Agriculture is China's greatest advantage in going global
Recently, the Australian government announced its rejection of a Chinese company's plan to acquire an Australian cattle farm for 350 million Australian dollars, on the grounds that the deal goes against the national interest; earlier, the New Zealand government rejected Shanghai Pengxin Group's application to acquire local farms for 56 million US dollars. Why do Chinese companies repeatedly run into obstacles in their efforts to “go global” by buying land locally? With what attitude should we enter the international market? In an exclusive interview with Mao Xuefeng, associate professor at Renmin University of China, he analyzed the deviations in Chinese companies' “going global” strategy and pointed out that a unique agricultural model is where China's greatest strategic advantage lies.
Why “go global”
Mao Xuefeng believes that we should first think about why we want to go global, why we want to establish branches, and why we want to merge with or acquire foreign companies. “If we go global without careful consideration, or under the encouragement of policy and the lure of foreign markets, then because of a lack of in-depth strategic thinking and little consideration or insufficient assessment of local laws and regulations, market risks and political risks, the final result is often blind bidding that turns us into a tool for investment banks to drive up prices, or outright failure.”
When companies “go global”, what they should first satisfy is their own need to allocate resources globally. For example, Bunge, a global agribusiness and food company, treats China as one of its important processing centers, South America as its production center, and the United States as its research and development center.
Mao Xuefeng pointed out that the fixed mindset of always worrying about being “controlled” comes from our self-perception that we are “still very weak”, but this perception is wrong. We need to change our way of thinking: a company going global is about optimizing the allocation of the company's resources at the global level, not simply about controlling resources or being controlled.
“In this process, one of the government's responsibilities is to provide relevant trade information about overseas markets. At present, we have major deficiencies in access to information, which severely restricts progress in developing overseas markets. We need to understand the other side's stage of development and their needs, and develop together with them to achieve win-win results. Of course, we also need to understand ourselves deeply. China's rapid economic growth and healthy agricultural development over the past 30-plus years mean we must have done many things right, and all of this needs to be explored in depth so that we can tell China's story well on the basis of the 'three confidences'.” he added.
What is the shortcut to “going global”
Mao Xuefeng believes that the single strategy of “going global” by leasing or buying land shows that we have deviations in our business thinking. A more feasible approach is to start with R&D support, start with small companies, start with a small shareholding, and start by establishing branches, so as to learn about, adapt to, become familiar with and deeply cultivate overseas markets.
“Do not underestimate a small shareholding; at a critical time it can play a big role.” Mao Xuefeng stressed that as long as we take a small equity stake, we have the opportunity to enter the company's decision-making level and to gain our own voice and pricing power. By gradually growing while participating in the international market, learning advanced technology and management experience, building a global marketing network, and enhancing brand value, we will naturally have market power globally.
At the same time, entering and mastering the global trade network and logistics network also plays a decisive role in forming a voice in the international market. “We should encourage capable and reputable Chinese companies to invest abroad and actively participate in every link, including warehousing, logistics, ports and agricultural product processing, so as to continuously raise the level of agricultural cooperation.” Mao Xuefeng suggested.
What do we “go global” with
In the process of going global, what is the most valuable thing China can offer the world? “The greatest advantage is China's agriculture.” Mao Xuefeng said.
Although US agriculture is advanced, it does not suit the needs of emerging market countries. Most emerging market countries are at the stage of transforming traditional agriculture, and what they need is precisely the science and technology, agricultural machinery, agricultural technology extension and rural governance experience that China possesses, having just moved beyond this stage.
For example, most developing countries along the “Belt and Road” are based on a smallholder economy, and their current situation is similar to that of China in the 1980s and 1990s. They all face the two historic tasks of transforming traditional agriculture and moving from poverty to prosperity, and these are exactly the two tasks that China can help with.
In the task of transforming traditional agriculture, first, China's agricultural technology development over the past nearly 30 years has achieved remarkable results, has already realized the shift of agriculture toward high yield, high quality and high efficiency, and has also accumulated rich management experience in agricultural technology extension. Second, China's agricultural machinery is more suited to the smallholder family farming system; for example, “Dongfanghong” tractors are very popular in Vietnam and Africa. Third, these countries all face the problem of reforming their agricultural operation systems, and experience in this area is China's strength, not the United States' strength.
Mao Xuefeng believes that the above technical and management experience is more easily absorbed and digested by agriculture in Africa and developing countries along the “Belt and Road.” Cooperating with China will help these countries realize the transformation of traditional agriculture.
In the task of moving from poverty to prosperity, poverty alleviation practices in developing countries fully show that the only way to reduce hunger and poverty is to create more and better employment opportunities for the poor and achieve sustained growth that benefits the masses. “China also has experience in this regard. Over the past 30 years, we completed our economic and social transformation through the transfer of population from the agricultural sector to the industrial sector.” Mao Xuefeng said.
We should encourage some labor-intensive manufacturing enterprises to go global and, through direct investment, gradually transfer their existing equipment and production to countries along the “Belt and Road” with lower wage levels, creating a large number of employment opportunities and cash income for these regions while also achieving their industrialization, modernization and rapid economic development.
“The government must also change its mindset and truly 'help enterprises' rather than 'subsidize enterprises'. It should replace the current simple subsidy approach with the provision of public goods such as information and data. It should push these enterprises to help and guide less developed countries in improving their economic environment and raising management efficiency.” Mao Xuefeng said.