www.pcmasiadirect.com

China’s Agriculture ---Attractive Market to Israeli Companies

Poalim Asia Direct, Jul, 2011

Content

• China Profile– China – China Agricultural Regions– Agricultural Land in China– China Farmer – Agricultural Problems in China– Increased Investments in Chinese Agriculture

• Synergy of China and Israel – Agriculture in the Desert – Water Treatment – Plants Planting– High-tech Agriculture

• Q: Why China?

2

3

China Profile

China Basic Info

4

• The People's Republic of China has a land area of around

9,600,000 km2

.

• The agricultural acreage of China is only 1,217,300 km2

and the

average of agricultural acreage per person is 1.38 mu, Which is

667 M2

(⅔ Dunam)

• The population of China is 1.34 billion at the end of 2010.

• 35 % of the labor force is in agriculture. There are 425 million

agricultural workers in China.

China Agricultural Regions

5

• Most of China is unproductive agriculturally. Arable land is concentrated in a band of river

valleys and along the southern and eastern coasts.

• Wheat, corn, soybeans, barley, kaoliang (sorghum), millet are grown in the north and

central China. Rice is the dominate crop in the south. Some places produce double crops

of rice. Most crops for export are grown in the coastal areas. These areas have relatively

good roads and access to ports used for exporting produce.

• The Northern Plain, which includes Beijing, is home to 65% of China’s agriculture but only

24% of water. It produces half of China’s wheat and corn. It suffered from lower water

table caused by too much pumping of water.

• The Yangtze River delta is another important agricultural area. It is home to 30 million people and fertile soils produce a tenth of the country's crops. The crop yields there

are expected to decline as large scale industries expand from nearby Shanghai and occupy productive agricultural land.

• In China, mechanized agriculture is more suitable for northeast China which is made up largely of flat plain. Farms controlled by individual farmers and villages are more

suitable for mountainous southwest.

Agricultural Land in China • Farm land is still owned and controlled by the state and leased to farmers. It can not be

bought or sold only leased. Land essentially belongs to local governments, a holdover from the commune era. Reforms passed in the Deng era allowed individuals to contract land from villages. To be converted into non-agricultural land it has to be reclaimed by the government and rezoned.

• Peasants often have little say on the fate of the land they work even if it has been cultivated by their families for generations.

• Most farmland in China is measured in MU., which is 667 M² (⅔ Dunam)• These days farmers sign 30-year leases for the right to work a plot but they no longer

are required to pay harvest quotas or most agricultural taxes. They don’t own the land, they can’t sell it and they can’t use it for collateral on a loan.

• A policy approved by the Communist Party in October 2008 that aims to end rural poverty gives farmers the right to trade, rent, sublet, subcontract, engage in joint stock ownership and transfer their land rights. If all goes according to plan the move will help impoverished farmers double their income to $1,200 by 2020 and provide them with money they didn’t have before and create a huge new reserve of private wealth that will stimulate domestic spending and growth.

6

China Farmer (Nong Min)• About 35 percent of China's labor force is in

agriculture (compared to 2.5 percent in the U.S.). There are 425 million agricultural workers in China. A little over a decade ago China was home to 700 million farmers.

• The majority of the Chinese farmers are peasant farmers (Nong Min) with only a very basic education. Many of them during the whole of their lives will only travel as far as the nearest market town, and almost definitely not to the provincial capital, and certainly not to Beijing.

• The Nong Min will manage to seek out a livelihood by backbreaking manual labour on their small plots of land. Each of these Nong Min families will typically have between 2 – 5 mu (about 1.5-3.5 Dunam) of land, and the plots will not necessarily be adjacent to one and other.

7

Agricultural Problems in China • Large Population China feeds 22 percent of the world population with only 10 percent of the planet's

arable land. Land is heavily utilized for agriculture. Vegetables are planted on road embankments, in traffic triangles and right up the walls of many buildings. Even so since 1949 China has lost one fifth of its arable land.

• Shortage of Agriculture Land Only about 10 to 15 percent of the land in China is good for agriculture (compared to 1

percent in Saudi Arabia, 50 percent in India, 20 percent in the United States, and 32 percent in France). There is 545,960 square kilometers of irrigated land in China. 40 percent of China’s crop land is irrigated.

• Water Crisis The increasingly acute water problems in China will affect agricultural production,

particularly on the north China plain, where irrigation is extensive but water depletion is severe.

8

Agricultural Problems in China • Farmers Moving to Cities The lack of farm subsidies and expropriation of farmland for urban construction has

crippled agriculture. As more farmers move to the cities, lured by better housing, education and other incentives, maintaining the food supply in China becomes more tenuous.

