Highlights

China is the second largest seed market in the world, annually planting 12.5 million tons of seed, with a market value at $17.2 billion. MOA reported that as of September 1, 2016, its Plant Variety Protection (PVP) Office had accepted 17,108 PVP applications and approved 7,824 applications. Increases in PVP applications indicate improving breeding capacity (more varieties) and improved awareness of plant variety protection. In October 2016, MOA also released a draft of Administrative Measures on Non-Major Crop Variety Record for public comments. Chinese officials announced that China has initiated work to revise PVP regulation. There are two options for PVP regulation revisions: revise existing PVP regulations or codify PVP regulations into law. There are disputes on the two options at this moment, but consensus has been reached to provide stronger protection to new plant varieties.

POLICY ISSUES

Revised Implementing Regulations of the Seed Law

In November 2015, China revised its Seed Law to support domestic seed industry development. Accordingly, the Ministry of Agriculture (MOA) revised implementing regulations in 2016 to comply with various aspects of the Seed Law, such as “Administrative Measures for Major Crops Variety Registration"; “Administrative Measures for Crop Seed Production and Operation Licensing"; and “Administrative Measures for Labels and Use Instructions of Crop Seeds." In October 2016, MOA also released a draft of “Administrative Measures on Non-Major Crop Variety Record" for public comment.

Chinese officials announced that China has initiated work to revise China's Plant Variety Protection (PVP) regulation. There are two options for PVP regulation revisions: revise existing PVP regulations or codify PVP regulations into law. There are disputes on the two options at this moment, but consensus has been reached to provide stronger protection to new plant varieties.

Intellectual Property Rights (IPR)

The seed industry is technology and research intensive, making effective IPR protection critical to its success. Weak IPR protection has been a major barrier to the development of China's seed industry.

Variety violation and counterfeit seeds are common problems for both imported and domestic seeds. The structure of China's seed industry makes it difficult to protect IPR. While the number of Chinese seed enterprises declined 46 percent between 2011 and 2015 due to industry consolidation, there are still 4,660 registered seed companies as of the end of 2015. Many of these companies have little or no research and development capacity, creating little incentive for them to focus on protecting IPR.

The Chinese government is working to create a favorable environment for innovation in the seed sector by strengthening IPR legal protections, reducing the number of seed companies, and encouraging the private sector to be more involved in variety breeding. Chinese government agencies, such as MOA, the Ministry of Public Security, and the State Administration for Industry and Commerce, play an important role in combating seed IPR violations. Campaigns to combat plant variety violations and counterfeit seeds never stop. Specially, MOA significantly strengthens supervision and monitoring in major seed production and breeding areas, such as Gansu and Hainan provinces.

Plant Variety Protection (PVP) Applications and Approvals

MOA reported that as of September 1, 2016, its PVP Office had accepted 17,108 PVP applications and approved 7,824 applications. Almost two thirds of the applications were for rice and corn. The approval process generally takes 3-5 years, but can take longer. Both PVP applications and approvals increased significantly in 2014 and 201. Increases in PVP applications indicate improved breeding capacity and improved awareness of plant variety protection. From 2011 to 2013, the PVP approval process was slowed by a change in the competent authority. In 2014, the PVP authority became fully operational and approvals rebounded to normal levels.

Patents

Seed related patent applications increased by 29 percent in 2015 to 6,428, of which, invention patents amounted to 4,015, and utility model patents amounted to 2,413. China does not allow plants to be patented. Therefore, unlike the United States where patents play an important role in variety protection, Chinese breeders mostly use PVP to protect their varieties.

Biotechnology and Planting Seeds

Domestically developed varieties of genetically engineered (GE) rice and corn received biosafety certificates in 2009 and these were renewed in December 2014. None of these varieties were granted variety registration, the last step needed for commercialization. To date, China has not approved any foreign biotechnology food or feed crops for domestic commercial production.

The approval for cultivation of GE corn would be a major breakthrough for China's biotechnology industry. The lack of a clear path to commercialize major biotechnology crop varieties (other than cotton) has limited incentives for local seed companies to invest in biotechnology. It has also encouraged public labs to focus on basic research rather than develop commercially viable seeds. Inconsistent protection of intellectual property and the fragmented nature of China's seed industry further discourage private sector investment in biotechnology.

