Agriculture may be one of China's core strategic industries, yet the pace of industrialization within the country's agricultural sector has fallen short of expectations for several decades. This disappointing outcome stems largely from a dearth of corporate investment into relevant technological innovations.
According to a recently released report from the Chinese Academy of Agricultural Sciences on the ability of various groups and companies involved in agriculture to create intellectual properties, domestic agribusinesses demonstrate little commitment to investing in new methods and technologies. As the report goes on to reveal, these companies lag behind not only their overseas counterparts but also domestic institutions such as agricultural colleges and academic research groups. Indeed, the Chinese Academy of Sciences was ranked as the most capable domestic group when it came to the creation of intellectual properties, scoring a grade of 99 percent on a comparative index designed by the report's authors. In contrast, China's top-rated corporate organization, Inner Mongolia Yili Industrial Group Co Ltd, was given a grade of just over 25 percent.
The contribution of Chinese agribusinesses to intellectual property development looks similarly languid when compared against the work done by their foreign rivals. To offer one specific example, Yili filed just 532 applications for agricultural intellectual property rights worldwide, while Bayer Group, a German multinational enterprise filed 125,279 such applications.
The lack of corporate devotion to funding scientific advances is a major impediment to agricultural industrialization in China, since ideally corporate entities should have a leading role in linking capital and market demand. Needless to say, this constitutes a failing on the part of companies, as agribusinesses are not proactively chasing the sorts of technological advantages which can translate into much-needed productivity and efficiency gains.
Agricultural advances are desperately needed now that China's ambitious urbanization campaign has paved over much of the country's farmland and sent millions of farmers packing into rapidly spreading cities. According to the latest official figures, China had some 135 million hectares of arable land as of the end of 2012, some 15 million hectares above the so-called red line set by the government to ensure food self-sufficiency. And further complicating an increasingly difficult situation, the Ministry of Environmental Protection estimated last month that as much as one-fifth of China's arable soil contained levels of pollutants which exceeded government standards.
In the past, Chinese authorities have tried to support innovative agricultural enterprises by offering benefits such as tax reduction policies and financial bonuses. But, as has happened in several areas where officials tried to foster innovation with lucrative hand-outs, such offers typically promote little more than an over-dependence on government largesse as companies detach from competitive endeavors. In the end, the market suffered as companies turned a blind eye to their rivals.
For the agribusiness industry, finding external sources of funding is both an urgent priority and a major challenge. Investment in agribusiness usually involves a relatively long return cycle and many unpredictable risks, factors which often make it hard for agriculture firms to attract capital. Yet, government stimulus measures alone won't go far enough to sustain long-term research and development projects across all levels of the industry. Over the near-term, China's agribusinesses - particularly smaller emerging enterprises - should focus on making themselves attractive to equity investors.
Indeed, younger companies have few other options when it comes to raising money since most of the country's financial resources and supportive policies are still reserved for corporate giants and industry champions. The central government took a step toward rectifying this situation earlier this year when, in a series of measures aimed at accelerating agricultural modernization, it encouraged qualified agricultural businesses to list on A-share markets.
For smaller businesses, the benefits of a public listing can be profound. The resulting exposure not only enhances a company's profile and reputation, it can also provide executives with a strong set of incentives to hone their management and leadership abilities. To satisfy value-oriented investors, companies will have to get better at responding to and anticipating market demands. Such abilities are vital to spurring productivity- and revenue-enhancing innovations.
The effects of climate change, industrial pollution and urbanization are putting unparalleled pressures on the world's food supplies. Never before has the need been so great to pursue agricultural breakthroughs. Agribusinesses in China cannot afford to turn a blind eye to current conditions. Companies which take the initiative now to bolster their intellectual property right portfolios will be better positioned for growth in the future.
The author is a reporter with the Global Times.
