Thursday, November 21, 2013

China on farm-buying spree

Prof. Usha Haley of West Virginia University is warning that if and when the Shuanghui International Inc. purchase of Smithfield Foods Inc. goes through, that will open the floodgates for more Chinese purchases of U.S. food companies and farms.

Part of the Smithfield deal involves ownership of about 400 hog farms.

Haley speculates that China could gain ownership a majority of the farmland in the United States.

“I can give it to you in writing that if this acquisition goes through . . . within five years a great proportion of our large farms (will be) controlled by the Chinese,” Haley says.

And, she says, then China will use that control to start increasing food prices.

Ian Cumming is one of the few journalists who has written about the aggressive purchasing of Canadian farms by Chinese buyers. In articles in the Ontario Farmer newspaper, he has reported on several Chinese delegations scouting out investment opportunities.

Haley says she’s not against Chinese investment in the U.S., but says the Chinese should not be allowed to gain control of strategic industries, such as food production.

Haley testified before the Senate Committee on Agriculture and her views are featured in a Meatingplace Magazine article.

Haley said it’s wrong to consider Shuanghui an independent privately-owned company. She said nothing important happens in China without government consultations and approval, and that Shuanghui should be considered part of the Chinese government.

She says if she were in China’s position, she would have the same strategy to gain control over U.S. food production. That’s because food is extremely important to the Chinese people.

She predicts that Shuanghui will import basic pork cuts such as ham from Smithfield, will blend them with Chinese-produced pork into processed products and sell those around the world, including back to the U.S.

She predicts there will be food-safety scandals with these pork products that will damage the Smithfield brand name and the U.S. reputation for meats.

She said it’s wrong to think that the Chinese have a competitive advantage because of plentiful and cheap labour. She said government subsidies and loans are a far more important factor.

She also warns that the Chinese economy is far less robust than most people think, mainly because there is an enormous amount of debt that has been taken on by local governments to subsidize factories to export products.

She estimates the Chinese government debt load, when all levels of government are included, is about 180 per cent of Gross National Product. That would make its debt burden higher than the U.S., much higher than Canada and even Italy at 128 and Greece at 158 per cent.