China Edgy Over Internationals in Its Agriculture

ChinaStakes.com 12 August 2008 

The Chinese government is more and more worried over the control that overseas firms are exercising over a good portion of China's food supply, and there is even some thought that the recent inflation might have been triggered by foreign food giants as they have expanded into every corner of China's agriculture.

Agriculture occupies the largest sector of the Chinese economy, and its stable development is crucial to the development of the country as a whole. The recent domestic inflation led by sharp price hikes for agricultural products, coupled with multi-national companies' entry into the Chinese market, has become politically sensitive and has triggered calls for protectionism. 

Five years ago, "ABCD" (four international grain dealers: ADM, Bunge, Cargill and Louis Dreyfus) gained control of China's soybean oil industry.

Now it is rumored that international investment banks, led by Goldman Sachs, may take a large stake in China's hog industry. Goldman plans to acquire around 10 hoggeries, in provinces such as Fujian and Hunan, for $200-$300 million. These hoggeries will all be operated by other companies under Goldman's supervision. Goldman already controls of Shuanghui and Yurun, China's two largest meat processing companies. Meanwhile, Deutsche Bank is actively negotiating with Shanghai-based Hongbo, and Tianjin-based Baodi, seeking to acquire their large-scale hoggeries.

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