new stress on seeds underscores Beijing’s pivot back to food security; private companies, above all GM seed developers, long the sleepers in the PRC market, may be the winners

Ag production’s very own ‘chip technology’ has been identified at last: seed development. Encompassing development of seeds, breeding animals and their genetic material, it was flagged for the first time at the 2021 annual economic planning conclave last December.

This upgrade will bring capital investment and resources to drive research and streamline paths to market. Yet while critical, resource mobilisation is far from sufficient to revamp the sector, plagued as it is by poor commercialisation and inadequate R&D.

hidden bottlenecks

While listing seed tech as a priority for 2021, Beijing also lauds success in the sector: over 95 percent of cultivated land, it claims, is planted with domestically-bred strains; wheat and rice use local seed exclusively.

This is only part of the story. Some ag sectors, not least vegetables and livestock such as pigs and cattle, are hostage to high-yield, high-quality imported seed, edging out local supply. But more urgently, Beijing fears that as global seed firms roll out more specialised varieties—resistant to drought, pests and weeds, and better suited to mechanised farming—less developed domestic cultivars will be squeezed out, threatening local control of the market and adding to food supply concerns.

The problem runs deeper still. Long oblivious to the importance of protecting germplasm (carrier of genetic information and key to breeding), indigenous diversity is at risk. Over 70 percent of local grain varieties, claims MARA (Ministry of Ag and Rural Affairs), have disappeared. A lack of entrepreneurial zeal in bringing crops from domestic seed to market compounds the problem: soybean germplasm collected in China and dispersed around the world fuels exports from the Americas; Chinese gooseberries a.k.a. ‘kiwi fruit’, are native to China but were commercialised by New Zealand. Even expats in major PRC cities are puzzled by the lack of varietal choice among fresh fruit and veg.

research shortcomings

Dominated by over 5,000 small domestic seed producers, China, the world’s second-largest seed market, fails to thrive. The top three companies supplying grain seed together accounted for less than 10 percent of domestic demand in 2019, far from the 50 percent commanded by the global top three.

The weakness lies in R&D, exacerbated by decades of disconnect between the elite research establishment and the mass of farmers, traditionally at the lowest rungs of status, wealth or ‘voice’.

Urgently needed for developing domestic varieties, seed tech progress has been slow, tech transfer poor. Traditionally leading in R&D, public academies that focus on basic (non-demand driven) research receive most state funding, leaving the private sector with limited support. Already suffering from low profits, private breeders invest little in R&D. In 2018, total investment of 3 bn by the top 1,500 domestic producers was dwarfed by the 10 bn of Monsanto alone. An investment-hungry sector with weak private players results in little of commercial potential.

Developing new varieties may be challenging, making easy money under a weak legal system less so. Instead of becoming world leaders via R&D, domestic producers fall into vicious competition at home. With only the outdated version of the International Union for the Protection of New Varieties of Plants providing limited protection to seed breeders, seed counterfeiting and related IP violations are rampant in PRC markets. Racing to the bottom, unprincipled companies sell counterfeit seeds or cheap but high-quality seeds from stolen genetic material, forcing others to defer investing, leading to ever bleaker prospects for seed tech.

private sector to lead

Aware of global powerhouse seed suppliers, Beijing is urgently overhauling the domestic industry. Private firms will be coaxed to step up as leaders in R&D, supported by basic research and IP protection from the public sector, explains Zhang Taolin 张桃林 MARA vice minister, outlining the forthcoming 5-year plan for ag. Policies rewarding large companies for investing in breeding, propagation and extension have been in play since 2011: the bar for entry has been raised, seed review procedures relaxed, and breeding subsidies extended.

Following the international industry consolidation trend that is reshaping seed markets, the total number of local corporations halved between 2011 and 2018. ChemChina’s $43 bn merger with Syngenta in 2017 made China home to the third largest company in global seed sales. Longping High-tech, China’s other major player (ranked 9th globally) took over a corn seed business from Dow in Brazil and is investing heavily in R&D, expanding from rice into corn, soybean and sorghum seed markets.

