Chinese companies are increasing their investments in foreign agricultural and food assets at a rapid pace, propelled by increasing reliance on food imports, concerns about national food security and a rising stock of foreign reserves. In fact, China’s agricultural investment abroad grew more than tenfold in less than a decade, according to a new report from U.S. Department of Agriculture’s Economic Research Service titled “China’s Foreign Agriculture Investments.”

China's investment statistics show that overseas ventures in agriculture, forestry and fisheries soared from $300 million in 2009 to $3.3 billion in 2016. However, the report said these totals understate the magnitude of Chinese agriculture-focused foreign assets because the statistics exclude the acquisition of food processing and trading companies classified in manufacturing and service sectors. A more complete count issued by China’s Ministry of Agriculture had more than 1,300 agricultural, forestry and fisheries enterprises -- with registered overseas investments of $26 billion -- at the end of 2016.

“Chinese officials have ambitious strategic plans for agricultural investments to reshape patterns of agricultural trade and increase China’s influence in global markets,” report authors Elizabeth Gooch and Fred Gale noted. “Foreign investment in agricultural and food sectors is part of a broader initiative to encourage Chinese companies to become economically competitive by engaging in international markets.”

Further, the report noted that some Chinese companies and officials have recently shifted the thrust of their strategy from farming overseas to acquiring established agribusiness companies based in Europe, North America and Oceania. These include ChemChina’s $43-billion acquisition of Syngenta, a Swiss farm chemical and seed company; Shuanghui International's purchase of U.S.-based Smithfield Foods, and China National Cereals, Oils & Foodstuffs Corp.’s purchase of two major agricultural trading companies: Noble Agri and Nidera. Chinese companies have also acquired companies or formed joint ventures in New Zealand and Australia focused on meeting China’s growing demand for dairy, beef and lamb.

“These investments contribute to national food security, gain a greater share of the profits for Chinese companies from imported commodities, exert influence on global price determination, impart technical and managerial expertise, open new markets for Chinese products and project political influence abroad,” the authors explained.

However, even though China’s foreign investment in agriculture is growing rapidly, the report pointed out that global news media often exaggerate its role. For example, the authors said a number of studies have found that the scale of many Chinese agricultural projects falls far short of initial announcements.

“Chinese researchers have found that few proj­ects were profitable, and relatively few investors exported products back to China as planned. The researchers attributed poor results to factors such as inexperience in global markets, lack of language skills, local bureaucracy, corruption and political instability,” Gooch and Gale explained.

Additionally, the report noted that most of China’s foreign agricultural projects involve relatively small companies investing in neighboring countries in Southeast Asia, Russia’s Far East and Africa that have unexploited land and are often receptive to Chinese investment.

In regard to North American investments, the authors said apart from the large acquisition of Smithfield Foods in 2013, relatively little Chinese investment has targeted U.S. agriculture. Statistics for 2014 show that North America received only 2% of China’s farming, forestry and fishing investment -- the smallest share of any continent, the authors added.

A database that tracks Chinese invest­ments in the U.S. also showed only two to three investments in agriculture and food annually, most of which were valued at less than $10 million. Statistics tracking foreign farmland holdings in the U.S. showed 12-25 Chinese acquisitions annually during 2008-13.

The authors suggest that Chinese investments in countries other than the U.S. could influence the U.S. share of the Chinese market for certain commodities like dairy products and beef. “However, the United States’ abundant endow­ment of productive farmland, leadership in agricultural technology, efficient management and marketing and skilled and experienced managers are all advantages that may help it retain its role as China’s leading supplier of agricultural imports, regardless of where Chinese companies choose to invest,” they added.

Overall, Gooch and Gale said a better understanding of the motivations behind the ventures and their size and impacts can help government officials, farmers, business leaders and other stakeholders in the U.S. and other countries make more informed policies and business decisions regarding these investments.