China’s Growing Agricultural Problems Pose Risks for the U.S.

These efforts present several risks to U.S. economic and national security. For example, Chinese companies’ acquisition of hog herds in the United States may save China money and enhance its domestic capacity; however, this could also reduce China’s need for U.S.-sourced production and redistributes the environmental effects of hog waste to U.S. communities. If further consolidations and Chinese investments in U.S. agricultural assets take place, China may have undue leverage over U.S. supply chains. China’s access to U.S. agricultural IP may also erode U.S. competitiveness in agriculture technology that supports food production. Additionally, China’s illicit acquisitions of GM seeds provides a jumpstart to China’s own development of such seeds, deprives U.S. companies of revenue, and offers an opportunity to discover vulnerabilities in U.S. crops.

This report reviews China’s food security challenges and how these vulnerabilities drive interests in U.S.-China agricultural relations. Specifically, it evaluates the motivations behind China’s agricultural investments, including challenges to food production and relevant CCP efforts to reduce import reliance, conserve farmland, and modernize agricultural technologies. It then examines the main areas of Chinese investment in the United States, including land, livestock, grains, and relevant infrastructure, like agricultural equipment and technology. Finally, the report presents considerations for lawmakers regarding further Chinese integration in the U.S. agriculture sector.

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Considerations for Congress
China has built an extensive toolkit for addressing its domestic concerns regarding food security as well as its

larger goals of achieving global leadership in agricultural innovation and production. Below are areas of

consideration that may present opportunities or concerns for Congress:

·  Information on Chinese ownership of U.S. agricultural land lacks transparency and remains limited. USDA reporting requirements for foreign ownership of U.S. land lack rules and transparency related to ownership, use, and change in use. The lack of enforcement mechanisms in place regarding false reporting or no reporting at all also raises concerns. It is unclear to what extent USDA conducts field assessments or tracks changes in land use or ownership after the initial paperwork is filed. Chinese firms may easily circumvent current reporting requirements under the Agricultural Foreign Investment Disclosure Act and could repurpose the purchased land with little concern of repercussions from USDA due to the lack of enforcement measures in place. Without the proper collection of land data, it will be increasingly difficult for the U.S. government to monitor and consider any potential risks to national security.

·  Chinese theft of U.S. agricultural IP threatens U.S. competitive advantage in crop development and agriculture technology innovation. The United States government, private sector businesses, and academia invest enormous amounts of time and resources into researching and developing the science that goes into these innovations. Continued theft of valuable U.S. IP will continue to disadvantage homegrown innovation necessary for the United States to stay competitive in the agriculture sector.

·  The potential weaponization of GMOs, like GM seeds, also poses a threat to U.S. economic and food security, which could be at risk if GM seed code is used to create a bioweapon. There are currently few open source documents on cooperation between the intelligence community and USDA. As the agriculture sector continues to experience consolidations, CFIUS reviews of key agricultural mergers and acquisitions are likely to continue. USDA may provide critical information regarding trends in China’s agriculture sector that could prove useful for CFIUS reviews. The extent of USDA and other related agency involvement in CFIUS actions may need clarification. Additionally, USDA may benefit from classified briefings as relevant government agencies see fit.

·  The CCP may have undue leverage over U.S. supply chains if further consolidations and Chinese purchases of U.S. agribusinesses take place. As seen with the Smithfield case, large agribusinesses have the resources to streamline their production lines by purchasing links or companies along the chain. This may create economic distortions in the U.S. agriculture market should China have more leverage over U.S. suppliers, resulting in more closed market or intracompany trade transactions.

·  Foreign-owned land near military installations may require additional monitoring. As more Chinese investors purchase land, including for agricultural use, CFIUS has an opportunity to safeguard vital military assets. Current U.S. law says that a purchase, lease, or concession by or to a foreign person of real estate located in proximity to sensitive government facilities will be subject to review by CFIUS. The committee has a right to refuse the transaction being considered, but it rarely conducts oversight post hoc. In some cases, threat environments may evolve and create new risks to U.S. defense infrastructures. Periodic reviews, as would be required with a security clearance, for example, could help alleviate national security concerns.

1. Reuters, “China’s Corn Imports Soar to New Record in 2021” January 18, 2022. https://www.reuters.com/markets/asia/chinas-grainpork-sugar-imports-dece….

2. Orange Wang, “China Food Security: Country Faces ‘Grain Supply Gap of 130 Million Tonnes by 2025 as Rural Workforce Dwindles,” South China Morning Post, August 18, 2020. https://www.scmp.com/economy/china-economy/article/3097781/chinafood-sec….