China considers opening of seed market

Updated: 2011-08-25 09:18

By Ding Qingfen and Zhou Siyu (China Daily)

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China considers opening of seed market

Seeds on display at an agricultural exhibition in Beijing. Currently, foreign companies can only participate in China's grain seed industry through joint ventures with domestic partners, and they are limited to a 49 percent stake in these ventures. [Photo / China Daily] 

BEIJING - China might further open up its seed market to foreign companies, with the Ministry of Commerce and the Ministry of Agriculture studying the market shares and development of these companies, said an official close to the matter.

The possible opening means that foreign seed companies may be allowed to hold controlling interests in joint ventures, compared with the current 49 percent ceiling, a commerce ministry official said on condition of anonymity.

The evaluation is still in progress and there is no target date for its conclusion, the source said.

"Further opening up of the seed industry to foreign companies will bring more competition, which can spur the development of the whole industry and provide farmers and consumers with more choices," the official said.

The current policy is holding back the development of China's seed industry, the source added.

Under current regulations, foreign participants in the business for field-crop seeds, such as soybeans and rice, must establish joint ventures with domestic companies. The foreign partner is limited to 49 percent of a joint venture, according to the Ministry of Commerce.

Many Chinese agribusiness experts say the limits are intended to prevent foreign companies from controlling the country's seed industry. China's seed market, which is estimated at 50 billion yuan ($7.7 billion) annually, is the world's second-largest behind the United States.

But the industry is highly fragmented, with more than 8,000 small and medium-sized companies vying for market share.

These small companies are weak in terms of research and technological abilities, experts said. Fewer than 100 have patent rights, for example.

To improve the situation, the State Council issued new industry guidelines in April that call for industrial consolidation and development.

Analysts said that a larger presence of the foreign companies will contribute more to the development of the industry.

"Fierce competition with multinationals will lead to an industrial consolidation and push large domestic seed companies to develop further," said Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant Ltd, a major agricultural consulting company.

But a freer market does not mean the government should ease up on its supervision, Ma cautioned.

But some experts say it is too early to remove the limits on foreign participation.

"There is still a huge gap between domestic and foreign companies in research and development capabilities. Chinese companies are vulnerable to their foreign rivals," said Jing Fei, a seed expert at Bohai University in northeastern China's Liaoning province.

Some large companies, taking an optimistic view of the industry's prospects, also prefer an open market.

"We have our own technological advantages. We have already been competing with multinationals in the international market," said Jin Yi, deputy general manager of Winall Hi-tech Seed Co Ltd, China's third-largest producer of rice seeds by capacity.

Based in Hefei, the capital of eastern China's Anhui province, Jin's company exports rice seeds to many countries including Bangladesh, Vietnam, Pakistan and Indonesia.

"Competition is not always a bad thing. Through competition, we have learned a lot from foreign companies, particularly in terms of management, research and development," Jin said.

"We are ready to face them in our domestic market."