VAT Free Policy on Seed Imports

China's value-added tax (VAT) exemption policy on seed imports has been implemented since 2006. It will continue during the 13th Five-Year Plan (2016-2020). The Administrative Measures of Taxation Policy on Imported Seeds was jointly released by the Ministry of Finance (MOF) and State Administration of Taxation (SAT) in November 2016. Accordingly, imports of seeds, seedlings, breeding stock, wild animals, and plants for reproduction continue to be exempt from the VAT from 2016 to 2020. The measure requests importers to submit import plans to MOA and the State Forestry Administration (SFA). MOA and SFA collect and analyze import plans and provide suggestions to MOF. Next, MOF, the General Administration of Customs, and SAT approve varieties for import and volumes of VAT-exempt products for any given year.

SEED MARKET

General situation

China is the second largest seed market in the world, annually planting 12.5 million tons of seed, with a market value at $17.2 billion. MOA estimates that 10.1 million tons of corn, rice, wheat, soybean, potato, cotton, and rapeseeds were used in 2015. Commercially produced seeds accounted for approximately 70 percent of seed use for these crops. China is self-sufficient in rice, corn, wheat, cotton, and soybean seeds, and produces 80 percent of the vegetable and fruit seeds that it uses.

According to MOA, the number of China's registered seed companies declined to 4,660 by the end of 2015 down 1,096 from 2014. The number of China's seed companies will continue to decline as the mergers and acquisitions in the industry continue. China's 2016 corn and hybrid rice seed production increased 34 percent and 17 percent, respectively due to acreage expansion and relatively good weather conditions. MOA announced that a significant rise in seed production and stable (even decreasing) seed usage would generate high stocks.

Corn

Hybrid corn seed production is estimated at 1.47 million tons in 2016, a 34 percent increase from 2015 as a result of bigger acreage and better weather conditions. According to MOA statistics, hybrid corn seed acreage increased 20 percent to 273,000 ha in 2016. The newly registered varieties are major contributors to acreage expansion. Six hundred corn varieties were registered in 2015 while only 472 varieties were registered in 2014. Weather conditions in major corn seed producing provinces, such as Gansu and Xinjiang, were reported favorable in 2016, which resulted in record high yield at 5,380 kg per ha, about 6 percent higher than the average for the last 5 years (2011-2015). Total supply in MY 2016/17 is estimated at around 2.1 million tons, including 600,000 tons of carry-in stocks. MOA estimates MY2016/17 hybrid corn seed usage at 1.15 million tons, causing stocks to increase to 950,000 tons.

Rice

Hybrid rice seed production is estimated at 280,000 tons in 2016, a 17 percent increase from 2015 because of acreage expansion. Hybrid corn seed acreage increased 12 percent to 108,000 ha in 2016. Hunan, Jiangxi, Jiangsu, Hainan, and Sichuan provinces are major hybrid rice seed producers. Total supply in MY 2016/17 is estimated at 360,000 tons, including 80,000 tons in carry-in stocks. MOA estimates MY2016/17 hybrid rice seed demand (domestic usage and exports) at 240,000 tons, causing stocks to increase to 120,000 tons.

Cotton

Hybrid cotton seed production is estimated at 1,090 tons in 2016, while conventional cotton seed production is estimated at 73,530 tons. Cotton seed production is nearly unchanged from 2015. Cotton seed supply in MY2016/17 is estimated at 4,350 tons for hybrid seeds and 103,000 tons for conventional seeds. MOA estimates MY2016/17 hybrid cotton seed demand at 4,000 tons and conventional cotton seed demand at 78,000 tons.

Prices

Seed prices remained stable relatively stable in 2015. According to MOA, average seed retail prices in 2015 were as follows:

Crop

2014

2015

---$/lbs.---

---$/lbs.---

Hybrid corn

1.53

1.55

Hybrid rice

3.24

3.32

Conventional rice

0.48

0.48

Wheat

0.31

0.30

Soybean

0.51

0.51

Hybrid cotton

8.50

7.20


TRADE

Imports

China imported 55,148 tons of planting seeds in MY 2015/16 valued at $297 million, decreasing 14 percent and 9 percent, respectively in volume and value, due to a significant decline of sunflower seed imports. Grasses such as rye grass, Kentucky grass and fescue were the most imported seeds by value, followed by fruit and melon seeds. The United States continues to be the largest seed supplier to China, and has a large market share in grass, sunflower, and fruit seeds.

