Globe Spotting


Reportagen & Analysen

Go West: The Silk Road Initiative and Agribusiness

by Uwe Hoering, January 2016

In October 2013, Xi Jinping, head of China's government and communist party, announced the initiative "One Belt, One Road": With the "New Silk Road" (Map), transport and trade routes between China, Central Asia and Eastern Europe are to be expanded and a network of roads, railway lines and pipelines in the region to be build. (1) This would become a kind of backbone for “Economic Corridors” in which the establishment of companies would be promoted and "the foundations for new China-centered production networks be laid" (2). The newly established Asian Infrastructure Investment Bank, AIIB, promoted by China, and a specially created “Silk Road Fund” could play an important role in financing these huge and ambitious projects. In May 2015, Russia and China also agreed to link the Silk Road Initiative to the Russian development program for Siberia and the Eurasian Economic Union. (3)


Access to land and water

Besides opening up new trade routes that would make China more independent from maritime shipping routes, controlled strongly by the USA and other Western industrialised countries (4), and better access to existing and new markets, the initiative also aims at access to oil, gas and other natural resources – including land, water, and food: According to dates from IFPRI, the Washington based International Food Policy Research Institute, Russia, Ukraine and Kazakhstan increased their share in the world's total corn and wheat output in 2014 by 20 percent (5). Large areas of Tajikistan, Kyrgyzstan and Siberia are underutilized for agricultural production. After the Sovjet Union broke up, investments into agriculture often went down. Cheng Guoqiang, one of China's top agricultural trade strategists, said at the '2015 China Agri-Business Development Forum' held at China Agricultural University on June 1, 2015, that Kazakhstan's average yield of wheat is only one-fifth that of China (6). Chinese companies, promising investments and Know how, could be very attractive for many governments in the region.

On the other hand, China's increasing demand and shrinking land and water resources are driving the outsourcing of agricultural production. As the Chinese Minister for Agriculture, Han Changfu, said already in 2010: „The time is ripe for the country's agricultural companies to embark on a go outward strategy“ (7). In the past few years Chinese Investors became very active actors in the global agribusiness, as concessionaires for large areas of land as well as taking over established companies in the agricultural and food sector of industrialised countries by merger and acquisition (M&E).

Different from the general perception, that the main target for Chinese 'land grabbing' is Africa, majority of concessions and investments were made in Southeast Asian countries like Laos and Cambodia, Indonesia and Philippines, often for industrial raw materials like rubber, cotton or wood. In Australia and New Zealand, Chinese investors take over huge farms, mainly for cattle ranching and milk production, supplying meat and milk products for mainland China. Now, Eurasia could well become the new 'promised land' for agricultural investors from China.


'Land grabbing'

Still, reliable information about Chinese investments into land and agriculture in the Far East, in Central Asia and Eastern Europe are sketchy. The database Landmatrix lists less than a handful of cases in Kazakhstan, Bulgaria and the Russian Federation. But reports about Memoranda of Understanding (MoU), intentions and negotiations are increasing:

  • China is reported to be acquiring land in the sparsely populated Russian Far East just across the border from heavily populated Northern China. Chinese companies are reported to have leased 1 million hectares of land through Russia. China's most ambitious investment in the sector is a land lease deal with Ukraine for 3 million hectares to produce grain and raise pigs. (8)

  • In 2010, Chinese companies were reported to have requested the lease of 1 million hectares from the Kazakh government to plant soybeans and wheat. The news led to widespread protests, following concerns, that China is grabbing the country's vast and sparsely populated land by bribing local officials. (9)

  • Im December 2015, the official news agency Xinhua reported, that ten Chinese firms are close to reaching final investment deals with an agricultural cooperation zone in Kyrgyzstan. The new investors are agricultural enterprises from Beijing and the central provinces of Hubei and Henan. They plan to invest more that one billion yuan (155 million US dollars) in the zone, said Liu Junyong, deputy general manager of Henan Guiyou Industrial Group, operator of the zone. Guiyou purchased a troubled animal husbandry company in Kyrgyzstan in 2011, which has a 5.67 sq km factory area. Six companies from Henan have already invested 22 million US dollars in the cooperation zone. (10)

  • Another Henan-based company, Jingyan Yinhai Seed Co. Ltd., invested 120 million yuan and set up an agricultural technology park on a large plot of rented land in Tajikistan, starting with a demonstration plot for corn, wheat and cotton. (11)

  • In Tajik context, two important land deals have caught the international media's attention as early as 2011: The authorities of the Xinjiang Uyghur Autonomous Region in West China have acquired a land concession of 2 thousand hectares, while not long before that, the Chinese (central) government concluded a deal with the Tajik government for the acquisition of 110 thousand hectares. However, controversy has arisen over both concessions. (12)

  • In November 2014 it was reported that China's Henan province will invest $800 million in the agricultural sector of Tajikistan according to the agreement signed in Beijing during a meeting between Tajikistan's President and the Governor of the Henan province. (13)

  • Im May 2015, The Moscow Times reported, that Russia and China will launch a $2 billion fund to invest in agricultural projects in the two countries. The deal was signed during Chinese President Xi Jinping's visit to Moscow that month. In cooperation with the Government of Heilongjiang province, a Chinese region that borders Russia, the fund will not only target investment in agricultural projects but will also consider creating an experimental agricultural free trade zone between the Heilongjiang province and Russia's neighbouring Amur region. (14)

  • A deal between a subsidiary of Zoje Resources Investment and Russia's Trans Baikal regional government has obtained a 49-year land lease from Russia to develop modern agriculture and livestock industries on 115.000 hectares of grazing land and uncultivated land to grow vegetables, wheat and other agricultural products, as well as for animal husbandry, reports China Daily on 10 June 2015. A spokesperson of the mother company, which manufactures sewing machines, said, „that the move is in response to the Chinese government's call for development in countries along the Belt and Road Initiative“. (15)

Several of these projects are intended not only for the production of agricultural products like cereals, meat or raw materials, but also for production and processing of agricultural goods.  And the 'Silk Road' would reduce logistics costs and remove bottlenecks to moving agricultural products.


