June 2, 2011

China encouraged to invest in foreign agri sector

China which is the world's biggest forex reserves holder should use its extensive foreign exchange reserves to develop investment in the overseas agricultural industry, a researcher with country's Research Centre for Rural Economy said.

The research said this will help to increase domestic market supply.

China's foreign exchange reserves are up to US$3.04 trillion as of end March, with a substantial portion invested in US Treasurys.

China should build grain production bases abroad, especially in South America, Africa and some neighbouring countries with great potential to increase grain production, the researcher added.

Chinese agricultural companies are eager to tap overseas resources as domestic demand is rising quickly and domestic grain and edible oil production is approaching full capacity due to rapid urbanisation.

Both the Chinese government and marketers also want to insulate prices from volatility in major markets such as the CBOT, and controlling upstream resources including land and crop selection would be the best way.

China, the world's largest importer of soy and palm oil, is attempting to maintain a grain self-sufficiency rate above 95%.