Defining The Disruptive Geopolitics Of The Global Farms Race
May 16th, 2018
Via Future Directions International, an interesting look at Chinese overseas agricultural investment and Beijing’s dream of a new economic world order:
- There is a link between China’s plans to return to a position of global centrality and its food security. Beijing’s food security strategy has shifted toward overseas investments.
- This involves moving on from “greenfield investments”, or land grabs, to the total control of whole supply chains.
- Such a strategy will be executed in two parts: the development and eventual takeover, agriculturally speaking, of Pakistan and the economic development of Central Asia into an agricultural hub.
- Just because China wants this to happen, however, does not mean that target nations will be willing to cooperate.
Summary
China has enthusiastically taken advantage of the fact that the future of its food supply lies in overseas agricultural investments. What was once a closely guarded policy field, domestic food security, has now become more contingent on how China performs overseas. Beijing has reformed its definition of food security, choosing to enmesh it into its broader grand strategy. The aim is to create a China-centric bloc of economies dependent on Beijing; similar to the old imperial patronage system.
To facilitate this strategy and thus its approach to overseas agricultural investments, China has moved to a “whole supply chain” approach. Whereas some countries may look overseas reluctantly, China has done so with vigour. It has made food security a pivotal part of its two most important mega-projects (the China-Pakistan Economic Corridor and the Belt and Road Initiative). Consequently, China’s quest for food security is a matter of significant national interest and a vital part of President Xi Jinping’s desire to reclaim for China what he sees as its natural place of global pre-eminence. Given that China’s food security intersects with its efforts to fashion its own economic order, failure to achieve the latter, could mean a similar fate for the former.
Analysis
Going Global
China’s population is around 1.3 billion people—approximately 22 per cent of the global population—and steadily increasing as the country’s standard of living improves, incomes rise and the availability of good quality food increases. Dealing with such rapid population growth has been made more difficult by the fact that China only possesses seven per cent of the world’s arable land. Moreover, that land has largely been damaged by the country’s efforts to boost domestic production. The overuse of chemicals and pesticides has contributed to soil erosion, the poisoning of rivers and lakes and a disgraceful food safety reputation. The combination of a rising population with an increasingly stressed natural environment is placing a significant burden on domestic food production capabilities. The Communist Party has realised that it has no choice but to look overseas for alternative food sources. Since the mid-1990s, China has attempted to do this through the ‘Going Global’ (GG) strategy, a foreign policy framework designed to direct Chinese firms and their investment to foreign markets.
The first phase of the GG strategy was based on the idea that China possessed ‘unique cultural solutions for other nations’ problems’. In other words, China was willing to work with other countries without requesting some form of political liberalisation in return, a precondition many Western institutions, like the World Bank, often press for. In the late 1990s and early 2000s, the China Model was implemented, with its overseas agricultural investments emphasising land grabs. Chinese firms bought, or had leased to them, large parcels of land in Cambodia, Laos, Mozambique and Tanzania. China wanted to assert itself as a serious economic player, capable of sustaining a presence in foreign markets and as a palpable alternative to the established Western system.
Chinese businesses were willing to ignore local regulatory and political frameworks to expedite deals and host authorities were happy to oblige. China’s model for overseas investment, however, left many in the West on edge. The non-interference strain consistent with the China Model – while granting Beijing access to foreign markets – also subjected the investment projects to the political fragility of the host countries. This double-edged sword of a strategy provoked the need for change, causing many in the Communist Party to look beyond simple land grabs as a source of national food security.
A mixture of politics and economics has caused China’s overseas agriculture investment strategy to evolve. Attempts to acquire land in Argentina, Brazil and Indonesia all failedafter the general public in all three countries pressured local government to resist an encroaching China. Cameroon and Angola have reported the concerns they have about ceding land to the Chinese. For all its supposed success in Africa, China often faces African countries simply unwilling to do business with Beijing. In his book The Land Grabbers, Fred Pearce points out that while China is active in Africa, its attempts to acquire land have been hampered by ‘the fragile political situation’ inside many countries.[1]Acquiring land from dubious governments has also proven to be problematic. While it is expedient for China, a country with little regard for human rights or liberal democracy, to establish connections with similarly regressive regimes, it is a difficult long-term strategy to maintain if, at the same time, China is doing business with duplicitous regimes that are a natural hindrance to economic progress.
