Research On The Development Of China Seed Industry Under The Open Economic Environment

Seed is the most basic, the most important material in agricultural production, it is located in the forefront of the production chain, and it is the basis for agricultural production and the key to ensure food security. Our market of seed industry opened lately, and is less competitive than foreign competitors. Meanwhile, with the accelerating marketilization and more openness of domestic market, multinational seed industry giants entered China. Although they brought advanced technology and management experiences to domestic companies, they also caused great pressure to domestic seed companies’development. To maintain food security and enhance the competitiveness of domestic seed companies, Chinese government issued a series of favorable policies, which aim for enhancing the competitiveness of domestic seed companies to deal with the "crying wolf".In1997, the regulation on the Approval and Registration of Foreign Invested Seed Companies was issued, and it was the starting point of China opening its seed market. In2000, Seed Law was officially implemented. In2001, China successfully joined the World Trade Organization, which represents the marketlization of China seed industry entered a new phase. However, the following questions are still not fully explored in the academic:Which development status is the current Chinese seed market in? What is the impact of multinational seed companies on China’s seed industry securities? What factors constrain the improvement of domestic seed industry competitiveness? What policies have Chinese government taken? How about the effect of these policies and regulations? We will try to answer the above questions in this study.Based on the current situation of Chinese seed industry, especially the opening of domestic seed industry market, I apply the theories of economics and financial management to analyze the operations, mergers and acquisitions, and the reaction of domestic seed companies. The two most important actors in the seed market, enterprises and farmers, are analyzed respectively. First, this study analyzes the performance of56key domestic seed companies from2010to2012. Overall, the operating profits, the diversification of seeds, and sales income increase gradually, which indicates that the companies experienced great development process. Based on the panel data model, I identify the factors that impact the development of domestic seed companies. I find that, the companies with higher research and development investment, more net asset, and older companies get more profit, furthermore, state controlled companies get more profit. Meanwhile, I do case studies using the China National Seed Group Co., Ltd. and Yuan Longping Agriculture Technology Co.. I analyze their development process, sum up experiences, and discuss the potential problems that they may face in the future. In addition, I analyze the factors that influence farmer’s seed choice, and find that farmers’ operation scale, professionalism, realization of fake seed, promotion through newspaper, direct message, and recommendation of rural technicians are the main factors.The main conclusions of this study are as follows:①The mergers and acquisitions of multinational companies stems from the companies’ profit-maximizing behavior, it succeed because multinational companies have strong research capability and efficiency. To respond to the potential acquisitions threats, domestic seed companies need to have strong research capabilities. At present, they need to rely on the corporation of domestic seed companies.②Through the empirical study on56domestic seed enterprises, I found that increasing R&D investment can help improve firms’business performance, which is consistent with the policy purposes of constructing bigger and stronger domestic seed enterprises. However, to enhance the core competitive (i.e., research capabilities), we also need more explicit policy measures. Simply increasing input is not necessarily the best choice, we should think about how to optimize and improve the cooperation mechanisms between universities, research institutes, and corporations.③The cooperation mechanisms between scientific institutions and corporations cannot meet the requirement of seeds industry development under the current situation. The new direction will be to strengthen the dominant position of corporations, and to promote the better corporation mechanisms between universities, research institutes, and corporations.④Through the analysis on farmers’choice on corn seeds, I found that, with the increase of farmers’operation scale and professionalism, they prefer to purchase foreign seed. The existence of fake seed also makes foreign seed foster higher market share. Finally, the recommendation of rural technicians also has positive effect. The above findings can partly explain why the acreage of foreign representative seeds "Xianyu335" increase rapidly. That is because, they ensure the quality of seed, protect their intellectual property and prevent fake seeds, enhance the promotion of brands, and do one to one service to farmers. On the contrary, domestic companies didn’t do much on that, which greatly reduce their competitiveness. In addition, above findings also shed light on the policy of seed industries.Based on the above analysis, the main policy recommendations of this study are:First, enhance the reform of seed industries, and construct more transparent and fair seed market. Second, improve the research capacities of domestic firms. Third, enterprises should cooperate with universities and research institutes, promoting the conversion of research outcome. Finally, strengthen the regulations and implication of punishing fake seed.Both opportunities and risks exist in the seed industry market of China. We are happy to see that the government recognize potential risks, and quickly issued a series of policies measures. As for the entry of foreign capital, we should analyze objectively from economic perspective, rather than individual subjective. The imperative task is to concentrate all forces to enhance the R&D capacities of enterprises, strengthen the management of the species. This is the only way to really improve the competitiveness of domestic seed industry, and maintain food security.