Chinese firms switch investment focus from mining to food sector
Mainland Chinese and Hong Kong-listed firms spent €9bn abroad on takeovers and investments in food, drink or farming last year, the most in a decade.
Those purchases included the largest Chinese takeover of a US company when Shuanghui International Holdings bought Smithfield Foods for €5bn. They are likely to be followed by overseas forays into beef, sheep meat and grain assets, says the National Australia Bank.
“These deals have been bound to happen, and I’m actually surprised it didn’t happen sooner,” said Paul Conway, vice-chairman of Cargill, one of the four companies that now dominate world food trade.
“China will be more integrated into the global commodities system on the agriculture side than they have ever been.”
In recent decades of growth, the Chinese government has used state enterprises to lead a charge into strategic industries. For example, with energy security, PetroChina went on a decade-long global €30bn spending spree to acquire oil assets.
China’s champion in food security is Cofco, which controls 90% of China’s wheat imports and has made two acquisitions this year. It bought controlling stakes in Dutch trader Nidera Holdings and Noble Group’s agribusiness in two months, for a total of €2bn.
China has 21% of the world’s population with just 9% of its arable land and an even smaller percentage of fresh water, according to Jefferies Group. Rising incomes are driving demand for more protein-rich food, while domestic output is close to its limits, said Abhijit Attavar, an analyst with Jefferies in Singapore.