• Low Level of Industrialization Agricultural production in developed countries is mostly farm-style production and has

high degree of mechanization. In China, agriculture has not become a mature industry• Low Production Efficiency Limited by China’s economic condition, technology of agriculture is in a quite low level.

Moreover, many farmers could not receive formal education and training. China does not have enough qualified labor force and agriculture has low production efficiency.

9

Increased Investments in Chinese Agriculture

• Han Changfu, the Chinese Agriculture Minister announced at the G20 meeting in June, 2011, that in order to increase food production and enhance the comprehensive farming capacity, the Chinese government had been working continuously to raise investment, advance farming and irrigation facilities, and step up agriculture-related technology innovation.

10

• In March 2009, China announced it would increase spending on agricultural production by 20 percent amid warnings of harmful effects of climate change, food

shortages and food crises. Prime Minister Wen Jiabao said an extra 121 billion yuan ($19 billion USD) would be spent on boosting farm yields and raising rural

incomes.

• The government's spending is aimed to boost overall domestic consumption with a strong emphasis on intensive agriculture. The short-term aim is to ease the

impact of the economic crisis on rural dwellers and reduce sources of social instability and increase grain prices as an incentive for farmers to produce more.

11

Synergy of China and Israel

Israeli Agriculture and China • Agriculture in Israel is the success story of a long, hard struggle

against adverse conditions and of making maximum use of scarce water and arable land. When Jews began resettling their historic homeland in the late 19th century, their first efforts were directed - mostly for ideological reasons - to turning barren land into fertile fields. The secret of Israel's present agricultural success lies in the close interaction between farmers and government-sponsored researchers, who cooperate in developing and applying sophisticated methods in all agricultural branches, as well as technological advancement, new irrigation techniques and innovative agri-mechanical equipment.

• Israeli agricultural companies are looking for alternative markets. Now, China is becoming a huge and potential market for Israeli companies to develop in. Advanced technologies that Israeli companies good at are technologies now highly demanded in China.

12

Agriculture in the Desert

• The dry land and semi-arid land account for 60% of the cultivated land area in China.

• Desertified land in China is about 2.6 million km2, nearly 27.3% of the total land of the country. Deserts are being created faster in China than anywhere else in the world and the rate of desertification nationwide is around 900 square miles a year.

• Economically, desertification led to a direct loss of 5.4 Billion Yuan a year.

• To combat desertification, Chinese government has encouraged the planting of drought-resistant trees in erosion-prone areas and helped people to obtain technology that helps them collect and store rainwater.

13

Solutions by Israeli Technology • Plant and Soil Control and Monitoring

– Soil moisture and resources control– Leaf temp and fruit size monitoring

• Pulse irrigation coordinated with potential and active transpiration

• Drip Irrigation • Plants growing in the desert • Fish farming in the desert

Seeking Life in the Desert

Water Treatment

• It is estimated that every year China has a water supply shortfall of 40 billion cubic meters. Water shortages are most severe in northern China. China has about the same amount of water as Canada put around 40 more times people.

• China supports 20 percent of the world population with only 7 percent of its water. On top of that the North China Plain is home to about 42 percent of China’s population but only has 8 percent of the country’s water resources.

• Reusing and recycling water is a solution to water problems in China. It is estimated that some cities can meet a 50% of their water needs by recycling water. Ultraviolet radiation is a popular means of disinfecting water but is less effective when the water contains sediments and sludge.

14

Water is the Life

Solutions by Israeli Technology

• Development and large-scale utilization of drip (trickle) irrigation,

buried irrigation, spray irrigation, sprinkler irrigation and operation of

irrigation systems technology

• Self-cleaning Filtration Technology

• Desalination: reserve osmosis

• Water circulation

• Advanced Oxidation Process

• Drinking Water Treatment

• Chain of Water Users

Plants Planting

15

Solutions by Israeli Technology • Seedling Preparation, Nursery• Breeding

– Breeding programs for unique varieties – High quality/better tasting fruits – Soilless Culture

• Greenhouse Technology – Anti-insects nets– Biologic suppress– Climate Control Equipment– Passive solar heating system

• Shed Technology – Aluminet

• Control and Fertigation system• Chemical pesticides• Organic pesticides

• Chinese plants have limited species, which are often planted in highly

concentrated areas.

• China has had strong grain harvests from 2005 to 2010. Grain harvests in 2009

were a record 530.82 million tons. Improved farming policies and technologies

have given China a high level of self-sufficiency and growth. But Chinese top

economic planning body warned that this would be hard to maintain.

• Most crops in China are raised with pesticides, chemical fertilizers and sewage

sludge. Farmers overuse it and overuse causes environmental damage.

