Multinational seed companies achieve localization in China

The Chinese version of this paper has been written by Tong Pingya, then translated and edited into English by CCM and issued in CCM’s latest monthly newsletter, Seed China News 1304. Tong Pingya, Researcher in the Chinese Academy of Agricultural Sciences, has been involved in the scientific study on corn and agricultural development strategy for a long time. With his great experience, Mr. Tong acts as a senior consultant for both government departments and non-government organizations.

With its huge market, China is the second largest consumer of crop seeds, attracting great attention from multinational seed companies. The Chinese seed market has a great potential for commercial interests. Indeed, for multinational seed companies, China is not only a large consumer market, but also an unmatched production base for crop seeds. Entering the Chinese market and developing along with the development of the Chinese seed industry becomes an important strategy for multinational seed companies to achieve a global victory in the intense competition of seed market.

Considering the disparity of culture and values between China and the West, multinational seed companies know well that they have to adopt a localization strategy to settle, develop and expand in China, especially workforce localization. Following the saying "When in Rome, as do as the Romans do", they try to tap into Chinese economy and society as soon as possible in terms of talent training and reserve, from germplasm resources collection to variety breeding, corporate culture to the public welfare, technology transfer from home to R&D in China, etc. With a solid base for the localization in China, multinational seed companies have a clear path to achieve a rapid expansion.

There are generally four major strategies for multinational seed companies to achieve their localization in China.

The first is setting up joint ventures. Multinational seed companies clearly understand that they can't set up a company and dominate the Chinese market by themselves in a short time. Nevertheless, they can do so by cooperating with large seed companies in China. For example, in the 1990s, Monsanto respectively set up joint ventures with local seed companies in Hebei Province and Anhui Province, successfully introducing its Bt cotton variety in China. Some other multinational enterprises like DuPont, Syngenta and KWS followed this kind of strategy and successfully tapped into the Chinese seed market.

The second is setting up R&D bases. Aiming to strengthen technology export and market-oriented R&D, multinational seed companies have built a variety of R&D institutes in China. For example, in Oct. 2008, Syngenta established a biotechnology R&D center in Beijing, China's first agricultural biotechnology research institution set up by foreign capital. Then, in Oct. 2012, Syngenta jointed the Hubei Academy of Agricultural Sciences to set up an innovation center for natural products in Wuhan City, Hubei Province. Besides, in 2009, Monsanto established a R&D company named Monsanto Biotechnology Research (Beijing) Co., Ltd. The same year, Monsanto started conducting a collaborative research with the Chinese Academy of Agricultural Sciences in various ways by signing a Memorandum of Understanding with the latter.

The third comes with the employment of senior consultants. This is another crucial step for multinational enterprises to achieve their localization in China though it demands some preparatory work. For example, some multinational seed companies or international consulting institutes provided a financial aid for a number of scientific researchers who went abroad for study or training in the 1980s and 1990s. After returning China, most of these researchers occupied a position in research institutes, universities, associations or even government agencies. Many of them became senior consultants in multinational seed companies, including those who were promoted as academicians or important officials influential in certain field. With the combination of their senior consultants and capital strength, multinational seed companies are likely to influence the Chinese political, economic and scientific decision-making, helping to accelerate their localization in China.

Training professionals is another far-sighted and prepared strategy for multinational seed companies to completely tap into the Chinese market. Since 2000, DuPont has established scholarships in China's key universities such as Tsinghua University, Peking University, China Agricultural University, etc., with a total annual grant of USD100,000 divided among 2,000 students. In Oct. 2010, with the help of China's Ministry of Agriculture, Monsanto launched the Monsanto Scholarship Program in the Chinese Academy of Agricultural Sciences, China Agricultural University, Shandong Agricultural University, etc. Monsanto tends to award the outstanding undergraduate and graduated students determined to engage in R&D or industry in agriculture and life sciences' fields. It is worth mentioning that some masters and PhD hold key positions in research institutes and seed companies that had granted them, like Monsanto.

The disorder and underdevelopment of the Chinese seed industry means a great business opportunity for multinational seed companies. Their localization strategy paves the way to their sole proprietorship in the future. Currently, multinational seed companies are still prohibited for sole proprietorship or operation holding in China, but their acceptance is only a matter a time after their localization in the Chinese market. After all, being confident with the Chinese seed market, policy and law, multinational seed companies will transfer their joint ventures into sole proprietorship rather than withdraw their investment,

In the operating strategy, multinational seed companies comply with the Law of Global Chain, namely "customers' following" and "global key accounts". They tend to study seriously the local seed market, sales network, management localization and appropriate partners before expanding their business chains into a country. They won't hesitate to tap into a market when they believe that there is an opportunity with desirable customers or appropriate partners. Therefore, the Chinese seed market is not only facing world-class leading multinational seed companies, but also the huge and effective international industrial chain.

Table contents of Seed China News 1304:

Winall Hi-tech' M&A gets reward in 2012

Seed business of DBN develops stably in 2012

Shandong Denghai performance sees growth in 2012

China's first fund for seed industry set up

Second batch of seed enterprises gain operation license nationwide

Multinational seed companies achieve localization in China

Domestic fresh corn industry under vigorous development

Domestic potato seed companies hard to become bigger

Large grain growers: thriving but in straits

Wang Feng: "Super Rice" subjective gauge rather than objective standard

China's soybean import dramatically reduces in Q1 2013

Seed China News, a monthly publication issued by CCM at the end of every month, mainly covers a diversity of topics, including market dynamic, company dynamic, crops, seed market, etc. With the latest news in seed industry and in-depth analysis on government direction and market competition, Seed China News can provide you with valid information which would help you make rational decisions in investment, production, marketing, etc.

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