Politics has not been the only cause for concern. In 2007-08, global grain prices shot up, renewing concerns in Beijing about the security of China’s food supply. In the wake of the crisis, Der Spiegel stated that though ‘the government [has] 40 to 50 million tons in emergency reserves…there is still a gap of about ten per cent between supply and demand, which means that the country must import rice for 130 million people.’ It was around this time that commentators and policymakers began seeing overseas investment as a long-term solution.
Attempts to control food exports to bolster local supply all failed and efforts to increase productivity with fertilisers and other additives had proven detrimental to farmland. The 2008 crisis galvanised Beijing into taking a more worldly approach to its food security. This led to the idea that China’s food supply would be better secured if it intersected with China’s national security strategy and its efforts ‘to secure supply chains to all continents.’ What is crucial is that Beijing’s heightened reliance on imports has been made an important part of its broader vision of building a China-centric international economic order. Instead of building stand-alone agricultural operations from the ground up, a “whole supply chain” approach was adopted, so that China could better influence supply and price.
Over the past ten years China’s interest in logistics, ports, trade routes, management techniques, learning centres and agricultural knowledge has increased. The Belt and Road Initiative (BRI) and the China-Pakistan Economic Corridor (CPEC) are perfect indicators of China’s attempts to execute the “whole supply chain” strategy. In an essay for the Wall Street Journal, Cambridge University professor David Runciman argues that ‘the ongoing appeal of the Chinese model’ is its promise to ‘deliver results in a relatively short period of time’. China itself, however, may have realised that short-term tactical moves, like land grabs, do not equate to a broader food security strategy.
China’s Overseas Agricultural Investment: China as a Great Power
China’s efforts to reassert itself as a great power cannot be separated from its Going Global strategy, which is meant to secure the country’s food supply; the two are linked. China’s overseas investment strategy is designed to improve China’s presence on a global scale and, as stated in a previous Strategic Analysis Paper, ‘to return China to its position of centrality in international affairs.’ Many assume that China’s rise is inevitable and that a decline in American or European power must mean a reciprocal rise in Chinese power on the world stage. This, however, is not the case. China does have a desire to assume a more globally commanding position; however, desires will remain just that without the necessary economic, industrial and international foundations to support them. This is to say that China’s overseas investment strategy is geared towards developing the national economy by controlling, and eventually running, entire supply chains, so that its place as a global power can be ensured.
Obviously, China’s domestic food security is not the main reason for such a strategy; however, it does have a role in how China is choosing to use its economic tools to satisfy its commercial interests. China hopes to secure its food supply through the creation of this China-centric economic order, with its own supply chains leading to all major continents, to ensure a steady and affordable stream of food to the Mainland.
China’s “Field of Dreams”
China’s rationale for overseas investment has been popularly regarded as a well-intentioned effort by China to reform and bolster international free trade, at a time when it appears to be wavering. In other words, China has managed to display itself as the saviour that international free trade needs right now. A paper by the JamestownFoundation, however, explains how phrases, such as ‘community of common destiny’, used to describe the BRI and China’s economic vision, hide Beijing’s efforts to engage states traditionally ignored by the United States and organise them into an economic community dependent on China.
This strategy would involve the creation of new trade routes, organisations to administer them and infrastructure to make them work. As Deng points out in an article written in 2007, ‘asset-seeking FDI [foreign direct investment] is undertaken in order to access new resources and to gain new capabilities or acquire necessary strategic assets in a host country.’ The aim of the BRI and CPEC is to peacefully revive the old patronage system that China presided over as an imperial power. An overtly aggressive effort to supplant the Western-led order would probably garner an equally aggressive reaction from the United States. Instead, China is accruing more power and influence on the world stage while telling concerned states it is dedicated to the “inclusive community” narrative. China’s food security strategy is tied up with this vision.
Executing the Dream
The success of this geo-economic vision is not possible without a physical plan to execute it. The CPEC and the BRI make up that plan; however, they should be seen as a dual execution of a strategy to secure an economic bloc conducive to Chinese imports and exports. The BRI is China’s attempt to connect ‘the two ends of Eurasia, as well as Africa and Oceania’, so that China can trade with Europe through Central Asia and the Indian Ocean and with its South Pacific partners through the South China Sea. The development of Central Asia to suit Chinese agricultural interests cannot be achieved without first being practised in a linchpin country crucial to bridging the Mainland and Central Asia: Pakistan.
