Published: 2008-03-13

From News, cover, issue no. 357, March 10th, 2008
Translated by Ren Jie
Original article
: [Chinese]

The first draft of a "soya document", which is said to propose incentives for domestic soya bean planters and processers, and measures for restricting foreign players in it, has been set and preliminary feedback solicited.

Domestic soya bean businesses have long been suspicious of foreign players in the industry, and have claimed that foreign capital has already monopolized the sector.

Several insiders told the EO that policy papers relevant to grains like corn, rice and wheat were also in the making.

Supporting Domestic Soya
According to an expert from the State Administration of Grain (SAF), the document discussed difficulties facing the Chinese soya bean industry and basically affirmed the standpoint that foreign players had too large a stake there.

China imported over 30 million tons of soya beans in 2007, which satisfied two-thirds of consumption. Eighty percent of imported soya beans went through the hands of four international grain merchants--- ADM, Bunge, Cargill, and Louis Dreyfus. Besides imports, foreign businesses have also controlled 40% of China's soya bean processing capacity.

China was a net exporter of soya beans before 1995. However, almost all large-scale grinding businesses are foreign-invested today. The expert said this made it difficult for government institutions to implement macro-regulation.

In the middle of January, 2008, SAF introduced a range of temporary price-intervention measures. Prices of many kinds of commodities, including oil and foods, were capped. "However, many foreign businesses said they cannot bear such measures," said the source,"especially since they believed such measures breached market rules." 

Sources said the document sought to support the national soya bean industry from different angles, including technology assistance and taxation incentives. It also would set specific restrictions on foreign capital entering the industry.

One boss of a Heilongjiang edible oil company familiar with the issue told the EO that the proportion of foreign investment in the industry was high, but it was spread among many different kinds of businesses. For example, competition existed among the four large grain merchants, so it was hard to convince people by simply describing the situation as a foreign monopoly.

Regarding control measures, some sources fimiliar with the issue said that in the past, Chinese soya bean businesses began cooperating with foreign firms in order to attract assets and technology—which to this day have yet to be fully integrated in the domestic industry. Pushing out foreign firms at this time would be devastating. 

Representatives at the two top legislative sessions recently suggested that China's development had crossed an important juncture, and foreign investment in certain industries such as finance should be limited.

What Comes After Soya?
Besides soya beans, further regulations dealing with foreign investment in corn processing may also be in the works. The Catalogue for the Guidance of Foreign-Invested Industries was amended in November 2007, high-end processing businesses for corn being listed as restrictive. Following this regulation, foreign capitals must apply for approval from National Development and Reform Commission (NDRC) before entering the processing industry to turn corn into ethanol or expanding capacity.

The manager of one foreign-invested corn processing businesses who wished to stay anonymous said that in fact no such applications had received responses—in effect, they were denied.

Unconfirmed sources said that the NDRC was drafting new regulations on corn processing; while another source from SAF revealed that: "Some government agencies are worried that the corn industry would eventually enter into the same predicament as the soya bean industry."