BEIJING — China’s biggest-ever overseas acquisition, announced this month, is not about gobbling up resources to feed its industrial maw, broadening its financial leverage, or enhancing its strategic position. Rather, the US$43 billion (S$60.3 billion) bid for Swiss agricultural company Syngenta is about something a lot more basic and a lot more important: Ensuring that its farms will be able to produce enough food to keep pace with the country’s still-growing population, already the world’s largest.

Beijing today faces a variation of the dilemma that has bedeviled leaders there for thousands of years: How to feed so many people with so little arable land.

China today accounts for about 19 per cent of the global population, yet has just 8 per cent of its arable land. And, unlike other countries with growing populations, there is no land left to till; indeed, given years of chemical abuse in the countryside and industrial pollution that sowed heavy metals through rice paddies, China’s available farmland is actually shrinking.

With the population set to keep growing, from 1.3 billion today to 1.4 billion or more by 2030, and with demand for cereal grains rising as the population eats ever more beef and pork, the country needs a quantum leap in agricultural productivity if it is going to feed its population in a generation’s time. Food shortages, or spiking prices for food, have been a recipe for unrest, rebellion, and imperial downfall in China for hundreds of years. Food security, the ability to ensure ample and affordable supplies of food for all, is a political headache for leaders in Beijing, who are all too aware that staying in power means keeping rice bowls filled. The Syngenta deal — which is meant to keep Chinese farms humming — could be part of the solution.

“Food security has become more prominent under President Xi Jinping. He personally has put a lot of political capital into emphasising food security,” said Mr Fred Gale, the senior economist for China at the United States Department of Agriculture’s (USDA) Economic Research Service.

It is not just Mr Xi. Premier Li Keqiang zeroed in on the under-performing agricultural sector last year in his wide-ranging critique of China’s economy, following former premier Wen Jiabao’s lifelong focus on food security. For the 13th straight year, China’s guiding annual policy blueprint, the so-called “No 1 Central Document”, put agricultural innovation at the top of the nation’s wish list. And food security was at the top of the agenda at last year’s summit between Mr Xi and United States President Barack Obama.

That is where the proposed US$43 billion purchase of Swiss-based Syngenta by state-owned China National Chemical Corp, or ChemChina, comes in.

Syngenta is one of the world’s biggest producers of crop protection products, from pesticides to fungicides to novel types of seed that can increase harvests of corn, rice, and wheat. It rebuffed a richer offer last summer from rival agribusiness giant Monsanto, but welcomed ChemChina’s bid with open arms; Syngenta’s board of directors said in a release that it was “unanimously recommending the offer” to shareholders.

The deal, said Syngenta chairman Michel Demare in a statement on Feb 3, “is focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation”.

It could also be just what the doctor ordered for Chinese leaders. “The Syngenta acquisition is very consistent with their goal of overhauling the agricultural sector. One of the themes of that overhaul is to rely on new technology to boost productivity,” said Mr Gale.

Indeed, ChemChina chairman Ren Jianxin talked up the deal as a way to “increase global crop yields” and placed special emphasis on the Chinese market, where he said it is necessary to increase both agricultural productivity and quality.

Of course, the purchase is not just a strategic, state-driven decision. It is also good business for a Chinese firm aspiring to play in the big leagues. ChemChina, in particular, has just in the last year snapped up a host of foreign firms, including a solar power company, the tyre maker Pirelli, a machine-tools concern and a commodities trading outfit.

“They are on a big buying spree to acquire technology, (and) they want to get intellectual property,” said Dr Deborah Brautigam, professor of international development at Johns Hopkins University’s School of Advanced International Studies. “For China, food security is always a politically important goal, but purchases like Syngenta have a real business rationale.”

Even so, China’s leaders have made clear that Chinese companies, especially state-owned firms like ChemChina, should hew to a government-mandated “agricultural foreign investment strategy”. That shows up in easy credit terms, for example: ChemChina boasted that it had prearranged financing for the entirety of the all-cash deal for Syngenta. Official Chinese support for business deals helps companies secure financing, whether from state-owned banks or from capital markets.

“With any deal that big, there’s no way it happens without the government signing off on it,” said Mr Gale.

ChemChina’s boss told a press conference that, having been dispatched to the countryside as a teen, he is familiar with traditional Chinese farming practices. That is precisely why he wants to introduce Syngenta’s technology-driven approach to squeeze more bushels of grain out of every acre.

China has actually done a great job of just that in recent decades, improving agricultural productivity at a faster clip than even the US (although China started from a much less productive baseline). China increased its total agricultural productivity three-fold between 1961 and today, while the US little more than doubled its productivity over the same time frame, according to the USDA.

China today produces about one-sixth of the world’s wheat (and twice as much as the US) and almost one-third of the world’s rice. Until 2007, China was a net exporter of grains such as those.

So, why the rush to spend tens of billions of dollars, at a time of economic malaise and belt-tightening at home, on a Swiss agribusiness? Because China’s huge gains in production could soon be outpaced by increasing demand from a growing population and a rising middle class eating pork, beef, and other foods that require a lot more grain than a vegetarian diet. China’s agricultural imports today are huge and rising, worth more than US$115 billion a year, much of which comes from the US. (To put that in perspective, China’s voracious appetite for imported crude oil costs only about $150 billion a year.)

Gaining access to a big international firm specialising in agricultural technologies potentially addresses several big Chinese concerns. First, it is a way to boost domestic food production and thus reduce the country’s reliance on food imports. While China has embraced global markets as a way to secure food supplies, self-sufficiency remains the ultimate goal. Indeed, while China appeared a few years ago to jettison its official goal of producing 95 per cent of the nation’s grains at home, in reality leaders are as anxious as ever to ensure they can feed themselves.

“They want to be absolutely self-sufficient in rice and wheat,” said Mr Gale.

To do so will require replicating the huge productivity leaps that came after dramatic technological breakthroughs, especially for rice, in the 1950s and again in the 1970s.

In order to grow enough rice for a bigger population on the same amount of land, Chinese researchers figure the country needs a way to increase harvests by 30 per cent or more in the next decade or so — a third quantum leap.

That is one reason China is looking for answers in the lab: In India, Syngenta helped some small farmers raise yields by 30 per cent using a tech-heavy system of hybrid seeds, special soils, and herbicides.

Embracing that kind of technology may sit well with China’s leaders, who in recent years have become vocal cheerleaders for a biotech revolution in China’s hinterlands. But Chinese consumers, burned by food safety scandals, remain wary of genetically modified crops. Even farmers who were promised sky-high yields from seeds made in the lab have been disappointed when huge harvests do not materialise.

That helps explain why, so far, China has moved cautiously on genetically modified crops. It approved non-food varieties, such as cotton. But genetically modified rice, corn, and wheat are still officially under study.

To finally slay China’s centuries-old food security demons, Mr Xi, ChemChina and others will likely have to convince Chinese farmers and consumers that the answer lies as much in the lab as on the land.

FOREIGN POLICY