Grass Seed Imports

Post forecasts that grass seed (alfalfa, rye, fescue, clover, and Kentucky) imports will remain stable in MY2016/17 at around 37,000 tons. China imported 35,279 tons of grass seeds in MY2015/16. The United States continues to be the largest grass seed exporter to China, accounting for about 77 percent of China's total grass seed imports in MY2016/17.

According to industry sources, China's forage seed imports are expected to remain at high levels because of China's strong demand for forage. According to MOA, China's fresh grass production will reach 1,050 million tons by 2020 and vegetation coverage of grassland will reach 56 percent, with forecasts of 1,028 million tons and 54 percent, respectively in 2015. Also, MOA released “National Structure Adjustment Plan for Crop Farming (2016-2020)" in early 2016, which listed forage as one of the substitute crops for corn. Industry sources report landscape grass seed imports will decrease in coming years because economic and policy reasons. China is experiencing a downturn in its property market and provincial government budgets have become strained. As a result, fewer public garden and landscaping projects are supported. Furthermore, government bans on golf course construction continue and, more recently some existing courses have been closed.

Global Seed Imports to China

MY(July-June)

Volume (MT)

Value ($1,000s)

HS Code

Planting Seeds

MY13/14

MY14/15

MY15/16

MY13/14

MY14/15

MY15/16

Total

64,641

64,205

55,148

320,056

325,517

296,618

100510

Corn

168

350

366

3,572

5,204

4099

12060010

Sunflower

1,788

1,248

174

23,371

11,783

2,036

1209100

Sugar beer

279

409

491

7,696

12,317

13,849

120921

Alfalfa

2,481

2,235

1,807

12,327

12,197

10,1

120922

Clover

2,3

2,946

1,961

10,639

14,496

8,864

120923

Fescue

14,636

10,74

8,391

29,621

19,903

16,457

120924

Kentucky

5,907

4,596

2,354

22

18,246

10,035

120925

Rye grass

21,227

22,183

20,766

30,06

30,025

28,43

120930

Herbaceous

27

50

54

11,498

13,847

14,419

120999

Fruit

5933

10,891

10,791

31,489

35,99

26,948

120991

Vegetable

9,895

8,557

7,993

137,783

151,509

161,381

Sunflower Planting Seed Imports

MY2015/16 sunflower planting seed imports declined to 174 MT, down 1,074 MT from MY2014/15. In China, the domestic sunflower planting seed market has diminished for several years. The market for domestic sunflower seeds has been displaced by growing imports of sunflower seeds for confectionary and crushing use as well as sunflower seed oil. Furthermore, industry sources report that greater IPR enforcement has encouraged an expansion in domestic production of sunflower planting seeds, substituting demand for imported planting seed supplies.

Vegetable Seed Imports

MY2016/17 vegetable seed imports are forecast flat at approximately 9,000 tons, about a 13 percent increase from the 7,993 MT in MY2015/16 driven by the strong demand for high quality seeds. As a major cash crop, vegetable seeds generate higher returns than major field crops, such as corn, rice and wheat. As a result, vegetable farmers prefer to invest in better seeds for better yields. Italy, Denmark, and Thailand supplied 73 percent of China's vegetable seed imports in MY 2015/16.

Exports

China exported 35,089 tons of planting seeds in MY 2015/16 valued at $219 million, a 29 percent increase in volume and 16 percent decrease in value from MY2014/15 because of the significant volume increase and value decrease of vegetable seed exports.

China exported 2,787 MT of vegetable seeds to Spain in MY2015/16, up 2,721 MT from MY2014/15 on higher demand for conventional bean seeds. Average unit prices for hybrid vegetable seeds are around $20,000 per ton. However, trade data indicate that the average unit prices of seed exports to Spain were relatively lower at $1,524 per ton. Industry sources report that seeds exports to Spain may be relatively lower priced, conventional vegetable seeds, such as bean seeds.

China's MY 2016/17 rice seed exports are forecast to rise slightly to 23,500 tons, compared to 22,454 tons in MY2015/16. Chinese seed companies have expressed concern that the government's tight restrictions on the movement of germplasm have hurt China's international competitiveness in hybrid rice seeds. China does not allow exports of hybrid parent rice seeds, and two-line hybrid rice seed exports are not allowed within five years after registration.