October 25, 2011
China's 2011-2020 development plan for the seed industry, which specifies measures for merger and consolidation and formulate polices to promote the country's seed sector, has entered examination procedure.
Analysts said that the new policies, drafted by the Ministry of Agriculture, will accelerate consolidation of China's seed enterprises and enhance industrial concentration, which is favourable to raising Chinese companies' competitiveness and gradually reducing the country's dependence on foreign seeds.
So far this year, China has introduced guidelines and measures to speed up the seed industry development and strengthen management of seed businesses, which indicates that the government will lay great emphasis on the industry in the following years.
In April of this year, the State Council rolled out proposals to push forward the modern seed industry development, saying that the country will strive to cultivate a number of proprietary seed varieties, build competitive seed production bases and form a batch of large modern seed groups in the following 10 years.
The proposals and the plan are both aimed to straighten out relations of scientific research, investments and management system in the seed industry. By raising access threshold to the industry, they will help guide and promote market operation of seed businesses.
China officially implemented the newly revised management measures for seed businesses on September 25 of this year. The measures are designed to gear up seed enterprises' merger and acquisition by significantly raising the market access threshold. They lift the requirement of minimum registered capital for hybrid rice and corn seed firms from RMB5 million (US$783,000) to RMB30 million (US$4.70 million), and that for companies engaged in seed imports and exports to RMB30 million from RMB10 million (US$1.57 million).
Currently, China has more than 8,700 licensed seed enterprises, with two thirds being small and mid-sized, each with a registered capital of RMB1-5 million (US$157,000-783,000).
After all management measures in place, more than 80% of the domestic enterprises engaged in hybrid seed production and operation will have to exit from the market, analysts predicted.
A considerably big share of the seed market in China has long been controlled by foreign seed companies. The multinational seed giants including the US Vanguard Group, Monsanto and the Germany KWS are now speeding up expansion in northeast China through establishing joint ventures and cooperating with research companies or Chinese research institutions, dealing a blow to the domestic seed industry.
The home seed enterprises still lag behind the foreign enterprises in capital size, technology, product varieties and human resources. At present, government investment accounts for the major investment in China's seed industry, which, nonetheless, only makes up less than 3% of the sales. In sharp contrast, foreign giants like Vanguard Group and Monsanto invest 15-20% of their sales revenues into research and development programmes per year.
Now China's seed industry mainly adopts the traditional breeding technology and rarely applies the advanced transgenic and cloning technology which has obtained riper development overseas and gradually came into Chinese market.
Currently, the biggest Chinese seed company just has annual sales of about RMB1 billion (US$157 million) while Vanguard Group's hits US$2 billion.
Industry insiders believe that the development plan designed for the following 10 years will help foster the home giants and thus gradually improve the situation of excessive dependency on foreign seeds.
China's major seed companies now have been listed on the domestic stock markets. They include Shandong Denghai Seeds Co, Gansu Dunhuang Seed Co and Hefei Fengle Seed Co.