'Look West' policy

Often, governments and state owned companies from Chinese provinces bordering the target countries are involved. COFCO for example, the China National Cereals, Oils and Foodstuffs Corporation, the country' largest food trader, has committed to deploying resources and manpower along the Belt and Road Initiatives routes in the next five years to help ensure China's food supply at home and to its key markets overseas. (16). China Daily quotes Ning Gaoning, chairman of COFCO, saying that “Chinese agribusiness companies should be pioneers in advancing agricultural modernization. We cannot just rely on the old ways of expanding production.”

And their "Going Out" drive has the blessing right from the top: According to Xinhua, the Chinese Prime Minister Li Keqiang told a meeting of colleagues from the Shanghai Cooperation Organisation (SCO), an Eurasian political, economic and military organisation which was founded in 2001 in Shanghai by China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan, that China is willing to work with other SCO countries to actively expand agricultural cooperation to guarantee food security. (17)

"China now needs a new strategy (to) maintain sovereignty … and occupy the commanding heights of international agricultural competition”, said the agricultural trade strategist Cheng Guoqiang. "'One belt, one road' is an opportunity to reshape the rules of agriculture and maintain stability" (18). Opening up new supplies for agricultural products from Eurasia, building new trade routes and strengthening Chinese agribusiness along the whole production chain of processing, logistics, storage and seeds would reduce China's dependency on international markets, which is forecasted to grow in den next years, and multinational corporations from the United States or Europe controlling global agricultural trade and agribusiness so far.

There are skeptics that the initiative "is at risk of failure", citing the economic slow down in China, difficulties with a number of infrastructure projects like the gas pipeline known as 'Power of Siberia', the downturn in many export markets and conflicts like the one in the Ukraine (19).

As well, it is an open questions, how reliable the reports about investor's interest are and how many of the MoUs, negotiations, intentions and promises will be implemented in the next few years. There are many problems and obstacles in the way like lack of experience with farming as in the case of the sewing machine company Zoje Resources Investment, difficult agroecological conditions, high financing costs and different regulations as well as political mistrust and protests against too much influence by China.

In most cases, any further information is lacking: What are the conditions for the investors, especially regarding environmental and social standards? Will they supply the local markets or are the products for export to China or may be Europe? How is the local population informed and consulted?

But for China, looking and going West – or North as in the case of Siberia - makes a lot of sense, not only for food security: The move started with the reorientation of the development strategy from the export oriented industrialisation along the Eastern and Southeastern Coast towards interior areas and internal markets of the country, including the rapid development of regions in the West like Yunnan province and the Xinjiang Uyghur Autonomous Region - and now looking further beyond the national borders towards more 'greener pastures'.


(1) For a map see: Moritz Rudolf, One Belt, One Road: Die Seidenstraßeninitiative. Mercator Institute for China Studies, o.J.

(2) ibid

(3) For further information on the initiative and also on its geopolitical aspects, see: Nadine Godehardt, Chinas “neue” Seidenstraßeninitiative. Regionale Nachbarschaft als Kern der chinesischen Außenpolitik unter Xi Jinping, Stiftung Wissenschaft und Politik, Juni 2014. Atul Bhardwaj, Silk Routes versus Sea Lanes. The Return of Landlubbers. In: Economic & Political Weekly, May 30, 2015, Vol 1 No 22, 10-12

(4) Atul Bhardwaj, ibid

(5) China Daily, 7 June, 2015

(6) dimsums.blogspot, 13 June, 2015

(7) Cited by Loro Horta, Chinese agriculture goes global – analysis. farmlandgrab, 16 December 2014

(8) ibid

(9) ibid

(10) Across Asia: more agricultural firms invest in central Asia. Xinhua, 17 December 2015

(11) ibid

(12) Irna Hofmann, Peter Ho, Rethinking China's 'land grabs': Chinese land investments in Central Asia. The Newsletter, No. 58, Autumn/Winter 2011

(13) Chinese rent over 6 thousand hectares of farmland in Tajikistan. farmlandgrab, 16 January 2015

(14) Russia and China to launch $2 billion fund for boosting farming. The Moscow Times, 8 May 2015

(15) Zhejiang firm to help agriculture in eastern Russia. China Daily, 10 June 2015

(16) China Daily, 7 June, 2015

(17) Xinhua, 17 December 2015

(18) dimsums.blogspot, 13 June, 2015

(19) Moritz Rudolf, China's 'Silk Road' Initiative Is at Risk of Failure. In: The Diplomat, September 24, 2015

See also: IAAE Symposium "Agricultural Transitions along the Silk Road. Restructuring, Resources and Trade in the Central Asia Region" in Almaty, Kazakhstan (4. bis 6. April 2016, Presentations)

Siehe auch: Alte Seidenstraße in neuem Gewand. Chinas Globalisierungsoffensive. Stiftung Asienhaus China Programm und Universität Duisburg-Essen, taz-Beilage, Oktober 2016. Download (pdf)