Chinese Agriculture Goes Global

China is the world’s second largest economy, but ironically, food security is emerging as one of the main concerns for China’s communist leaders.

During a visit to an Argentinian farm in July President Xi Jinping said: “If China is going to grow, it must solve its grain problem for its 1.3 billion population first.” Measures taken by China to address the problem – going to the world – may not be a panacea.

As China grows wealthier, food consumption and diet have undergone a dramatic transformation.

Between 1985 and 2005 meat consumption quadrupled, reaching 59.5 kilos per person a year, according to the United Nations Food and Agriculture Organization. Meat consumption is likely to continue to increase in coming years as more Chinese are expected to join the ranks of the expanding middle class. By 2020, meat consumption is expected to grow by 35 percent from current levels.

Chinese are also developing a voracious appetite for certain delicacies taken for granted in the West such as coffee, spices, vegetables like asparagus and exotic fruits like avocados and blueberries.

China is home to 22 percent of the world’s population, but possesses around 7 percent of its arable land – 334.6 million hectares. However, in recent years the county’s arable land has been shrinking as a result of serious environmental damage such as soil erosion, deforestation and pollution of rivers and lakes. In November Chinese officials reported that more than 40 percent of China’s arable land is suffering from degradation.

The combination of rising food demand and reduced arable land makes it difficult for China to feed itself in the not so distant future. In the past decade China has experienced hikes in food prices and shortages of certain products.

China has no choice but to turn to overseas farming. In 2013 China imported 4 percent of the world’s grain and this figure is likely to rise in coming years.

Several Chinese government officials have also talked about the overseas option as a complement to strengthening domestic production. In 2010, Chinese Minister for Agriculture Han Changfu said, “The time is ripe for the country’s agricultural companies to embark on a go outward strategy.”

In recent years Chinese investment in overseas agriculture and land leases has steadily increased. Chinese companies began investing in neighboring Laos and Cambodia farmland in the early 2000s and slowly ventured further afield. Chinese-owned or jointly owned farms are in several African countries including Mozambique and Ethiopia.

In Mozambique, a Hubei-based company has invested US$250 million in a rice farm in Gaza province. In November 2013 the country’s state-owned newspaper Notícias cited Raimundo Matule, a director at the ministry of agriculture, reporting that several Chinese conglomerates were expected to invest up to $2.5 billion in the country’s agricultural sector. In Angola Chinese state-owned giant CITIC pledged to invest $5 billion in agriculture in addition to its current lease of 20,000 hectares of land in the former Portuguese colony.

Mozambique and Angola in particular are large countries with immense tracks of fertile land and a small population. Angola has a land area of 1.24 million square kilometers and a population of 16 million.

China’s ongoing tensions with its Southeast Asian neighbors make other parts of the world even more attractive, and Africa could emerge as a major provider of agricultural products to China in coming years.

Chinese business interests have also leased tracts of land in Brazil, Peru Argentina and Mexico. China is also reported to be acquiring land in the sparsely populated Russian Far East just across the border from heavily populated northern China.

Chinese companies are reported to have leased 1 million hectares of land through Russia. China’s most ambitious investment in the sector is a land lease deal with Ukraine for 3 million hectares to produce grain and raise pigs. In 2010 Chinese companies were reported to have requested the lease of 1 million hectares from the Kazak government to plant soybeans and wheat.

In 2010 China was believed to have leased or bought over 2 million hectares of land abroad. In 2011 China’s largest agriculture group, Heilongjiang Beidahuang Nongken, announced that it was investing $1.5 billion to develop 300,000 hectares of land in Rio Negro province in Argentina .

However, the overseas option China is pursuing carries risks as well as promises of reward. As shown by recent events in the Ukraine, once a relatively stable part of the world, nothing is guaranteed. Land is a sensitive issue that touches upon our most primordial fears. In Kazakhstan there is widespread concern, sometimes bordering on paranoia, that China is grabbing the country’s vast and sparsely populated land by bribing local officials. In Brazil several officials including former Minister of Agriculture Delfin Netto have accused China of carrying out a stealth land grab.

In Mozambique a Chinese land lease in the Limpopo valley is reported to have displaced 80,000 people, while in Cameron tribal chiefs and local NGOs have protested against land acquisitions by Chinese companies. In Angola there have been allegations of physical assault against African farm labors by their Chinese managers, while such incidents have been isolated cases. Angola has bitter memories of Portugal’s brutal plantation system in which the chicote, or whip, was widely used.

China is not alone in its interest for African farmland. Brazil, Japan, South Korea and several Gulf States have leased large tracks of land in Africa. Brazil seems to have been far more successful than China, at least in Mozambique, having acquired 500,000 hectares of land in the country’s north. Brazilian land deals have been far less controversial than Chinese ones and elicited less suspicion. Brazilian companies are reported to be producing soybeans in Mozambique, and for several years, Brazil has been main supplier of this product to China. It seems that the Brazilians have stolen a march on the Chinese.

Despite these risks Chinese investment in overseas agriculture is likely to continue. China has little choice but to turn overseas to sustain its growing food needs.

However, one must be cautious not to see Chinese acquisitions of overseas farms as a mere land grab. The issue is far more complex. China has invested hundreds of millions of dollars in agriculture research centers throughout Africa that have greatly increased production of rice and other crops and alleviated food shortages. Hundreds of Chinese agriculture scientists are working in Africa and elsewhere to improve efficiency.

While Africa and other parts of the world are supplying China with products such as grain, soybeans and meat. China may also contribute to consolidating food security in Africa and other regions with its investment and expertise. China’s long-term strategy may be to boost Africa’s capability to produce agriculture surplus, both addressing the continent’s chronic food shortages and China's demand for imported food.

Chinese investment in overseas agriculture can bring significant benefits provided such investments are done in an open and transparent way and with respect for local communities. Indeed, certain countries – particularly Angola and Zimbabwe, to mention a few – are keen on such investments. China and the host countries for such investments can benefit tremendously – if both sides have the imagination to build mutually beneficial partnerships.

Loro Horta is a senior diplomat based in Beijing. He previously served in Africa, Southeast Asia and Central Asia. The views expressed here are strictly his own. This is reprinted with permission from YaleGlobal, the website of the Yale University Center for the Study of Globalization