China's new development and investment frontier
Hong Kong and Gansu, China—7 – 18 July 2014
In July 2014, GIFT travelled to Gansu Province to conduct a project focused on China’s forage industry: a currently understudied and underdeveloped part of China’s agricultural sector. Twenty-four executives from nine different countries traveled to Gansu Province to provide recommendations for Gansu Modern Forage (GMF) as it worked towards its goal of becoming China’s top forage producer and marketer.
As they move up the economic ladder, the Chinese population will consume 30% more meat and dairy over the next five to seven years. This requires more livestock, which is in turn driving demand for high-quality forage. Participants developed recommendations for GMF to strengthen its supply chain and scale up its production to achieve sales of RMB1.3 billion in the coming five years.
Gansu Province—larger than Japan or Germany and similar in size to California—is situated on the upper- and middle-reaches of the Yellow River. Gansu once played a significant role as a trading center along the Silk Road.
Gansu is an ethnically diverse province, with 45 different ethnic minorities. The Hui—a predominantly Muslim ethnic group—makes up five percent of the population. The Yugu, Dongxiang, and Bao’an groups are only found in Gansu.
The main crops produced in Gansu are wheat, corn, potatoes, flax, maize and melons. Gansu is also known as a vital source for Chinese medicinal plants. Unfortunately, significant tracts of arable land suffer from heavy metal pollution from industry.
Most areas of Gansu Province are very dry. Its annual average rainfall is only 300mm, though can vary greatly across its vast area. Temperature can also vary greatly from day to night, and can drop as low as -40C in winter.
Like much of Western China, Gansu's economic development has lagged behind the eastern coastal provinces. Its GDP per capita is the second-lowest of China's 31 provinces. Over 60% of Gansu’s 26 million residents rely on agriculture for their livelihood.
Changing Tastes in China's Agriculture
GLP participants enjoy a meal in Gansu. Before 1980, meat was considered a luxury item in most parts of China. China now produces and consumes half the world’s pork, nearly 20% of the world’s poultry and 10% of the world’s beef.
China has approximately 260 million smallholder farming households across the country. Many still live in relative poverty due to low prices, limited access to financing and market information, and rising input costs.
The main challenge for Gansu’s farmers are the arid climate, dependence on rain for water, a lack of financial resources to invest in inputs, and difficult-to-access farmland.
Urban migration is another serious challenge to smallholder farming, which limits the labor available to farmers.
Agriculture and rural development are key priorities for the Chinese government, which aims to strike a balance between promoting agricultural modernization and protecting the interests of smallholder farmers. The central government invests RMB 200 billion into agricultural infrastructure every year.
On the Ground in Gansu
"As Chinese people’s economic situation improves, they do not eat more potatoes; they consume more meat and dairy. China needs higher quality livestock products; therefore, we need higher-quality forage. Currently, China has many quality standards for human food, but none for forage like alfalfa, and there is no formalized alfalfa market. That is what we are here to do."—Mr. Zhang Yuping, Chairman of GMF.
Alfalfa is known as the "queen of forages" for its high protein, vitamin and mineral content, and its highly-digestible fiber. It is primarily used as forage for high-producing dairy cows, and has been proven to positively affect cattle health, milk production and protein content.
GMF’s operational hub and alfalfa pellet plant are in Dingxi Prefecture, 100km from the provincial capital of Lanzhou.
Dingxi Prefecture covers 20,300 square kilometers and a population of 2.77 million. Some of China’s earliest cultures developed in Dingxi, with numerous Neolithic sites found throughout the area.
Despite recent development, Dingxi is still one of the poorest areas in China. All seven of its districts are classified as "poverty-stricken," with a per capita GDP of only RMB 5,530 (USD 817), about 20% of the national average.
Although Gansu’s roads are in better condition than in most Asian countries, transportation in the mountains is still difficult. One participant recommendation was to explore the use of pulley systems that can transport crops down a mountain quickly and cheaply.
Crops can spoil in the critical post-harvest drying period, but a shortage of storage facilities and mechanized harvesting equipment means that crops are often exposed to the elements.
Introducing the new GMF
GMF was advised to focus on the production of alfalfa pellets to take advantage of the growing animal husbandry sector, and establish cooperatives of alfalfa farmers with "sweat equity" in the parent company.
Through meetings with government, community and business leaders, and through frank and open discussions amongst themselves, participants learn to navigate conflicting and contradictory views to transform concepts and theories into realities on the ground.
The GLP uses real-world field projects to hone the practical skills needed to manage diverse teams in unfamiliar situations. Participants challenge business models to create new ideas to solve practical issues.
Participants developed a plan that provided strategic recommendations to GMF. Below are a few excerpted slides.
The team suggested that GMF adopt a decentralized management structure, and open up part of their shareholding to cooperatives in its supply chain. This would allow GMF to cement dedicated and committed suppliers, while ensuring that GMF’s revenues benefited the community.
It was proposed that GMF form a joint venture with a leading machinery provider to co-design and distribute dedicated mechanized harvesters designed for Gansu’s mountainous terrain.
Participants presented their plan to over one hundred people, including senior provincial agricultural officials, private sector leaders and members of the media, who showed great interest in the plan’s ability to support Gansu’s rural development. Guest speakers included Mr. We Wenbin, Director of the Gansu People’s Congress Agricultural Committee and Mr. Li Hui, Vice-President of the Gansu Investment Group.
Grace Chan, MasterCard
"The GLP was so much more than just a leadership program. It challenged the way we perceive the world and encouraged participants to better connect what we do professionally and personally to drive impact on key aspects of our society."
Sarah Ye, Maybank
"The programme enriched my leadership thinking and experience, particularly around the ways to inspire people to achieve goals by creating positivity. It has been an unforgettable experience."
Hiskia Purwoko, Astra International
"For me the GLP is not just another leadership programme. I would call it 'the second chapter' of leadership programmes, meaning that it goes beyond the textbooks and theories. This program is not for everyone, only those who have the passion and courage to create a better future."
Please contact Karim Rushdy for more information about the Gansu GLP, other projects held in China, and future projects held by the Global Institute For Tomorrow.