The Dynamic Effect Of Technological Monopoly With Foreign Investment On China’s Food Security

With gradual penetration and control of foreign investment on China’s agricultural up-stream industry chain, the potential occurrence of food security crisis in China has gained more and more attention. According to the present study, whether foreign investment has positive technology spillover effect in the host country is deeply affected by the technology gap between the foreign company and the local company. If the gap is too large, foreign investment is more likely to establish technical monopoly, which will have great impact on the local R&D activities in the host country. As for agriculture, some multinational companies can participate in agricultural R&D activities by establishing R&D department of sole proprietorship or join venture, cooperating with domestic research institutions. This strategy can have negative influence on the accessibility, availability, supply and safety of domestic food, further undermining the degree of food security in the host country.This paper uses agricultural invention patents as agricultural R&D ability and Negative Binomial Model as the empirical method, to examine whether there exists technological monopoly with foreign investment in China’s agricultural R&D activities. The empirical results show that as agricultural FDI rises sharply with increasing percentage to agricultural GDP, agricultural FDI exhibits a negative relationship with domestic agricultural invention patents. It can enlarge the gap of R&D ability between foreign company and local company, which facilitates foreign investment to gain the advantage of technological monopoly.Considering the significance of seed sector development to agriculture in China, this paper further takes the seed sector for example, and establishes a dynamic simulation system to assess the role of technological monopoly with foreign investment for R&D ability development in both foreign company and local company. Simulation runs reveal that the development path of the local industry depends crucially on the capacity of the local seed sector when the multinational company enters. If foreign company withdraws the resources suddenly, local capacity stocks and profits still increase in the short term, but the growth rate goes down dramatically. It shows that the local sector suffers great impact from the withdrawal and has to adapt to the new but uncertain situation, which is quite detrimental to China’s food security.Those threats can be reflected in China’s corn seeds market. In the case of a corn seed called "Xianyu 335" from the international seed company Dupant Pioneer, we find that R&D ability of local companies are far left behind in the germplasm resource, promotion pattern and R&D investment, compared with Dupant Pioneer. Those multinational corn seed company with great technological advantage have entered the R&D field of China’s corn seeds in recent years. While asking the local farmers for high patent fee, they are taking strong control of the core technology in the joint ventures, leading to the high dependence of local farmers on the multinational corn seeds companies.In order to prevent China’s food security threatened by the technological monopoly with foreign investment in the agricultural R&D field, we should spare no effort to improve our local R&D ability, establish a company-centered agricultural R&D system, strengthen the domestic IPR protection in the agriculture sector, and enforce the relative laws to protect China’s food security.