China is simulating in Pakistan what it hopes to see happen across its Belt and Road routes, so that when connecting with one of the most important regions – Central Asia – Chinese funded and controlled infrastructure in Pakistan is ready to ensure the safe passage of agricultural produce from Central Asia to Mainland China. Pakistan’s importance is twofold: its eagerness to be a source of agricultural produce and its strategic positioning.
A report by Dawn revealed that, contrary to popular opinion, the main purpose of CPEC is the broad takeover of Pakistan’s agricultural industry. This is not the first time Pakistan has willingly sacrificed its food security to secure foreign investment. In 2008, investors from Saudi Arabia and the United Arab Emirates secured thousands of acres of land in return for oil and financial aid. The deal was heavily criticised for the apparent lack of concern Pakistan displayed for the health of its own agricultural land, which many observed would wither due to over farming by foreign farmers. Pakistani willingness has also made it easier to prepare it for the role it will play as a bridge between Central Asia – another breadbasket China hopes to cultivate – and Mainland China. China has been busy both developing, and planning to develop, ports, storage depots, roads, water management facilities and seed depositories; to not only extract Pakistani produce, but to make transporting produce from Central Asia that much easier. A closer look at how Pakistan and Central Asia have been positioned to agriculturally empower China is needed.
Pakistan and the CPEC
It should come as no surprise that China is attempting to practise in Pakistan the kind of debt trap diplomacy it eventually wants to practise in Central Asia. Pakistan certainly has a tendency to sacrifice its own food security to either generate revenue or achieve a much needed political win. The China-Pakistan Economic Corridor was initiated under then Prime Minister Nawaz Sharif back in 2013, when he gathered all the heads of Pakistan’s political parties together at a luncheon in honour of Chinese Premier Li Keqiang. A memorandum of understanding was signed between the two countries on the establishment of an economic corridor. In 2014, President Mamnoon Hussain visited China to further discuss the possibility of an economic corridor. Then, in 2015, during a state visit to Pakistan, Xi Jinping and his Pakistani counterparts signed a US$46 billion ($61 billion) energy and infrastructure agreement.
The deal was sold to the Pakistani people and the international community as a great diplomatic success that could only benefit the fledgling Pakistani economy. At a workshop at the National University of Sciences and Technology, the Chinese Charge d’ Affaires Zhao Lijian stated that CPEC was, ‘proof of the time-tested friendship between the two countries.’ Others have tried to argue that the CPEC is more than just a trade route. A piecein Carnegie-Tsinghua argued that CPEC is not actually just about ‘simply [connecting] point A to point B.’ Economic cooperation and the bettering of Pakistan’s finances, energy and industry is of principal concern and should be the main focus point as CPEC develops.
The reality is, that despite the investment and infrastructure projects scheduled to come to Pakistan, CPEC is part of China’s attempts to build a bloc of economically dependent countries with Beijing at the centre, so that, among other products, agricultural exports to China can be better managed. China is confident that it has the capability, as well as the inherent right, to regain what it sees as its place among the great powers. Observers should note that Chinese developments in Pakistan offer an insight into the kind of tributary system Beijing wants to create across Central Asia. As China’s strategic interests creep west, Beijing will seek to increasingly entrench Pakistan’s place as the crossroad client state connecting Chinese interests in Central Asia with Mainland China, particularly western China. China’s plans for Pakistan are primarily to do with agriculture and the Dawn report referred to earlier, said: ‘thousands of acres of agricultural land will be leased out to Chinese enterprises to set up “demonstration projects” in areas ranging from seed varieties to irrigation technology.’ Crucially though, ‘the plan outlines an engagement that runs from one end of the supply chain all the way to the other.’
Chinese seeds will be planted by Chinese enterprises, worked by Chinese farms and then stored and transported by Chinese trade companies. China’s involvement in Pakistan’s market is centred on ‘profitable engagement in the domestic market’ and the facilitation of agricultural trade, both to and from Pakistan. In other words, China wants to engage Pakistani agriculture from production to distribution, to satisfy Chinese agricultural demands.
