The great land grab

Why Zhejiang entrepreneurs are buying lots of foreign farmland

The great land grab

A Brazilian soya bean field: ripe for a Chinese acquisition?

Otto von Bismarck liked to buy forests. The nineteenth century German leader proved a canny investor. Now, almost 113 years after the Iron Chancellor’s death, China wiliest risktakers – the entrepreneurs of Zhejiang province – have also decided to put their money into accumulating forestry and arable land.

Why so? The background here is increasingly well-known. China’s dramatic urbanisation has put enormous pressure on the nation’s stock of farmland. As WiC has often reported, the government reckons that China needs at least 120 million hectares of arable land to safeguard its food supply. Given that minimum is close to being breached, Zhejiang’s smart money is betting that buying farmland abroad will prove a profitable investment.

Their vote for agribusinesses is emphatic. According to Xinmin Weekly magazine, more than 500,000 businessmen from the province are invested in agriculture in at least 40 countries. Sourcing data from Zhejiang’s Department of Commerce, the magazine says they now own 200,000 hectares of farm and forestry land abroad. The numbers are staggering when you consider that Zhejiang only has around 2 million hectares of arable land itself.

The investments have been described as a ‘land grab’ in the media, and has not always been welcomed by landowners in other countries. After all, it’s illegal for foreigners to own farmland in China itself. Agricultural land provides an essential means of employment for the poor, and domestic ownership is considered essential for food security.

Nevertheless, “the trend of Zhejiang businessmen going overseas to ‘enclose’ land is continuing to gather momentum”, according to Xinmin.

Zhejiang-native Zhu Zhangjin of Huafeng village is a typical example of the new breed of investor. He bought land in Brazil’s southernmost state, Rio Grande Do Sul in 2007: “I have invested more than $30 million, raising more than 3,700 head of cattle and buying large tracts of fertile land,” he told the magazine. The leather and beef go to the international market, but his wheat and soy crops help make sure China is fed.

The cost of all this? According to Zhu, Brazilian farmland goes for about $2,200 a hectare, and all the major multinational grain merchants are competing to snap it up. That price is attractive enought that he’s partnered with Heilongjiang province’s Land Reclamation Bureau to invest in a further 100,000 hectares of prime Brazilian farmland over the next five years.

The buying spree isn’t just in Latin America. Africa and Asia-Pacific are also favoured targets. “In Australia, with a few hundred yuan one can buy one mu [a fifteenth of a hectare] of land with access to the ownership and a perpetual right to use, so it is very worthwhile to invest there,” advises Wu Zhisong, a Zhejiang agribusiness consultant.

China’s industrial machine also needs plenty of other raw materials that can’t be found domestically. That’s been the experience of Zhejiang entrepreneur Lu Weiguang, who has spent $26 million on forests abroad (in this case, Vladivostock and Brazil). His commercial logic? The Chinese government places no tariffs on timber imports and gives tax rebates to floorboard exports.

China Daily points out that while accelerating, this is not necessarily a new trend. It cites the example of a 6,700 acre ranch in Zambia, which is “one of China’s largest overseas farms”. Surprisingly it was founded in 1989 – with just 200 chickens.

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