Key
“The disadvantges in capital, operation pattern, logistics system and so on can be offset by mergers and acquisitions among the Chinese agricultural products companies. The largest problem lies in the technology. Farmers certainly prefer the seeds like “Xianyu335” with larger output and better ability against calamity. This disadvantage can not be offset in a short time. Though we have some hi-tech seed companies like Yuanlong High Tech Corporation, great efforts are still needed to dismiss the technological drawbacks,” said an insider from the Ministry of Agriculture.
Now there are 8,700 seed companies registered in China, but only 200 of them have the amount of registered capital over 30 million yuan (USD 4.39 million). The number of companies having independent research and development ability is smaller than 100. In comparison of the forerign giants’ R&D funds taking 10% of their income, the proportion for Chinese companies is only 1%.
“Apart from the enhanced market management and harder access standard for foreign companies, how to improve the competitive power of Chinese companies are what the relevant government department needs to think carefully. Now, a contest of agricultural innovation is going on in China, aiming at introducing more people with talents into the agriculture and agricultural companies. To change the adverse situation of the Chinese companies needs several years’ efforts,” said the aforementioned insider.