Why Is China Spending $43 Billion for a Farming

Company?
The biggest overseas purchase in Chinese history is meant to ensure the worlds largest
country can keep feeding its people.
By Keith Johnson, February 15, 2016, Foreign Policy

Chinas biggest-ever overseas acquisition, announced this month, isnt about gobbling
up resources to feed its industrial maw, broadening its financial leverage, or enhancing
its strategic position. Rather, the $43 billion bid for Swiss agricultural company
Syngenta is about something a lot more basic and a lot more important: ensuring that its
farms will be able to produce enough food to keep pace with the countrys still-growing
population, already the worlds largest.
Beijing today faces a variation of the dilemma that has bedeviled leaders there for
thousands of years: how to feed so many people with so little arable land. China today
accounts for about 19 percent of the global population, yet has just 8 percent of its
arable land. And unlike other countries with growing populations, theres no land left to
till; indeed, given years of chemical abuse in the countryside and industrial pollution
that sowed heavy metals through rice paddies, Chinas available farmland is actually
shrinking.
With the population set to keep growing from 1.3 billion today to 1.4 billion or more by
2030, and with demand for cereal grains rising as the population eats ever more beef
and pork, the country needs a quantum leap in agricultural productivity if it is going to
feed its population in a generations time. Food shortages, or spiking prices for food,
have been a recipe for unrest, rebellion, and imperial downfall in China for hundreds of
years. Food security, the ability to ensure ample and affordable supplies of food for all,
is a political headache for leaders in Beijing who are all too aware that staying in power
means keeping rice bowls filled. The Syngenta deal which is meant to keep Chinese
farms humming could be part of the solution.
Food security has become more prominent under President Xi Jinping. He personally
has put a lot of political capital into emphasizing food security, said Fred Gale, the
senior economist for China at the U.S. Department of Agricultures Economic Research
Service.
Its not just Xi. Premier Li Keqiang zeroed in on the under-performing agricultural
sector in his wide-ranging critique last year of Chinas economy, following former
Premier Wen Jiabaos lifelong focus on food security. For the 13th straight year, Chinas
guiding annual policy blueprint, the so-called No. 1 Central Document, put
agricultural innovation at the top of the nations wish list. And food security was at the
top of the agenda at last years summit between Xi and U.S. President Barack Obama.

Thats where the proposed $43 billion purchase of Swiss-based Syngenta by stateowned China National Chemical Corp., or ChemChina, comes in. Syngenta is one of the
worlds biggest producers of crop protection products, from pesticides to fungicides to
novel types of seeds that can increase harvests of corn, rice, and wheat. It rebuffed a
richer offer last summer from rival agribusiness giant Monsanto Co., but welcomed
ChemChinas bid with open arms; Syngentas board of directors said in a release that it
was unanimously recommending the offer to shareholders.
The deal, Syngenta Chairman Michel Demar said in a statement on Feb. 3, is focused
on growth globally, specifically in China and other emerging markets, and enables longterm investment in innovation.
It could also be just what the doctor ordered for Chinese leaders. The Syngenta
acquisition is very consistent with their goal of overhauling the agricultural sector; one
of the themes of that overhaul is to rely on new technology to boost productivity, Gale
said.
Indeed, ChemChina Chairman Ren Jianxin talked up the deal as a way to increase
global crop yields and placed special emphasis on the Chinese market, where he said
its necessary to increase both agricultural productivity and quality.
Of course, the purchase isnt just a strategic, state-driven decision. Its also good
business for a Chinese firm aspiring to play in the big leagues. ChemChina, in
particular, has just in the last year snapped up a host of foreign firms, including a solar
power company, Pirelli, the tire maker, a machine-tools concern, and a commodities
trading outfit.
They are on a big buying spree to acquire technology, [and] they want to get
intellectual property, said Deborah Brautigam, professor of international development
at Johns Hopkins Universitys School of Advanced International Studies. For China,
food security is always a politically important goal, but purchases like Syngenta have a
real business rationale.
Even so, Chinas leaders have made clear that Chinese companies, especially stateowned firms like ChemChina, should hew to a government-mandated agricultural
foreign investment strategy. That shows up in easy credit terms, for example:
ChemChina boasted that it had prearranged financing for the entirety of the all-cash deal
for Syngenta. Official Chinese support for business deals helps companies secure
financing, whether from state-owned banks or from capital markets.
With any deal that big, theres no way it happens without the government signing off
on it, Gale said.
ChemChinas boss told a press conference that, having been dispatched to the
countryside as a teen, hes familiar with traditional Chinese farming practices. Thats
precisely why he wants to introduce Syngentas technology-driven approach to squeeze
more bushels of grain out of every acre.
China has actually done a great job of just that in recent decades, improving agricultural
productivity at a faster clip than even the United States (though China started from a

much less productive baseline). China increased its total agricultural productivity threefold between 1961 and today, while the United States little more than doubled its
productivity over the same time frame, according to the U.S. Department of Agriculture.
China today produces about one-sixth of the worlds wheat (and twice as much as the
United States) and almost one-third of the worlds rice. Until 2007, China was a net
exporter of grains like those.
So why the rush to spend tens of billions of dollars, at a time of economic malaise and
belt-tightening at home, on a Swiss agribusiness? Because Chinas huge gains in
production could soon be outpaced by increasing demand from a growing population
and a rising middle class eating pork, beef, and other foods that require a lot more grain
than a vegetarian diet. Chinas agricultural imports today are huge and rising, worth
more than $115 billion a year, much of which comes from the United States. (To put
that in perspective, Chinas voracious appetite for imported crude oil costs only about
$150 billion a year.)
Gaining access to a big international firm specializing in agricultural technologies
potentially addresses several big Chinese concerns. First, its a way to boost domestic
food production and thus reduce the countrys reliance on food imports. While China
has embraced global markets as a way to secure food supplies, self-sufficiency remains
the ultimate goal. Indeed, while China appeared a few years ago to jettison its official
goal of producing 95 percent of the nations grains at home, in reality leaders are as
anxious as ever to ensure they can feed themselves.
They want to be absolutely self-sufficient in rice and wheat, Gale said.
To do so will require replicating the huge productivity leaps that came after dramatic
technological breakthroughs, especially for rice, in the 1950s and again in the 1970s. In
order to grow enough rice for a bigger population on the same amount of land, Chinese
researchers figure the country needs a way to increase harvests by 30 percent or more in
the next decade or so a third quantum leap. Thats one reason China is looking for
answers in the lab: In India, Syngenta helped some small farmers raise yields by 30
percent using a tech-heavy system of hybrid seeds, special soils, and herbicides.
Embracing that kind of technology may sit well with Chinas leaders, who in recent
years have become vocal cheerleaders for a biotech revolution in Chinas hinterlands.
But Chinese consumers, burned by food safety scandals, remain wary of genetically
modified crops. Even farmers who were promised sky-high yields from seeds made in
the lab have been disappointed when huge harvests dont materialize.
That helps explain why, so far, China has moved cautiously on genetically modified
crops. It approved non-food varieties, like cotton. But genetically modified rice, corn,
and wheat are still officially under study.
To finally slay Chinas centuries-old food security demons, Xi, ChemChina, and others
will likely have to convince Chinese farmers and consumers that the answer lies as
much in the lab as in the land.