China’s recent leasing of nearly one-tenth of Ukraine’s arable land marks its progress in acquiring prime agricultural assets in the former Soviet Union

Ukraine, once the breadbasket of the erstwhile Soviet Union, may soon become the main overseas farming province of China.

A Hong Kong newspaper reported recently that China had leased millions of hectares of prime farmland in Ukraine. The report was promptly denied by the Ukrainian side, but it threw light on China’s push for a foothold in the agricultural sector of the former Soviet states.

Report sheds more light

The South China Morning Post said on September 21 that China’s Xinjiang Production and Construction Corps (XPCC) had signed a deal with a private Ukrainian company to lease three million hectares of high quality farmland for crop and pig farming for a period of 50 years. The deal spanned more than nine per cent of Ukraine’s arable land and was touted as China’s largest overseas farming project involving the investment of $2.6 billion.

KSG Agro, the Ukrainian partner of XPCC, denied leasing any land to the Chinese company. The KSG owner, Sergei Kasyanov, explained that in June, the two companies had signed “a framework agreement on cooperation in food production.” Its implementation, he said, “will begin” with setting up drip irrigation on 1,00,000 hectares of farmland that his company leases from the state. Later on, Chinese irrigation technologies would be used on three million hectares of Ukraine’s farmland.

It appears that the newspaper has revealed more than what the Chinese and Ukrainian authorities are prepared to disclose at this stage. An unnamed Ukrainian official confirmed to Forbes last week that talks were under way with China on leasing out “large plots of farmland.”

EU agreement

On a visit to China last week, Ukraine’s Agriculture Minister Nikolai Prisyazhnyuk said that China could become a strategic market for Ukrainian cereals, meat, sunflower oil and sugar. This is a win-win prospect for both sides. Ukraine needs to diversify exports as Russia has threatened to hike customs duties on Ukrainian food and other products after Ukraine signs an association agreement with the European Union next month. The pact will also open the Ukrainian market to subsidised food imports from Europe, forcing local farmers to switch to more efficient farming technologies that are on offer from China.

China, which consumes a fifth of all global food supplies yet possesses only nine per cent of the world’s farmland, has been scouting other countries for agricultural assets. As of 2009, Chinese companies acquired two million hectares of farmland in Africa, Latin America and Australia, and have since stepped up their expansion efforts, training sights on the former Soviet Union.

Back in 2011 the president of Ukraine’s Association of Farmers and Private Landowners, Ivan Tomich, asserted that Chinese companies were in the process of assembling a $400-billion fund to lease farmland in Ukraine. He predicted that China would soon emerge as the biggest farm operator in Ukraine.

Dissent

Fearing local protests, China prefers to tread cautiously in negotiating land deals. After Kazakhstan President Nursultan Nazarbayev’s rather impudent announcement four years ago on leasing out one million hectares of farmland to China — provoking protest rallies in the country’s commercial capital, Almaty — the two sides decided to keep their sensitive talks under wraps.

According to the International Institute for Sustainable Development (IISD), China’s state-owned Jilin Grain Group in 2010 struck a deal with the government of Kazakhstan to grow soyabeans on one million hectares for export to China. Another Chinese company, Oriental Patron, in 2010 formed a co-investment partnership with China Investment Corporation (CIC) with a stated goal “to explore agricultural investment opportunities in Kazakhstan and other [nations in the] Commonwealth of Independent States.”

Tajikistan, which two years ago leased 280 hectares to Chinese cotton growers for 49 years, now plans to allot them more farmland, according to the country’s Agriculture Ministry.

Soil damage

Chinese farmers have also made some inroads in Russia. They have leased 25,200 hectares in the Jewish Autonomous Region in Russia’s Far East and smaller farming plots in many other parts of the country. However, China’s further “land grab” in Russia has been stalled by a bad reputation the Chinese farmers have earned in that country. Renting land for one or two seasons, they leave behind barren land heavily polluted by pesticides and spiked by an overdose of fertilizers. Earlier this year a court in the Far East fined a Chinese company more than $5 million and cancelled its lease of 107 hectares for ruining the soil with pesticides. Some Russian regions have imposed an informal ban on Chinese farmers, but in many provinces, authorities close their eyes to the Chinese malpractices because they just do not have enough local labour to till farmland.

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