Perspectives from SinoLatin Capital | June 26th, 2009

By: Luis Gómez Cobo

According to a Reuters report published this week, China halted a program that would see marginal farmland returned to woodland. The measure comes due to concerns over the rapid reduction of the country’s arable land. China needs a total of 120 million hectares of arable land to satisfy the food demand of its population. While this number might be challenged in terms of how the demand is calculated, the fact is that through the combined process of reforestation and urbanization, China’s available arable land is approaching the 120 million hectares mark. Just in the past 12 years, China has lost more than 9 million hectares of arable land, and the last reports post the total area at 121.7 million hectares; which today accounts for just 8.8% of the world’s total arable land. In contrast, 1.33 billion people of the world’s 6.78 billion are Chinese (19.6%). With this combination of factors – the increase in food demand by a growing middle class and the shrinking of the already scarce available arable land – we cannot help but to ask ourselves: How is China going to feed its people? This question is driving companies from all over the world to export food to China and invest in China’s food industry. On the other hand, Chinese food companies are diversifying their supply sources by partnering and investing abroad. In this context, Latin America is surely one of the most attractive places for China to invest in arable land and food industries.