Chinese seed companies should urgently ramp up research and development for biotech seeds to counter increasing penetration of foreign products into the country despite high entry barriers, according to Deloitte.

Global players such as Monsanto and DuPont are well-integrated along the seed value chain, from R&D to distribution, or further into farming and food processing. They already have a 10 percent market share in China, where they set up joint ventures with domestic companies to meet regulatory requirements.

China's commercial seed industry is highly fragmented, with about 8,700 seed producers and more than 100,000 distributors, all focusing on conventional seeds, a report by Deloitte showed yesterday.

Biotech seeds still face great barriers to expansion in China, amid strong public concern over the safety of new seed types and boycott threats.

"Compared with the global commercial seed market, China's biotech seed market has a very low penetration rate. In 2010, biotech crops only accounted for 2.2 percent of the total planted crop area in China," said Yann Cohen, national leader for the chemical industry at Deloitte China.

But the government has announced policy and subsidy support for both conventional and biotech seeds, particularly for biotech corn, cotton, rice and wheat, which will likely support R&D investments, encourage the use of commercial seeds and promote sector consolidation, Cohen said.

Chinese players should begin now to prepare and better position themselves by investing more in R&D of biotech seeds, since the path from research to final product is a multi-year process, with many challenges in R&D, uncertainties en route to market and regulations to anticipate, he said.

About 70 percent of cotton grown in China is transgenic. Two transgenic seed lines have also been certified safe for experimental field planting by the Ministry of Agriculture, although mass production and sales are still forbidden.