MLBA5: October / November 2008

China's hog market to benefit from greater foreign investment

By SHI Tao, with contributions from PHEE Beng Ying

US private equity investment firm, Goldman Sachs has recently acquired full control of more than 10 hog farms in China for US$300 million. Located in the provinces of Hunan and Fujian, Goldman Sachs will outsource the daily operations of the farms to third parties while maintaining firm control over hog prices.

Before this bout of investments, Goldman Sachs already holds a 13-percent stake in China Yurun Food Group, a Chinese meat prod­ucts manufacturer, and 60 percent of Shuanghui Investment and Develop­ment, another main player in China's retail packaged meat industry.

Apart from Goldman Sachs, Deutsche Bank, a leading global investment bank, is also interested in investing in China's livestock industry. In mid-2007, Deutsche Bank set up a trust fund for investment in agriculture related ventures globally. A portion of the fund will reportedly be invested in China.

Deutsche Bank has also revealed its interest in an unnamed large-scale hog farm in Shanghai. According to an industry source, Deutsche Bank will invest US$60 million in the hog farm, securing 30 percent control of the farm.

In addition, Deutsche Bank is also eager to join hands with Tianjin Baodi Agri & Tech. Co., Ltd in the building of ten meat processing industrial parks across China. If the plan is realised, the meat processing industrial parks are poised to challenge the market shares of Yurun and Shuanghui. If Deutsche Bank is accepted as a partner in the venture, it will partake a substantial share of the consumer market for meat products in China.

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