Introduction to Foreign Investment in the Agriculture Industry

In accordance with the Guiding List Concerning Foreign-Funded Industries, jointly published by the State Development and Reform Commission, the former State Trade and Economic Commission and Ministry of Foreign Trade and Economic Cooperation (MOFTEC), foreign investors are encouraged to invest in the following:

Transforming low- or medium-yield fields, development of green technologies for growing vegetables (including edible mushrooms and sweet watermelons), fruit and tea; development of new and fine breeds of fruit trees, flowers, pastures, crops for sugar-making and other high-tech techniques and new high-tech species (except those involving gene transformation), building flowers plant nurseries, developing organic fertilizer resources, planting and raising Chinese medicinal materials ( confined to equity joint ventures (JV) and contractual JVs ) and planting natural rubber, sisal hemp and coffee.

Foreign investment is restricted in the following:

Developing and producing grain crops (including potatoes), cotton, seeds of oil-bearing crops (with a Chinese party holding the controlling share).

Foreign investment is prohibited in the following:

Producing unique Chinese breeds.

From the beginning of the reform and opening up until the end of 1998, there were 9,392 agricultural projects with foreign investments with a contractual value of US$18.018 billion; 150 foreign loan projects (involving preferential loans) with a contractual value of US$6.751 billion, accounting for 42.8 percent of the total foreign investment in the agriculture sector; 7,915 foreign investment projects (involving capital from Hong Kong, Macao and Taiwan) with a contractual value of US$8 billion, accounting for 50.9 percent and 407 foreign-aid projects with a contractual value of US$1 billion, accounting for 6.3 percent of the total in the agricultural industry.

During the four years between 1999 and 2002, foreign-invested projects totaled 2,047 with a contractual value of US$3.209 billion. The projects for each year numbered 456, 484, 536 and 571 respectively, with a growth rate of 6.53 percent in 2002 over the previous year, a growth rate of 10.74 percent in 2001 over the previous year and a growth rate of 6.14 percent in 2000 over the previous year.

The contractual value for each year was US$0.761, US$0.692, US$0.962 and US$0.794 billion respectively, with a decreasing rate of 17.49 percent in 2002 over the previous year, a growth rate of 38.91 percent in 2001 over the previous year and a decreasing rate of 9 percent in 2000 over the previous year. (See chart below for reference.)

From 1999 to 2002, projects using foreign investment in the planting industry totaled 1,420, with a contractual value of US$2.062 billion. The projects for each year were 312, 398, 310 and 400 respectively with a growth rate of 33.78 percent in 2002 over the previous year and a decreasing rate of 22.11 percent in 2001 over the previous year and a growth rate of 27.56 percent in 2000 over the previous year.

The contractual value of each year was US$0.446, US$0.551, US$0.386 and US$0.562 billion respectively with a growth rate of 45.62 percent in 2002 over the previous year and a decreasing rate of 8.77 percent in 2001 over the previous year; the growth rate was 23.60 percent in 2000 over the previous year.