Target: local grain depots

The foreign grain giants are not only targeting the soybean industry, but also investing in other fields. Yihai Group, for example, started investing in the rice industry in Heilongjiang Province in 2005. It is also expanding into the flour processing industry with a daily capacity that surpasses even that of COFCO.

Cao Jianhai, an expert from the Industrial Economy Research Institute of the Chinese Academy of Social Sciences, stated that large-scale investment in grain logistics and processing, particularly through the purchase of local depots, demonstrates the multinational giants’ ambition to dominate China’s grain industry.

Stable grain sources are essential to maintaining the smooth operation of these plants, but the grain supply is mainly controlled by the state-owned China Grain Reserves Corporation, whose strategy is crucial to the security of domestic food supply and economic development. Its President Bao Kexin disclosed that he has refused cooperation proposals from the four foreign grain giants.

However, as an alternative to the China Grain Reserves Corporation, local grain depots are the other sound choice for them; as foreign investment penetrates the main grain production areas in China; local governments need to be alert when sourcing finance.

All the foreign grain giants have been investigating the Chinese market for some time, and they are anticipating the end of the transitional period for foreign companies entering China’s grain market. Because there is no specific and comprehensive research data available on these foreign grain giants, it is difficult to establish exactly how extensive is their level of penetration.

(China.org.cn by Wu Huanshu and Fan Junmei October 5, 2008)