Capital Embedded in Agriculture: Sequoia Capital plans to inject 2 billion into the Beautiful New Rural Area platform, supporting the sustainable revitalization of rural areas

The Central Committee of the Communist Party of China and the State Council issued the “Opinions on Doing a Good Job in the Key Work of Comprehensive Advancement of Rural Revitalization in 2023” (Central Document Number 1), which explicitly proposes to improve the guidelines for social capital investment in agriculture and rural areas. It emphasizes the enhancement of the whole process supervision of capital introduction, utilization, and exit in rural areas, the improvement of the linkage mechanism between government investment and financial and social inputs, and leveraging financial and social capital to invest more in agriculture and rural areas based on market principles.

Under the guidance of policies, an increasing amount of social capital is flowing into rural revitalization development projects, bringing not only funds and technology to rural areas but also introducing new concepts for agricultural development. According to relevant data, in 2022, there were over 200 investment events in the agricultural sector (including venture capital, strategic investment, mergers and acquisitions, IPOs, etc.), with disclosed fundraising events amounting to approximately 42.826 billion yuan. If considering the 88 investment events with undisclosed specific amounts, which range from tens of millions to billions, it is conservatively estimated that the inflow of capital into China’s agriculture in 2022 was around 50 billion yuan.

Sequoia Capital Enters Rural Revitalization with a Planned Investment of 10 Billion Yuan

Social capital can bring significant developmental force to rural revitalization projects, injecting new technology and concepts into these projects, as well as aiding in the development and extension of industrial chains. In 2023, the General Office of the Ministry of Agriculture and Rural Affairs and the Comprehensive Department of the National Rural Revitalization Bureau jointly issued a notice on the “Guidelines for Social Capital Investment in Agriculture and Rural Areas.” These guidelines encourage social capital investment in modern farming and breeding, modern seed industry, rural wealth-generating industries, agricultural product processing and distribution, new types of rural services, green development in agriculture and rural areas, agricultural science and technology innovation, talent cultivation in agriculture and rural areas, construction of agricultural and rural infrastructure, digital and smart agriculture, agricultural entrepreneurship and innovation, improvement of rural living environments, and international cooperation in agriculture.

But what are the focal points for rural revitalization projects attracting capital investments?

Shen Nanpeng, the founder of Sequoia Capital, publicly stated: “The transformation of Chinese agriculture will continue to intensify, and scientific, moderately scaled investments could yield better returns. Large industries offer significant opportunities, and the modernization and branding of agriculture need entrepreneurs with conviction. With the implementation of plans like rural revitalization, the previously long return period for agriculture is now becoming one of the options to hedge against other investment risks, making agriculture a new investment track.”

In November 2023, led by the General Office of the Ministry of Agriculture and Rural Affairs and the Comprehensive Department of the National Rural Revitalization Bureau, the Sequoia Capital China Rural Agricultural Science and Innovation Fund signing ceremony and exchange event were held both online and offline. Shen Nanpeng, founder and executive partner of Sequoia Capital China, Pu Xiaoyan, partner of Sequoia Capital China, Liu Huanxin, Vice Minister of the Ministry of Agriculture and Rural Affairs and Director of the National Rural Revitalization Bureau, and other leaders including Xia Gengsheng, Huang Yan, and Li Jinghui, participated in the event.

Liu Huanxin, Vice Minister of the Ministry of Agriculture and Rural Affairs and Director of the National Rural Revitalization Bureau, stated in his speech, “The countryside is fertile ground for innovation, creation, and entrepreneurship. We welcome Sequoia Capital China to invest its funds in the agricultural sector. We also believe that Sequoia Capital, with its professional advantages, can help develop agricultural technology, inject new technology and models into rural industrial development, and promote the transformation from beautiful rural areas to livable and business-friendly beautiful villages, achieving a comprehensive enhancement of rural areas both in appearance and essence.”

According to sources, Sequoia Capital plans to focus on rural revitalization projects and invest in rural infrastructure development, with a funding scale of about 10 billion yuan. The investment is intended for the “Beautiful New Rural Area” platform, collaborating with regional governments to explore rural revitalization. The planned projects include rural health infrastructure construction, rural medical projects, agricultural projects, and rural cultural and tourism development projects.

The Beautiful New Rural Area: Allowing Capital to Organically Integrate into Rural Industrial Revitalization for Greater Value

“The Beautiful New Rural Area” has its unique perspective on rural industrial development and attempts to build multi-directional communication with capital, government, and farmers through the power of the platform. This allows capital to be organically integrated into agricultural production, playing its due role. As a project construction and execution platform, the development concept and goals of the Beautiful New Rural Area are highly favored by Sequoia Capital. It is revealed that the Beautiful New Rural Area is currently in deep project consultations with investors and the Rural Revitalization Bureau.

“The Beautiful New Rural Area” has selected Zhejiang Province as an important source of rural industry project development. On the one hand, Zhejiang’s favorable business environment, public services, and infrastructure construction provide greater confidence for capital seeking new tracks in the agricultural field. On the other hand, the challenging issue of land transfer, which often vexes agricultural industry development investors, is being addressed by local governments offering attractive conditions and willingness to take an active role in coordinating to ensure the smooth implementation of related agricultural projects.

In Zhejiang, there are many villages worthy of investment and exploration. For example, Jiangshan City has a rich variety of special agricultural products. Due to previous deficiencies in deep processing capabilities and lack of sales channels, its agricultural products could not reach far markets. By bringing capital to rural areas, constructing agricultural product factories in Jiangshan City, which have relatively low construction costs and abundant labor resources and are close to major domestic consumer markets, can compensate for the lack of large agricultural processing enterprises locally and can be linked with other major agricultural projects in Jiangshan. Coupled with mature sales channels, there is a good market development prospect.

Jiang YuGuo, Deputy Director of the Agriculture and Rural Bureau of Jiangshan City, said to the Beautiful New Rural Area: “In the past, agricultural projects mostly involved agricultural facility land with less construction land, which was not conducive for enterprises to form effective assets. For example, urban houses can be mortgaged for loans, but farmhouses cannot. Therefore, Jiangshan City is actively exploring measures such as orderly inclining construction land indicators towards agricultural investment projects to alleviate the concerns of enterprises about investment, construction, and even future exit strategies.

It is precisely these preferential policies and their implementation that have given real confidence to the Beautiful New Rural Area and capital investors. Currently, related agricultural projects are still in further negotiation.

Looking to the future, the Beautiful New Rural Area platform will adhere to the development strategy of ‘following a market-oriented path and fully utilizing market mechanisms.’ By actively linking government and capital, building a good tripartite relationship, understanding the trends of rural revitalization development, aligning with actual development needs, reasonably utilizing technology and funds, and cleverly applying policies, it aims to explore rural industrial development models that conform to industrial development laws. The goal is to create regionally distinctive rural developments with ‘tailored solutions’ and ‘one village, one product,’ further strengthening the ‘blood-making’ capability of village-level collective economic development, promoting the large-scale development of rural economy and industry, and achieving mutual benefits for multiple parties.