Central Asia as an Agricultural Hub…
The implementation of CPEC is to complement the creation of trade routes and logistical facilities in Central Asia. China’s interests in Central Asia are purely economic and are geared towards the establishment of a Chinese-funded agricultural hub. The BRI is running through territory and encompassing economies that Russia had once hoped to include in its Eurasian Economic Union, which is why China has been more than happy to let Russia exercise its hard power influence in the region.
China’s interest in Central Asia is trade, or, to be precise, the establishment of rail and freight lines and the cementing of agricultural investments in countries rich in wheat, such as Kazakhstan. Kazakhstan is ground zero for China’s agricultural ambitions in Central Asia. Chinese companies last year pledged to commit around US$600 million ($797 million) to Kazakh agriculture by 2024 and to increase the importation of Kazakh wheat.
Russia is also getting involved. China is planning to buy Russian grain and move that trade along the shared Trans-Manchurian Railway. According to the Nikkei Asian Review, ‘the buyer is state-owned Chinese grain trader COFCO [China National Cereals, Oils and Foodstuffs Corporation] and the imports seem intended to serve as a tangible result of the Belt and Road Initiative.’
According to the United States Department of Agriculture, ‘COFCO has dual commercial and national objectives, including the preservation of China’s national food security.’ COFCO is representative of China’s efforts to shift to ‘a so-called “whole supply chain” approach.’ China’s vision and its plans to execute its strategy are clear, especially when COFCO’s chairman has pledged to secure China’s food supply ‘by controlling a greater share of global agricultural resources.’
…Maybe
There is no assurance that Central Asia, namely Kazakhstan, will become an agricultural hub for China. Though investment figures and project scope suggests progress, the awe-inspiring size of a mega-project, like the BRI or CPEC, does not guarantee a natural path to success. There is, in fact, a significant difference between China and its Central Asian business partners; what China wants to build may not be what its Central Asian partners want built. A defining feature of the future Sino-Central Asian relationship will be how well Chinese interests align with Central Asian interests.
On one hand, China’s determination to cultivate Central Asia is incredibly evident. As previously stated, China has long acknowledged the fact that its food security rests, for the most part, on imports from other countries. China, however, has not just acknowledged this and put in place the required policies; it has embraced this reality with enthusiasm. The policies it has implemented do not reflect a nation investing overseas because it has to, but an aspiring power doing it because it wants to. According to The Central Asia-Caucus Analyst:
China is not only relaxing subsidies on domestic agricultural production while promoting the market mechanisms required to import more grains, it is genuinely letting go of domestic production as a food security ballast and will begin to let other nation states feed its populace … The program envisions moving whole production chains offshore, essentially shifting Chinese industrial capacity to external geographies.
Though China’s internationalist food policy is, in part, designed to complement a lagging domestic industry, there is a broader mission attached to this strategic move. Government officials have commented on China’s divine right to the region. One was caught saying that ‘Central Asia was a rich piece of cake given to today’s Chinese people by heaven.’ PLA General Liu Yazhou has commented on China’s destiny in Central Asia, saying ‘advancing westward was a historical necessity for the Chinese nation, and it is also our destiny … [It is a] territory to be recovered in our advance, not as a border region.’ Plans and speeches, however, do not always translate to reality; ‘a route on a map … does not create traffic and trade.’ China has plans, but whether they will gain traction is difficult to say.
Conclusion
Together, the CPEC and the BRI outline China’s plans to develop a route leading from mainland China to Central Asia. The scope of these mega-projects and the size of the investments demonstrate a linkage between economic growth and the establishment of an international economic order resembling the old patronage system. A revival of this system is clearly meant to beckon a new era of stable economic growth, however, Chinese policy makers need to be wary of the risks of attaching the future of its food security to mega-projects that may never come to fruition.
It is easy to confuse the size of the BRI, for example, with guaranteed success; a kind of “to big to fail” scenario. Failure is possible regardless of the size of the project and, whether it likes it or not, Chinese investment in Central Asia and Pakistan can only work if it is genuinely wanted. Kazakhstan, for example, is an autocratic country that does not mind accepting Chinese overtures as a way of boosting domestic growth. Though it does not need to, it is happy to work with China. Kyrgyzstan on the other hand, needs foreign investment to boost growth, but is politically wary of the consequences of allowing China into the domestic political system. China’s long-term success is far from secured.
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Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land. Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas. Monty writes about freshwater scarcity issues at www.waterpolitics.com and frontier investment markets at www.wildcatsandblacksheep.com.