Charoen Pokphand Group: Creative Property Model Leads to Mutual Benefits

Company Profile
 
As a famous transnational conglomerate established by Thai Chinese, CP Group is known as Charoen Pokphand Group outside China. Focused on farm and pasture products, retail and telecommunication, CP Group’s business range covers over 10 industries, including finance, real estate, pharmacy, machining, etc.. By far, CP Group has set up over 300 affiliated companies in most Chinese provinces (except for Tibet and Qinghai) with more than 80,000 employees and over 110 billion yuan of total investment. Its sales revenue is approximately 100 billion yuan. CP Group has become one of the foreign-invested enterprises with the largest investment scale and most investment projects in China.
 
Challenge
 
The order model of China’s agricultural industrialization mostly is “enterprise + order” which is not consistent with the current requirements of agricultural development in the new era for agricultural scientific education, farmer quality and agricultural infrastructure development. Leading enterprises and farmers do not form the connection of shared risks & interests, mutual collaboration, and common development. It has been a huge challenge for leading enterprises to get rid of the backward development of agriculture, improve interest linking mechanism and figure out approaches to improve farmers’ wellbeing.
 
Solutions
 
As an industry giant, CP Group proactively seeks for new ideas on large-scale agricultural industrialization. In Pinggu District, Beijing, CP Group, local government, Beijing Bank and local farmer cooperative join hands to launch the CP Pinggu Chicken Egg Project, form a “4+1” property model (government + corporate + bank + agricultural cooperative) and achieve win-win progress of multiple stakeholders.
 
Create “4 + 1” Model Based on Multiple Advantages
 
In the project, farmers rent land to set up the Green Square Cooperative; Beijing CP Egg Products Co., Ltd. (affiliated to CP Group)and Gucai State-Owned Operational Company (set up by Pinggu District Government) establish the Guda agricultural investment and financing platform. The cooperative entrusts the platform to invest in, finance, build and operate the project to make sure the steady growth of it. During the implementation of the project, Beijing Bank provides business loans for the project while the Pinggu District Government offers policy support. After the completion of the project, the platform rents the project to Beijing CP Egg Products Co., Ltd. Both sides sign an irrepealable, take-or-pay leasing agreement so that farmers do not have to bear any investment risks, and the only existing cultivation and market risks are solely undertaken by Beijing CP Egg Products Co., Ltd.
 
In 2012, the CP Pinggu Egg Project, with the total investment of 720 million yuan, was officially completed and put into practice after two years of development. This is by far the most modern, largest-scale egg cultivation project in Asia. Every year Beijing CP Egg Products Co., Ltd. pays 12% of the budget investment to the platform which also pays the bank loan, and the rest of the revenue is paid to the cooperative for paying for the land rent and dividend. Alongside that, farmers could also work here. After 20 years of contract period, the project will fully belong to the cooperative. By that time, farmers with advanced technology could decide whether to renew the leasing contract or operate the project on their own.
 
Build the Industry Chain to Promote Circular Economy
 
CP Pinggu Egg Project has independent fodder processing factory with an annual output of 180,000 tons. The transportation is through totally-enclosed tube to make sure the fodder is hormone-free, drug residue free and salmonella free. The project implements the strict epidemic prevention system and immune procedure to make sure good health of chickens. Egg grading equipment and processing adopt automation control to ensure the quality of eggs sold to consumers.
 
Each year the waste treatment equipment could produce 30,000 tons of ecological organic fertilizer for the production of fruits and vegetables in the district. In addition, the project will eliminate the chicken products from private factories, develop the crocodile industry with vulnerable chickens and use waste water for irrigation through effective processing technology. Each link does not produce waste and form a virtuous circle of agricultural system. In this way, we have achieved the sustainable development of modern agriculture.
 
Achievements
 
CP Pinggu Egg Project is an important move to explore new rural construction and crack the Three Rural Issues from the perspectives of property introduction and industrial development. It is of vital importance to agricultural modernization, the integration of rural and urban areas and modern agricultural circular economy.
 
Social Benefits
 
To help farmers to obtain land rent and capital rent, we have set up an investment and financing platform and adopted loan guarantee and interest subsidy to support the cooperative so that government’s capital for agricultural development has a more effective beginning. Banks obtain finance and social capital through lending.
 
Emancipate Rural Labor and Improve Farmers’ Wellbeing
 
CP Pinggu Egg Project has emancipated rural labor, expanded the source for farmers’ income. The project involves an area of 779 mu, emancipated 117 rural laborers, provided jobs for 955 laborers (including sales staff) among which 499 people are rural registered permanent residents. The project helped 1608 rural households, among which 852 households are land leasers, and 756 households are handicapped farmers (receiving the year-end bonus unconditionally).
 
Farmers receive the year-end bonus in three phases: during the first 8 years, every household obtains the year-end bonus of 5,000 yuan; during the 9^thand 12^th years, the year-end bonus is 7,400 yuan; during the 13^rdand 20^th years, the bonus is 23,900 yuan. Farmers could also obtain the rent through land renting with the rent increasing 5% year-on-year. In 2014, the rent is 1,340 yuan/mu. After 20-year operation of the project, the cooperative is entitled to recycle the production equipment and factories with the total worth of 36 million yuan. Factories and other equipment are estimated to continue to sustain for another 10 years, and the yearly earnings is 69.84 million yuan (including taxes) with the annual return rate of 12%. In order to address the social problems resulting from farmers without stable jobs, the local government organizes farmers to safeguard the public security environment and conduct the follow-up sightseeing agriculture project to effectively solve the rural employment issue.
 
Economic Benefits
 
In 2013, the project was put into production, with the daily output of 2.4 million eggs and annual output of 54,000 tons of eggs. Based on the advanced technology and management experience of leading enterprises, the company produced a huge amount of high-quality eggs, obtained great economic benefits and achieved win-win results in China’s agricultural industrial development.
 
Prospect
 
CP Group made money through providing quality seeds to farmers at the very beginning, and farm and pasture products have been its main business. Therefore, helping farmer to obtain economic benefits has always been CP Group’s goal and incentive. The Group is exploring the “4 + 1” model in Xinjiang and Shandong. However, the specific conditions will change according to various features of different regions. In the future, the “4 + 1” model will be promoted to the whole country, which will make progress in and set a good example for the transformation and upgrading of China’s animal husbandry as well as the development of modern recycling farm and pasture industries.