Chinese agriculture ripe with opportunity, says market

The time is right to be investing into China’s agriculture industry, according to a private equity professional and an Asia-based placement agent.

Stuart Pang, managing partner at Pinetree Capital Partners, a private equity firm that is currently fundraising for Fund II, believes that the Chinese government’s approach to the agriculture sector is particularly appealing.

“If you invest in China you need to be able to read the winds of change in terms of regulatory changes. Chinese regulations change all the time and they can affect your interests as an investor,” Pang told Agri Investor. “But it seems that it is very safe to invest in the agriculture sector because it is promoted by the government; it is encouraged and protected because China attaches a big priority to food security, safety and supply.”

“The government wants the agriculture sector to be more efficient and has always had the initiative to encourage its development,” he added.

Areas such as soil fertility improvement provide particular opportunity for investment, according to Pang, because “run-off is a particular concern in China”.

“The condition of agriculture and soil in China is a big opportunity for investment, with firms working with universities in various provinces to study the soil, and as companies look at ways to improve marginal/desert land for crop growth,” said Pang.

Vincent Ng, partner at Atlantic-Pacific Capital, agreed that the regulatory environment is suitable and the opportunities for improvements are attractive. But he expressed some concerns about the risks involved.

“On a regulatory basis, the government is pushing better food quality and higher yielding food production out of China, and if you consider the low technology base from which its farmers are coming, there is a lot of opportunity for improvements and therefore investment return,” said Ng.

“But there are two sides of the coin. This low technology base and low efficiency in the Chinese agriculture market also means there are greater risks. How can you complement new technology into existing operations, for example?”