The biggest Chinese e-commerce companies are starting the agricultural revolution to feed the nation

25/02/2021

The battle to supply 1.4 billion people with fresh fruit and vegetables is leading Chinese e-commerce companies to the hinterland of the country, where they are looking to revolutionize centuries-old practices to secure production for their thriving online grocery businesses.

The government has long made food self-sufficiency a "prime issue of the state" in an effort to avoid a looming food crisis.

The need to modernize China's 200 million largely small farms took on further urgency during the pandemic, when production and logistics disruptions coincided with closed-in shoppers turning to various online retailers for their needs.

Now, some of the nation's largest private companies have partnered with the state to help growers increase production, improve quality, and lower prices.

A key area for the future of e-commerce

For the e-commerce giants, it's a way to get quotes in the online grocery market (which is expected to be worth more than $ 120 billion by 2023) without get in conflict with Beijing's recent crackdown on monopolistic practices like aggressive prices and exclusive agreements.

In Fujian, along the east coast, Alibaba has provided chicken farmers with smart bracelets that monitor the health of their poultry.

Under the leadership of JD.com, rice farmers in the arid north have installed smart sensors to obtain real-time information for irrigation.

In the west, scientists from Yunnan are collaborating with Pinduoduo to use artificial intelligence (AI) to automate the strawberry plantation.

The driving force behind the push of e-commerce platforms into smart agriculture is the boom in online groceries, which is expected to double to around 820 billion yuan ($ 168 billion) by 2023 from last year.

In the first half of last year, the food category outperformed consumer electronics in terms of sales volume on JD.com, while Alibaba is acquiring larger stakes in the Sun Art Retail Group hyperart.

Increase the production without industrialization processes

As the Chinese government is breaking down on monopolies from fintech to e-commerce, agriculture is a sphere where the business interests of the tech giants are in line with the national plans.

In the guidelines issued last April, the China's ministry of agriculture and rural affairs called for an increase in private investment to develop modern agricultural techniques and introduce technologies such as the Internet of Things, 5G and blockchain in so-called digital villages.

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Livestock and cultivation sciences have also been listed among Beijing's top technology priorities for the next five years, along with AI, quantum computing, and computer chips.

JD said his smart farm projects are at least 50% funded by government subsidies.

Despite the efforts, the growing demand for fresh fruit and vegetables has forced most Chinese farms to struggle to keep up. In fact, about 98% of the 200 million operators are families or small businesses.

Restrictions on land ownership and the various terrains spanning the steppes of Inner Mongolia to the tropical coasts of Hainan Island in the south make it difficult to implement industrial-scale agriculture that is commonly observed in the United States and Europe.

Data from the National Bureau of Statistics shows that about one-third of farm workers are 55 or older and the birth rate is at an all-time low, driving up labor costs.

Some projects put into practice

Mr. Lei Jinrong is a farmer who has benefited from connecting with online retailers. The owner of Fuxin Farm in Fujian province has equipped 1,000 of his chickens with Apple Watch-style bracelets supplied by Alibaba.

The devices digitally track the number of steps birds take each day to prevent disease, adding that he no longer needs to patrol his fields for sick poultry.

"Smart farming is really the way forward," said Lei, the chicken farmer. "We all have to innovate".

This means she can expand production without hiring more workers - good news given that average wages in her village have nearly quadrupled over the past decade.

In eastern Shandong province, peach farmers increased their revenue by 50% last year after using JD's blockchain technology to encrypt every step of the planting process and increase trust and transparency. This has attracted consumers who have long been fed up with food scandals, from tainted milk powder to egg imitations.

Pinduoduo, which raised $ 6.1 billion last November in part to finance its agricultural innovations, is counting on these efforts to quadruple agricultural product sales to one trillion yuan by 2025.

There is still a long way to go, but the premises are encouraging

Many of these initiatives are still in their infancy and expansion will take time, as farmers have only recently begun to collect data (the basis for running AI and other next-generation technologies) and test new growth methods.

The rise in demand for online products and at the same time Beijing's drive to achieve self-sufficiency in food supplies, show that the forays of tech giants into the modernization of Chinese farms are only just beginning.

Author: Alessandro Ave

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