ChemChina’s bid for Syngenta is just the start

As China looks to secure natural resources beyond its borders, more mega-deals are on the cards

PUBLISHED : Saturday, 06 February, 2016, 12:39am
UPDATED : Saturday, 06 February, 2016, 12:39am

Despite some resistance, China is opening up to biotechnology in the key agricultural sector. The country has more than 20 per cent of the world’s population, but less than 10 per cent of its arable land. Food security is therefore paramount as a matter of state policy.

The government-owned ChemChina’s US$43.8 billion bid to take over Syngenta, the country’s largest overseas acquisition, is a key advance in that direction.

The Swiss agribusiness giant develops bioengineered crop seeds and pesticides. Beijing generally does not allow cultivation of genetically modified crops, but is considering a relaxation of the ban. Currently, modified cotton and papaya are the only exceptions. But China is already the world’s biggest importer of modified soybeans for animal feed. It also buys insect-resistant corn and cotton.

In its first directive of the year, traditionally an agricultural policy, the State Council for the first time said GMO crops should be “cautiously promoted” to increase crop yield, so long as safety is ensured.

Some state sectors and non-government organisations oppose genetic modification of food, but for different reasons. Groups such as Greenpeace China are concerned about the long-term safety of the technology and its impact on people’s health.

The People’s Liberation Army is more worried that the technology is mostly developed by Western powers and China may become overly dependant on them.

In truth, Syngenta’s main rivals are from the United States: Monsanto, DuPont and Dow Chemical. The latter two have announced a US$130 billion merger.

ChemChina’s bid still has to overcome regulatory scrutiny, especially in the US where Syngenta has extensive business. But if the deal does go ahead, advanced bioengineering techniques will become more readily available in China.

That in turn will make it easier to allow the domestic cultivation of modified food.

Understandably, China is looking for valuable assets overseas, especially in agriculture. Cofco, the state grain trader, recently paid US$750 million for Noble Group’s stake in their agricultural joint venture, and Shuanghui International bought US pork producer Smithfield Foods for US$4.7 billion in 2013.

As China looks to secure natural resources beyond its borders, more mega-deals are on the cards.