CHINESE PRESIDENT Xi Jinping has a problem related to his nation’s growing demand for high-quality food and other agricultural products. In December 2013, Mr. Xi declared a strategic goal for China: to seize “the commanding heights in biotechnology,” in areas such as genetically modified organisms (GMOs). It must “not let large foreign companies dominate the agricultural biotechnology product market,” he said. However, China is still years behind the United States and Europe in research and development.
One way to square the circle would be to import products from the West to keep Chinese consumers supplied while hoping that the bracing stimulus of foreign competition would impel Chinese firms to catch up. Mr. Xi’s government implied such an approach at a U.S.-China high-level trade meeting in Guangzhou in November, which produced a promise that U.S. exporters would henceforth face a regulatory “process based on international standards” and “science” when they tried to sell in the Chinese market — as opposed to the rejection that had met nine out of 12 GMO varieties U.S. companies submitted for approval in recent years.
Now comes word, however, of a bid by China’s state-owned chemical company to buy Swiss-based Syngenta, suggesting that Beijing has a rather different strategy in mind: to buy the Western biotech it can’t develop on its own — and give one particular importer favored access to China’s huge market. The strategic value China places on the deal is obvious from the price tag: $43 billion, the largest Chinese foreign investment ever. After paying so much for Syngenta, will China grant approval to a GMO made by Dow or Monsanto if its own captive company offers a similar product?
As is so often the case with Chinese mercantilism, it is hard to specify what the United States could do to counter this move. Raising the specter of Chinese control over Syngenta’s large U.S. subsidiary, which supplies 10 percent of U.S. soybean seeds and 6 percent of corn, Sen. Charles E. Grassley (R-Iowa) has called for the U.S. commission that scrubs foreign investment deals for national security concerns to let the Agriculture Department weigh in on this one, and perhaps others. That might help — or create a precedent for defining investment-related security concerns beyond traditional law enforcement, military and intelligence considerations, with unintended consequences for the free flow of capital to the United States.
What is clear is that China has embarked on a buying spree of foreign firms, $92 billion worth so far this year, with motives that range from commercial to nationalistic — to murky, as was the case with the bid for Starwood hotels by Anbang, a previously unheralded Chinese insurance conglomerate with ties to the Deng Xiaoping family but, according to news accounts, no one answering its headquarters telephone. If China deploys its cash to create jobs in the West, well and good. But given the nontransparent and cronyistic nature of Chinese companies, both state-owned and “private,” there may be risks, too, of a kind not posed by investment from democratic allies such as Japan, say, or Germany. The United States needs a new approach to account for the new reality.