HSBC, charity in rural credit talks

PUBLISHED : Friday, 07 March, 2008, 12:00am
UPDATED : Friday, 07 March, 2008, 12:00am

The Bill & Melinda Gates Foundation and HSBC Holdings are in talks with the mainland's largest animal feed producer about setting up rural credit firms to help the nation's army of poor farmers to modernise.

New Hope Group chairman Liu Yonghao, who heads the huge farming and animal husbandry empire in Sichuan province, said he had discussed the proposal with Mr Gates and HSBC executive director Vincent Cheng Hoi-chuen.

Talks had also been held with Standard Chartered Bank and international charities.

Mainland farmers, who struggle to survive on meagre incomes, are typically too poor to upgrade their equipment and production techniques. Many drift to the cities seeking better pay, putting the nation's food supply under more pressure.

Rural credit companies provide financing to farmers who lack collateral to obtain bank loans but who want to update their operations.

Mr Liu said HSBC already had some rural credit businesses in the mainland and co-operation between the two firms could not be ruled out.

He also said he had approached Mr Gates during a visit to Seattle in 2006 about his charity foundation contributing to the venture.

New Hope has three partially government-funded rural credit firms in Shandong and Liaoning provinces, with plans to invest 100 million yuan (HK109.69 million) to set up seven more.

Along with its partners, New Hope plans to invest more than five billion yuan in the agricultural and animal husbandry business over the next five years, to further tap the fragmented sector's vast potential.

The company, which gets 80 per cent of its sales from agriculture, plans to raise this figure 46.5 per cent to 50 billion yuan this year from last year's 27.3 billion yuan. Sales were about 17 billion yuan in 2006.

Mr Liu estimates that traditional inefficient farming accounts for some 70 per cent of the nation's agricultural output, with the rest being supplied by large-scale operations.

'Output growth from modern farming can not keep pace with declining production from traditional farming so there is pressure on food prices to go up,' he said.

About 130 million farmers were estimated to have migrated to coastal cities over the years to seek better job opportunities, resulting in a falling supply of labourers, he said.

Farmers, who typically earn 3,000 yuan a year after deducting expenses, are increasingly moving to key cities where they can earn about 1,500 yuan a month, he said.