A: Absolutely. In the past 15 years, farmland investments have generated on average 9% return. Yale, the Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, Temasek have all moved into agriculture investments or setting up divisions to focus on it.
Q: What regulatory or policy changes do you expect to see in China’s agricultural sector?
A: There have been a lot of good policies already. The whole industry has no tax, so we save a lot on taxation.
What I’d like to see is that the government provide subsidies not to the farmers, but directly to those who grow the grains. I think around RMB10 trillion subsidies are provided to the farmers directly into their accounts, even though a lot of the farmers are working in the cities for Foxconn or other industrial companies.
The government also should encourage more financial institutions to invest and lend to us. Right now, it’s very difficult for us to get loans.
Q: Previously, you were a capital provider. Now you sit on the other side of the table. How did the role change feel?
A: It makes me more humble. Now I know how hard it is for entrepreneurs to obtain capital. I respect entrepreneurs a lot more, and have more respect for capital.
Q: How do you finance the business and at what cost?
A: More than 10% a year, in mezzanine financing. Very expensive. That’s why we need more government support.
About Chang Sun:
Chang Sun is founder and chairman of Black Soil Group Ltd., a grain production business in Heilongjiang province in China’s Northeast region. Before founding Black Soil in 2015, Sun was chairman of North Asia and head of China at private equity firm Warburg Pincus, where he worked for 20 years. Prior to that, he was an executive director in the investment banking division of Goldman Sachs (Asia).