• The data and insights about the latest fertilizers, pollution risks and genetically-

engineered crops issued by Chinese agricultural research centers and

laboratories rarely find its way to farmers, who mostly rely on the pesticide and

fertilizer salesmen to keep them informed.

The Fruitful Life

High-tech Agriculture

16

Solutions by Israeli Technology

• Sheltered ground cultivation technique

– protective screening: anti-insect net, anti-storm net, sunshade net

– Automatic control greenhouse

• Biological sensor technology

• Agricultural products fresh preservation technology and packaging

technology

• Biological anti-insect technology

• Agricultural mechanization

– fruit harvester

– classification equipment

– pneumatic sprinkler

• Agriculture in China is labor intensive. Women do about 60 percent of the

work. Animals such as mules, oxen and water buffalo are considered luxuries

and most plowing is done with sticks or hoes by farmers in lamp shade hats and

rubber boots. Human excrement, urine and even burnt duck feathers are

brought into the fields and used for fertilizer.

• The agricultural mechanization has not been promoted well in all over China.

Several different kinds of water pumps, none of them powered a motor or even

an animal, are still used in China.

• Much of the field work is done with heavy, thick-bladed hoes. In some places

the harvest of millet, sorghum and wheat are deliberately left out on the roads

to be threshed by passing cars that crack the chaff. Rudimentary muscle-

powered machines are still used to do things grind corn in Shaanxi Province.

Many ethnic minorities in the south use large mortars and pestles to crush

grain into flour.

Creating the Life

17

Q: Why China?

Why China ?

Israeli companies, experts, consultants and entrepreneurs can be found in China today in most of the sectors, including the agriculture sector. The Israeli drip irrigation technology already can be found in large government funded projects to fight desertification and to encourage forestation.

It is a good timing to expand Israeli agricultural technologies in China. • Enormous Market Potential With the birth of China’s “Opening Up Policy” , Israeli companies and entrepreneurs joined the

trickle (now flood) of international companies and entrepreneurs that decided to come to China, with its 1.3 billion population, has enormous market potential.

• Fast Growing Economy It is the world's fastest-growing major economy, with average growth rates of 10% for the past 30

years. China is also the largest exporter and second largest importer of goods in the world. China became the world's top manufacturer in 2011, surpassing the United States. The country's per capita GDP (PPP) is $ 7,518 (IMF, 93rd in the world) in 2010.

• Strong Government Support The total investment on agricultural industry is 3,000 billion RMB (469 billion USD) in the 11th five

years plan (2006-2010) , with 23% annual increase rate. It is estimated the investment for the 12th five years plan (2011-2015) is double, which will reach to 6,000 billion RMB (938 billion USD)

Chinese government issued many finance preferential policies in order to attract foreign agricultural companies, such as enhancing investment on infrastructure, increasing subsidies aiming at developing modern agriculture, supporting brand building, strengthening financial service and encouraging insurance innovation, land preferential policy and so on.

18

• Good Financing Environment China has better financing environment now, compared to American and European countries. The

development of VC and PE in China provide a good financing environment for companies already have market in China. In 2010, the total investment amount by VC/PE in agriculture industry is 1.363 billion USD . Some funds specialized in agriculture industry are established. Moreover, some Sino-Israel funds in China can help more Israeli agricultural companies develop in China.

• Increasing Price of Agricultural Product Consumption has increased across the board for all commodities and this will continue as more

Chinese people move out of rural areas into urban settings. The supply shortage which has driven prices upward. It makes the advanced Israeli agricultural technology attractive.

• Well-known Israeli Technology in China Israeli high-tech is world famous and well accepted by Chinese people in recent years. Chinese

gradually realize that only advanced science and technology can boost the development of agriculture. The central and local governments show many interests in importing Israeli modern agricultural technologies from Israel.

19

20

∞

The Jewish people, see similarities between Chinese. Also due to the deep link of the two nations, long-lasting tradition for years and also for

demonstrating the ability of both to establish a state from scratch in 60 years. China and Israel enterprises should take advantage of the similarities, put

shoulders together in long term, seek honest and strategic cooperation for mutual benefit in rural development, to achieve agricultural industry growth

and profit for China and Israel.

Thank You!

Poalim Asia Direct

www.pcmasiadirect.com

联系方式：中国 北京（总部）朝阳区光华路四号 东方梅地亚中心 A-1806

电话： 010-65818018 传真： 010-65818028

邮编： 100026

Email: gal@pcmasiadirect.com

以色列 特拉维夫Alrov Tower, 46 Rothschild Blvd., Tel Aviv

Tel: +972-3-567-5959 Fax: +972-3-567-5760

Email: boaz@pcmasiadirect.com