Jul 7, 2011
Asian Venture Capital Journal

CMIA seeks to work with China's farmers

Investment in China's agricultural sector is not easy. While the central government is keen on reform and consolidation – with a long-term view to leveraging the economies of scale that characterize farming in the West – progress is held back by land tenure issues. Land, divided into small plots on a household-by-household basis is the only real asset of many of the 700 million people who reside in rural areas, beyond the reach of the welfare state. Take it away and you take away their livelihoods.

Foreign investors bring capital, equipment and expertise, but they must tread a fine line between central government policy, local government agendas and farmers' needs. Nevertheless, China agriculture is a focal point for CMIA Capital Partners' latest $200 million growth capital fund.

"This is not a sector focused fund but we have some expertise on the agricultural side," Anson Wang, co-founder and managing director of CMIA, tells AVCJ.

He refers in particular to China Minzhong Food Corp, a state-owned vegetable processing business that CMIA guided through a management buyout in 2004. A second round of fundraising saw the Government of Singapore Investment Corp (GIC) and Olympus Capital come on board and the company listed on the Singapore Exchange in 2010. The new fund, CMIA Fund IV, has already invested in another Chinese agribusiness, mushroom producer and processor Emerald Asia Group.

The fund's first close is expected in the next three months and a number of investors in CMIA's previous funds have expressed interest in participating. However, Wang sats more of the LPs – typically institutions and family offices – will come from the Middle East, Europe and Asia than before.

In addition to agriculture, the principal target sectors are health care, consumer and pharmaceuticals. What unites these areas is CMIA's belief that they will prosper under the ‘quality of growth rather than quantity of growth' agenda outlined in China's 12th Five-Year Plan, which was released in March. The key objectives are boosting domestic consumption, closing the urban-rural wealth gap, widening access to social services, and promoting energy efficiency.

Unlike its predecessors, CMIA Fund IV is not solely focused on China – around 30% of the capital will be deployed elsewhere in Southeast Asia. This might remove CMIA somewhat from the viciously competitive China growth capital space, although Wang stresses that the firm is already different in that it is looking to work with companies for several years, not just pursue pre-IPO deals.

"Our deals tend to be more propriety, coming from within our business networks," he says. "And we are now looking at firms outside China that are doing business with China."