The soybean industry is facing challenges and urgently needs to reposition foreign investment in agriculture.

by qxing0001 on 2009-06-12 15:47:34

The Agricultural Information Network (http://www.nongyexinxi.net/) reprinted an article recently written by Dr. Wang Xiaohong from the Macroeconomic Research Institute of the National Development and Reform Commission, pointing out that foreign-invested enterprises in the agricultural sector are by no means a "flood or ferocious beast" in their investment in China. We should rationally deal with them, reasonably utilize their resources, actively promote the participation of our country's agricultural industry in international competition, enhance core competitive advantages, and promote the healthy and orderly development of China's agricultural industry to adapt to the trend and development of global agricultural market integration.

Since China joined the WTO and the soybean market was fully opened, China's soybean industry has faced unprecedented challenges. With foreign agricultural enterprises gradually increasing their investments in soybean-related industries in China, the competitive disadvantages faced by China's soybean industry have drawn widespread public attention. While many people criticize the "impact" of imported genetically modified soybeans on domestic soybeans, foreign agricultural groups investing in China have also been accused of attempting to use soybeans as a breakthrough to achieve "monopoly" in the domestic market. This year, within China's soybean industry, there has been a beginning to face issues such as outdated planting techniques and the urgent need for improvement in the industrial chain. Meanwhile, "rationally dealing with foreign capital in agriculture and reasonably utilizing foreign agricultural capital" has become a consensus in the industry.

Dr. Wang Xiaohong pointed out in her article: The influence of foreign capital on the development of China's agriculture is mainly reflected in the following aspects. First, it compensates for insufficient agricultural investment. According to statistics, from 1995 to 2000, foreign capital utilization in agriculture amounted to $6.36 billion, equivalent to 26% of the total agricultural investment at all levels in rural areas during the same period. Second, it promotes the progress of agricultural science and technology. China has successively introduced over 100,000 animal and plant germplasm resources and a large number of advanced practical technological achievements, such as mulch film covering, dry-seeded rice cultivation, agricultural remote sensing, straw ammoniation, integrated pest management, mechanized chicken farming, cage fish farming, fruit and vegetable preservation and processing, etc., which overall narrowed the gap with world agricultural science and technology. Third, it improves agricultural production conditions. Through the introduction of foreign capital for farmland consolidation, development of barren mountains and lands, construction of farmland water conservancy facilities, as well as the purchase of agricultural machinery, rural power grids, and rural road construction, agricultural production efficiency has been improved. Fourth, it enhances the level of agricultural industrialization.

Currently, foreign investment in agriculture is mainly concentrated in the field of agricultural product processing. These processing enterprises effectively extend the agricultural industry chain by establishing interest community relationships with farmers, promote the operation of China's agricultural industrialization, and provide management experience in this area, promoting the development of China's agricultural product processing industry. Taking the soybean processing field as an example, although China's indigenous soybeans are currently facing a temporary industrial low point, from another perspective, due to the active introduction of foreign capital, China has become one of the largest soybean oil processing bases in the world, with soybean oil processing capacity accounting for more than 30% of the global total pressing capacity. The soybean oil processing capability and technical level have already reached international first-class standards. The soybean pressing industry chain not only drives the development of surrounding industry chains and creates numerous job opportunities but also ensures that China's livestock farming and feed industries can obtain sufficient supplies of soybean meal feed raw materials, which is a necessary prerequisite for the scale and quality enhancement of downstream poultry farming and feed industries. At the same time, in developing non-genetically modified domestic soybean food industries, we also need to draw on international advanced food processing technologies and management experiences, making achievements in diversifying product lines, standardizing high-end products, and managing food safety.

Many countries consider agriculture as a key sector for attracting foreign investment and adopt preferential policies. In the 1980s, Thailand proposed five priority sectors for absorbing foreign investment, three of which were related to agriculture. Since 1989, the Philippine government, by actively encouraging agricultural foreign investment, has redirected over 70% of investments towards rural areas. For this reason, some scholars suggest: For foreign investment in agricultural deep processing, using advanced technology in crop cultivation and animal husbandry, greater preferences can be given in terms of land use rights and taxation. Especially encouraging investment in good seed breeding, pest control, ecological environment construction, and efficient resource utilization in agricultural science and technology projects. Encouraging foreign investment in the circulation of agricultural products, improving various agricultural product storage, transportation, wholesale markets, farmers' markets, and other distribution networks, utilizing foreign capital to enhance the electronic informatization level of China's agricultural product markets. At the same time, actively encourage foreign capital to participate in the development of backward and impoverished areas. In addition to tax preferential policies for such foreign capital, the government can also provide certain financial subsidies.

Starting from 2008, the transition period for foreign enterprises entering China’s grain circulation sector under the WTO agreement has ended. Not just the soybean industry, other agricultural sectors have also begun opening up to foreign capital. The injection of foreign capital brings challenges while undoubtedly bringing positive factors to the domestic agricultural market. Instead of considering how to restrict competition and avoid competitive pressure, we should think about how to use the resources of foreign enterprises for the development of China’s agricultural industry chain, such as how to utilize foreign capital’s network in international markets, how to utilize these enterprises’ resources in major agricultural countries, and how to acquire advanced agricultural technologies and management experiences in competing with foreign agricultural enterprises. Correctly recognizing the status of foreign agricultural capital in China’s agricultural industry chain and seizing the opportunities brought by foreign capital is the correct development strategy for China’s agriculture to face global competition.

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