Global concerns over competition and concentration in the seed market have yet to worry Beijing’s policymakers or the public. The trend is welcomed, even encouraged: in 2019, the global market share of China’s top two seed tech companies was below 10 percent, too low to protect domestic seed supply. Facing escalating global monopolies, Beijing has no choice but to build its own seed powerhouses to compete.

biotech to the rescue

The tech gap faced by established players must be narrowed as soon as possible, admit the seed experts, finding hope in cutting-edge seed biotech, such as gene editing, breeding by design, and genetic modification (GM).

Mounting concern over a shortage of feed grain (not least corn and soybean) drives the focus on GM crops, imported in huge quantities, yet not approved for local planting. With massive investment in the sector over recent decades, China does not lack GM expertise. Rather regulators have been hesitant to give a green light to commercialising GMOs for fear of public resistance. But 10 years since issuing its first biosafety certificates, Beijing is reconsidering its position and domestically developed GM soybean and corn varieties are again being approved. A 1-2 year wait for variety review lies ahead, but, following increasing official rhetoric on easing grain supply through biotech, commercialising GM crop appears on the cards.

Thrown this new opportunity, leading domestic companies (behind the bulk of domestically approved GM varieties) may soon thrive in global seed markets.


profiles

Wan Jianmin 万建民 Chinese Academy of Engineering academician, CAAS vice president

Pioneer in molecular breeding, Wan has led several national key R&D programs, deploying genetic manipulation to improve pest-resistance and yield traits in rice. The seed sector remains weak in corn, soybean and vegetable breeding, he laments, and dominant cross-breeding methods, popular among local researchers, lag behind those of international players. The industry must prioritise developing high-yield, high-quality, energy-efficient and machine-friendly varieties of staple grains and characteristic crops, he urges; the same breakthroughs are needed in relation to livestock and aquaculture.

Chen Yaosheng 陈瑶生 National Pig Industrial Tech System chief scientist

Specialising in genetic evaluation, Chen’s team at Sun Yat-Sen University developed technical standards for large-scale production of lean, meat-producing pigs. Over 80 percent of China’s herd comes from international breeds, he warns, with domestic varieties in rapid decline. Domestic breeding has failed to come up with superior breeds, hence the heavy reliance on imported strains. To remedy this, Chen’s team has created a data centre and gene bank to preserve domestic breeds and their DNA.

Beijing Dabeinong Technology Group Co Ltd 北京大北农生物技术有限公司

Once a feed and seed producer, Dabeinong’s interest has in recent years expanded to plant protection, smart farming and ag e-commerce. In the top tier of domestic seed producers and the leading GM breeder, its first-generation corn products and combinations are now biosafety certified. Argentina approved one of its GM soybean varieties for commercial production in March 2019. Hosting five national research platforms, the group is deemed a model enterprise; a recent award from MARA named it the ‘leading company in ag industrialisation’.


context

27 Jan 2021: 2021 GMO supervision plan stipulates promotion of development and commercial application of GMO

18 Dec 2020: seed industry mentioned at the Central Economic Work Conference as a 2021 priority

1 Sep 2020: seed industry included on list of those encouraged to invest in the Hainan free trade port

23 Jun 2020: FDI negative lists relaxes market access for foreign investment hoping to strike a balance between protecting the local seed industry and adopting high-quality varieties

2 Jan 2020: domestically developed GM crops receive biosafety certificates for the first time since 2009

2016: market entry bar raised to reduce numbers of private companies

2014: NDRC lifts controls on seed prices to promote market competition

2012: three national seed bases—in Gansu, Sichuan and Hainan—set up

2011: State Council clarifies the leading role of the private sector, encouraging companies to develop breeding, propagation and extension capacity

2000: Seed Law released to develop the modern seed industry


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