China Business, Internet

China Agricultural Opportunities: Shandong Province as the Place to Be.

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I knew China’s new land reform laws making leasing of farmland easier and potentially more profitable would lead to opportunities relating to agriculture. But it took David Wolf at Silicon Hutong and his post, Why Land Reform is a Tech Opportunity, to explain exactly what those opportunities will be.

Wolf sees China land reform as opening things up for agricultural technology in China, particularly in the following areas:

  • Drip irrigation: China’s shortage of fresh water is already bad, and it is going to get worse. Chinese farms will only be sustainable if they use exactly as much water (and fertilizer, and nutrients) as they need, and no more. Drip irrigation is the best, most practical solution today. As aeroponic techniques develop beyond space travel and dorm-room cultivation of cannabis sativa, they may eventually supplement drip irrigation, but likely only for specialized applications.
  • Greenhouses and Nurseries: beyond the vagaries of pests and weather, the challenges of China’s environment is likely to drive the production of cash crops – not just flowers – into greenhouses. We see a lot of this around major cities and in centers like Kunming, but expect this to expand. This involves more than just covered farmlands: it also means temperature monitors and controls, irrigation systems, air-quality management systems, and harvesting.
  • mAgriculture: few Chinese farmers can afford laptops, but many more can afford mobile phones to monitor their crops, the weather, and market prices, as well as to take orders, capture opportunities to sell at higher prices, and make payments on supplies and micro-loans. Farmers will need inexpensive yet rugged and waterproof handsets with large buttons, long battery life, and possibly even solar charging capability. They will also need easy-to-use service bundles to include information access and mobile banking.
  • Training: there is just no way to get millions of farmers into schools. Raising skill levels in new crops, new tools, and agricultural economics is going to involve a combination of traditional low-tech methods and some experimental efforts in using remote training via satellite TV and possibly the Internet.
  • Finance: once you have the land, you need the cash to develop it and to finance your first crop. Traditional methods of agricultural banking in China, including banks and farm co-operatives, won’t be enough. Micro-finance, in all of its forms, can be most economically administered using technology. That doesn’t mean a computer on every farm, but it does mean loan officers in rural areas equipped with at least handhelds to help manage payments and collections.

In addition to technological changes to farming, I also see farming bringing change to China. I predict China’s most fertile regions, like Shandong Province, are the most likely to benefit both from land reform and new farming technologies. Shandong is already a very wealthy province (in the most recent PRC statistics, it is listed as the number two province in Gross Domestic Product and number one in fixed investments) and I see its wealth only increasing over the next ten years. If I had to pick one China province to outperform, it would be Shandong.

What do you see happening with China AgTech?

4 responses to “China Agricultural Opportunities: Shandong Province as the Place to Be.”

  1. Thank you for your insightful article. I am interested in the terms of the leasing policy implemented by the government. Does it only apply to Chinese nationals or it also permits foreign enterprises to lease land? What about developing hunting and gaming industry in the meantime while producing agriculture products?
    Thank you.

  2. Dan wrote: “Shandong is already a very wealthy province (in the most recent PRC statistics, it is listed as the number two province in Gross Domestic Product and number one in fixed investments)…”
    This is an interesting development. When I first arrived in China back in January 2002, I worked in Jiangsu Province, which borders Shandong. At that time, Jiangsu was the second wealthiest province after Guangdong, and Shandong was way down the list. Everyone I met in Jiangsu (my spouse included) had the impression that Shandong was a “very poor province”. The following year I spent some time in Qufu (Confucius’s hometown) and Qingdao. Qingdao was relatively developed, and very nice in places, but the rest of the province that I passed through did appear noticeably poorer than its southern neighbour. Qufu, despite its fame, was a dusty, underdeveloped town with no decent hotels and no decent restaurants.
    I’m pleased to hear that Shandong has caught up, developmentally, and in such a short time.
    On the subject of agricultural land reforms, I would think that very large numbers of people would first need to be alienated from their land in order to make viable the setting up of large scale technology-driven agri-businesses. More than just land reform laws will be be needed for this to occur on any large scale: urban-based jobs, housing and other basic infrastructure will also need to be made available to migrants from the farm.

  3. Mark, you make a fair point on land alienation. The point that I made in my post is that the U.S. manages all of its cultivated land with less than six million people actually involved in farming. China has over 700 million farmers, so even pumping 90% of that population into cities and towns will still leave China’s farms awash in labor.
    For that reason, China’s new green revolution cannot be based on the kind of large-scale farming we see in North America, Argentina, Australia, or Russia, all of which are based on labor scarcity, land surplus, and high capital availability.
    Even after urbanization and land reform, China needs a model that presumes land scarcity, labor surplus, and a growing availability of capital in all forms.

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