China just purchased a chunk of Ukrainian land the size of Massachusetts, and evidence suggests this type of transaction is well on its way to becoming the newest trend in international trade. This is happening because countries are industrializing more quickly than ever and, as a result, losing their arable land.
While China's population consumes 20% of the world's food supply, its arable land constitutes only 9% of the world's farmland. This disparity, caused by the nation's rapid industrialization and population growth, leads to a higher demand for farmland that simply does not exist within the country. As a result, the Chinese government must look elsewhere for natural resources to sustain its population.
The deal that China struck with Ukraine on Monday wasn't the first of its kind. In 2010 and 2011 China purchased a few hundred hectares of farmland from Sudan and Tajikistan, but those numbers sound almost irrelevant compared to the 3 million hectares it just purchased from Ukraine.
Under this most recent deal, Ukraine is required to sell all crops and pigs raised in the eastern region of Dnipropetrovsk at a preferential rate to China, and in exchange, China must provide Ukraine with seeds, equipment, a fertilizer plant, and a plant to produce a crop protection agent. China also agreed to help Ukraine build a highway through its Autonomous Republic of Crimea and a bridge across the Strait of Kerch, a major transport and industrial center for the country.
China is not alone in seeking out foreign farmland. Countries such as the U.S., Britain, Saudi Arabia, South Korea, and the United Arab Emirates have also purchased foreign farmland, initially mostly in Africa, but now increasingly also in Eastern Europe, Latin America, and Asia. A study from January 2013 showed that between 0.75% and 1.75% of the world's farmland is now being transferred from locals to foreign investors.
Critics are concerned that these types of deals are a foreshadowing of modern day colonialism, with wealthier countries capitalizing on poorer ones. However, this concern is unwarranted because the majority of these deals have been motivated by a government's desire to provide food security for its citizens, not a private company's scheme to generate profit.
Another concern about these types of deals is that foreign investments in land could negatively affect locals by taking away their work and resources. While this may be true, the benefits of foreign investments may outweigh the costs. Foreign investors typically have a larger abundance of resources they can devote to putting the land to good use, whereas locals who don't have these resources may end up "wasting" the land if they're not able to maximize its use.
Both critics and supporters have valid arguments, and it's still too early to tell how this trend will affect the global economy. But amidst all the unknowns, there is one thing we have learned from this colossal purchase, and that is, when in doubt, buy another country.