Agriculture leverages the Belt and Road to go global, or opens up 750 billion yuan in cooperation space

In recent years, the strategy of Chinese agriculture “going global” has been implemented at a faster pace, especially the abundant agricultural resources of more than 60 countries along the “Belt and Road”, which have brought a huge market for Chinese agriculture to “go global”. Recently, at the “2015 China Agricultural Development Forum”, participating experts believed that under the stimulus of the “Belt and Road” strategy, this year will become the first year of China's agricultural outbound investment, and may create a 750 billion yuan overseas agricultural investment market.

Grain output rising repeatedly, imports rising year after year

Data from the National Bureau of Statistics show that since China's grain production resumed growth in 2004, by 2014 the national total grain output reached 607 million tons, an increase of 5.16 million tons over 2013, up 0.9%, achieving “eleven consecutive increases”. At the same time, customs data show that China's grain imports also hit a new high in 2014. In the first 10 months alone, grain imports were almost equivalent to the full-year import volume of 2013. The total annual import volume exceeded 104.2 million tons, of which more than 70% was soybeans, reaching 71.4 million tons.

On the one hand, domestic grain output has increased year after year; on the other hand, total imports have soared year after year. This has become a basic feature of China's grain market in recent years. In response, Ke Bingsheng, president of China Agricultural University, believed that this is because China's grain demand growth far exceeds production growth.

Although the central “No. 1 Document” has locked onto the “three rural issues” for 12 consecutive years, under pressure from China's own environmental and resource constraints, relying solely on domestic grain production has already made it difficult to meet demand. “At present, China's land self-sufficiency rate is only 80%. Under conditions of overloaded agricultural resources and high environmental costs, it can only meet 90% of domestic demand for agricultural products such as grains and oilseeds. If 10% of agricultural products are imported from the international market, it is equivalent to using foreign agricultural resources to supplement 20% of domestic cultivated land resources.” said Cheng Guoqiang, director of the International Cooperation Bureau of the Development Research Center of the State Council.

Breaking the pattern of “whatever China buys rises in price”

To ensure the long-term security of China's grain supply, in addition to developing modern agriculture and reforming the traditional development model, it is imperative to implement a new strategy, make agriculture “go global”, and build a global supply network.

“What Chinese agriculture needs in the future is a global strategy. It must grasp the initiative to coordinate the use of both domestic and international markets and both types of resources, and occupy the commanding heights of international agricultural competition.” Cheng Guoqiang said, “The Belt and Road” is precisely a favorable opportunity for China to advance agricultural outbound investment, reshape international agricultural rules, and maintain global market stability.

In fact, China's overseas agricultural investment has been carried out for decades. According to Ministry of Agriculture data, by the end of 2013, China's cumulative agricultural outbound investment totaled 3.956 billion USD, with 373 domestic investment institutions establishing 443 agricultural enterprises overseas. Central enterprises invested a total of 161 million USD, accounting for 4.1%, while the rest came from local state-owned enterprises, agricultural reclamation groups, and private enterprises.

However, Chinese agriculture “going global” is not a smooth path. In addition to difficulties such as political instability in host countries, lack of information and talent, and shortage of funds, some countries are also worried about China's moves to “buy land”. In response, Cheng Guoqiang said that there are now two kinds of domestic concerns about the international market. One is concern that low-priced foreign agricultural products will hit the domestic market; the other is that international market price fluctuations will be transmitted to China and affect the domestic macroeconomy. To avoid the situation of “whatever China buys rises in price”, it is particularly necessary to control the risk of market fluctuations by formulating rules, and China must actively participate in the formulation of global rules. China needs to clarify its import demand and give the international market stable expectations.

“Agriculture going global is absolutely not just about buying land, but is all-dimensional and multi-layered, including trade and technological exchange.” said Han Yijun, professor at the College of Economics and Management of China Agricultural University.

May open up 750 billion yuan in cooperation space

In fact, food security is not only an issue of concern to China, but also a common concern of countries along the “Belt and Road”. Therefore, food cooperation can be said to be one of the best points of convergence for a “community of interests” and a “community with a shared future”. Data show that in 2014, China's total agricultural imports from countries along the “Belt and Road” were 22.839 billion USD, accounting for 18.80% of China's total agricultural imports; total agricultural exports were 21.032 billion USD, accounting for 29.48% of China's total agricultural exports.

“Central Asia is vast and sparsely populated, with concentrated and flat land, abundant species resources, low agricultural production efficiency, insufficient labor, and extensive management methods. For example, Kazakhstan, which has the largest cultivated land area in Central Asia, has the lowest cereal yield per unit area in Central Asia. Wheat output accounts for 80% of total grain output, and wheat yield is 1 ton per hectare, only 1/5 of China's, with huge potential for improvement.” Cheng Guoqiang said.

In Han Yijun's view, 2015 is the first year of China's overseas agricultural investment, and the scale of overseas investment will grow substantially in the future. “According to estimates by our team, in agricultural cooperation between China and countries along the ‘Belt and Road’, there is at least 500 billion yuan of cooperation space in crop farming, 200 billion yuan in livestock farming, and 50 billion yuan in the seed sector.” Liu Yang, senior agricultural analyst at CITIC Securities, believed that compared with countries along the route, China has competitive and R&D advantages and the capacity to export capital, technology, and talent. “This may be a very good critical period to go global.”

At present, “financing connectivity” provides important support for agriculture to “go global”. The “three banks and one fund”: the Asian Infrastructure Investment Bank, the BRICS New Development Bank, the Shanghai Cooperation Organisation Development Bank, and the Silk Road Fund, four platforms, as well as the establishment of local government and other funds and the integration of social capital such as banks, will all deliver a steady stream of funds for the “Belt and Road”. For agricultural enterprises “going global”, these funds can be described as “timely rain after a long drought”.