China Ramps up International Investment

Contribution to World

The recent China-Ukraine agricultural cooperation is a focus of global attention. Certain media claim that China bought land in Ukraine to plant crops and so ensure its own food safety.

He Zhenwei's response to such claims: "There are misunderstandings about this bilateral agricultural cooperation. No Chinese enterprise has bought land in Ukraine, because its laws prohibit such purchases by foreign entities within its boundaries. China-Ukraine agricultural cooperation is based on land leasing, but media reports have distorted this fact." He went on, "China's policies encourage international cooperation in agriculture. As we all know, agriculture is one of the most important industries in China and involves hundreds of millions of people. This has equipped the country with ample expertise and experience in this regard. We've leased land in Africa, Russia and Ukraine, at the same time sharing our experience with locals."

Ukraine is an agricultural country, once dubbed the "granary of the former Soviet Union." It has vast arable land, much of it uninhabited, and a small population. No matter grain produced in the country stays there, is transported to China or sold to another country, the leasing of uncultivated land by Chinese enterprises is a contribution to world food security.

"Whether or not grain produced in Ukraine goes to China implies nothing," He said. Ukraine is an exporter of agricultural products whose destinations include Europe, the Middle East and now China. "Through contacts with Ukrlandfarming, one of Ukraine's leading agricultural enterprises, I have learned that the group owns 530,000 ha. of land, much of it lying fallow. The group has expressed willingness both to cooperate with China in utilizing its idle land and to export the grain it produces to China," He said.

China also owns plenty of unused agricultural resources, capital and laborers, which makes China-Ukraine agricultural cooperation beneficial to both sides.

"In brief, we should take a rational view of China's overseas investment in agriculture. In spite of its large population, China can guarantee its grain supply through technology. I think that by encouraging Chinese agricultural enterprises to go global China is in a sense endeavoring to strengthen its agricultural sector by pitting these enterprises against international competitors, so making them an international force. The essence of the 'going global' strategy for Chinese agriculture is that it will contribute to world agricultural development," He concluded.

SOE Autonomy

China's state-owned enterprises (SOEs) have been under discussion among observers within the world community of these companies' forays abroad. The general opinion is that the Chinese government's manipulations of SOEs have quashed many of their potential acquisitions.

"Foreign observers usually have scant understanding of China's administration system. They labor under the misconception that SOEs' operations abroad are controlled and financially supported by China's government. This is not the case. The government neither manipulates nor allocates funds to them," He told China Today.

When examining and approving overseas investment projects, the National Development and Reform Commission (NDRC) raises suggestions with respect to the investment orientation to ensure investment safety, according to He. For example, approving authorities will obviously advise enterprises not to invest in countries that are embroiled in wars. But as to whether or not an investment will be profitable, this is left entirely to the enterprise concerned to decide, according to He.

The NDRC checks the source of investment capital and an enterprise's bank credit. Unless the bank is willing to issue letters of guarantee for loans to an enterprise, the NDRC will not approve that enterprise's proposed overseas investment project.

Some overseas China watchers believe that the Chinese government is the source of SOE investment, as their loans are mainly obtained from stated-owned banks. As He explained, "State-owned banks are also enterprises whose loans must be repaid because they are not government appropriations. A bad loan, in the case of an investment going sour, means that the bank will suffer." To avoid risks, therefore, banks make financial audits of enterprises to ensure their repayment capability prior to granting loans.

Although China's SOEs took the lead in the "going global" campaign, private enterprises are adding robust momentum to it. In 2011, the proportion of private enterprises among the total undertaking overseas investment was around 35 percent. In 2012, the proportion rose to 40 percent.

"China's government has repeatedly stressed its willingness to support private enterprises that go global. I personally think that private enterprises will become the main force of China's overseas investment, and that this is an inevitable trend," He said. "As for the rapid increase of the private share in China's overseas investment, I think this can be attributed to their flexible mechanisms and quick decision-making. These are the strengths of private companies, as there is no need to obtain approval at various levels. Sometimes, all that is needed is a decision by the chairman of the board."