(June 17, 2014) — China’s $650 billion sovereign wealth fund will turn its attention to farmland and agriculture investments in an effort to “shore up food security” in the world, according to its chief Ding Xuedong.
In an opinion piece in the Financial Times, the normally reserved Ding—quoting an old Chinese proverb—expressed the China Investment Corporation (CIC)’s interest in taking advantage of agriculture investments outperforming equities and bonds.
“We believe the agriculture sector offers stability, a way of hedging against inflation and a device for spreading risk,” he wrote. “We are keen to invest more across the entire value chain—in partnership with governments, multilateral organizations and like-minded institutional investors—in areas that will help to unlock the industry’s potential, increase the food supply and offer attractive returns.”
The 54-year-old chairman said the fifth largest sovereign wealth fund is not alone in tapping into farmland investments.
The world’s “savviest” investors have also noticed the sector’s performance, he said, and are “reaping handsome rewards” through agriculture-heavy portfolios, forming consortiums—and even developing one’s own vehicles.
Institutional and private investors must take on the “urgent challenge” of securing the supply of food for future generations, a task requiring long-term investments, Ding argued.
Smaller and short-term investors often hesitate due to volatile crop prices, illiquid assets, and burdensome regulation. The “drought of capital” in agriculture investments directly linked to increasing the food supply is a “serious misallocation of funds,” he said.
“An unmet need is an investor’s opportunity,” Ding wrote. “And investors everywhere will prosper if they help the people of the world meet one of the most basic needs of all.”
Ding also emphasized CIC’s continuous commitment to creating local jobs and contributions to economic growth.
The chief executive was appointed to chair the 7-year-old fund last year, taking over the position from founding Chairman Lou Jiwei as part of a once-a-decade leadership change. Prior to his CIC role, Ding served as deputy secretary general of China’s cabinet and was a former vice finance minister.
Most recently, CIC launched a joint equity venture of $100 million with Ireland’s Pension Reserve Fund to invest in Irish and Chinese technology companies.
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