CHINA QUIETLY USHERS IN AG BIOTECH REVOLUTION

UNCLAS SECTION 01 OF 05 BEIJING 003263

SENSITIVE
SIPDIS

STATE FOR EEB/TPP/MTAA/ABT ARYAN
STATE FOR C MPLOWDEN
STATE FOR J BOBO
STATE PASS USDA/ERS
STATE PASS USDA/FAS/OSTA BERMAN/PORTER/JONES
STATE PASS USDA/FAS/OCRA CHINA DESK
STATE PASS USDA/OGA
STATE PASS USDA/APHIS/SIMMONS/HERON
STATE PASS USTR FOR STRATFORD
STATE PASS USTR CLARKSON
STATE PASS FDA/DEITZ
STATE PASS EPA/WOZNIAK

TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: SNAR SENV EAGR ETRD ECON CH VN

SUBJECT: CHINA QUIETLY USHERS IN AG BIOTECH REVOLUTION

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(U) This cable is Sensitive But Unclassified. Please protect
accordingly.


1. (SBU) In early November 2009, China authorized the first
commercialization of major biotech food crops. A government website
confirmed their approval of phytase corn and Bt rice. Despite little
fanfare, this will revolutionize China's agriculture and may be the
global agricultural development of the decade. Successful
utilization of plant biotechnology by millions of Chinese rice
farmers will likely significantly defuse, if not end, debate about
the safety of the technology in China and possibly the developing
world. END SUMMARY.

LITTLE FANFARE, MAJOR MOVE
-------------- --------------


2. (SBU) On November 21, 2009, Beijing-based Origin Agritech
announced that it is the first company to receive de-regulated
status for genetically modified corn for planting in China.
Confirmed by China's Ministry of Agriculture (MOA),Origin's phytase
corn product received the final biosafety certificate that permits
its domestic sale and marketing. China also granted a biosafety
certificate to Huazhong University and Dr. Zhang Qifa for Bt rice.
Reuters first announced the Bt rice news on November 27 and it was
picked up by the Chinese media on November 30. On December 3, MOA
posted formal confirmation of both authorizations on its website.
The cultivation of corn will be limited to Shandong province and
rice will be limited to Hubei province. Moreover, provincial seed
registration procedures will likely prevent the first direct sales
to farmers until at least the 2012 planting season.


3. (SBU) In 2008, seven million farmers grew biotech crops in
China, about half of the global total. Chinese farmers grew biotech
crops on 3.8 million hectares of land, making China the sixth
largest producer of biotech crops by land area. Prior to this
announcement, the list of genetically modified plants approved for
planting in China included: cotton, tomato, sweet pepper, petunia,
poplar, and papaya. Cotton and poplar trees are the only biotech
plants grown on a large-scale in China. There is also limited
production of biotech papaya. China also currently permits 28
varieties of biotech corn, cotton, canola, sugar beet, and soybean
to be imported for processing.

CHINA ALREADY USES BIOTECH, WHAT'S THE BIG DEAL?
-------------- ---


4. (SBU) China's record on biotechnology is already impressive, but
the agricultural world has been waiting expectantly for China to
decide how it would approach the application of plant biotechnology
in food crops. Why is the deregulation of biotech corn and rice is
a ground-breaking event in Chinese agriculture and possible the
history of this technology? The answer is that China's application
of plant biotechnology was narrow and omitted several key aspects of
a country that intends to be a leader in the technology. There are
three main reasons why current application has heretofore been
considered "narrow": 1) avoiding non-food crops; 2) using only
proven technology; and 3) avoiding decisions related to
environmental safety.


5. (SBU) First, China's commercial use of the technology is almost
exclusively limited to non-food plants. Focusing on non-food plants
minimizes the need to analyze the impact on human health, thus
reducing risk to regulators and the personal consequences of making
an incorrect decision. In addition, food security concerns do not
come into play if the crop fails to produce as advertised or various
factors lead to yields that are less than conventional varieties.
Biotech papaya is an exception, but a very minor crop that accounts
for far less than 1 percent of total biotech planted area. In fact,
this rationale also applies to phytase corn because it will not be

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used directly in human food.


6. (SBU) Second, the majority of the technology in use is proven
technology, first tested and used in the United States. For
example, the majority of the biotech planted area consists of a
version of Roundup Ready cotton created in the United States and
misappropriated for use in China. China's biotech papaya was also
originally developed in the United States. Using proven technology
also limits the risk taken by Chinese regulators, which makes these
early deregulated events safe choices for hesitant bureaucrats.


7. (SBU) Third, the current biotech agricultural crops are not
native to China or have relatively unimportant wild relatives in
China. This is a very important consideration. The stakes are far
higher for regulators when dealing with plants that have wild, weedy
cousins or where wild relatives are still important sources of
genetic information for seed developers. Pollen drift is of
particular importance in the debate about biotech rice in China and
the rest of Asia. For this reason, the Chinese government poured
extensive time and money into environmental risk analysis.


8. (SBU) Though Chinese leaders have long stated that biotechnology
can be safely used after proper evaluation, no large-scale
commercially viable food crops were granted a safety certificate for
the three political and scientific reasons mentioned above. Even
though China has advanced research in all major crops and in dozens
of traits, the Ministry of Agriculture has tabled previous biosafety
certificate applications and prohibited certain advanced trials;
this was notably the case for vitamin A enriched "golden rice." Many
experts blamed the delay on risk-averse bureaucrats who wanted a
zero-risk situation in terms of biosafety and press/public reaction
in order to protect their careers.

LOGJAM BROKEN
--------------


9. (SBU) Many Chinese senior researchers had been discouraged from
further research and investment in plant biotechnology by the
barriers faced by developers of food crops and of China-origin
technologies. Cotton is one of the most agrochemical-intensive
crops and Chinese researchers for years have shown the significant
reduction in chemical use and improved worker health associated with
biotech cotton. Despite cotton's obvious success, there was a
feeling of frustration in the research community by 2008.


10. (SBU) However, in early October 2009, local contacts reported
to AgAttache that there was a private meeting between Premier Wen
Jiabao and developers of high tech products, including agricultural
products, to discuss these issues. He reportedly told the group
that while China was a leading investor in biotechnology, it was
failing to get new events to market. Wen went on to emphasize that
state funded technology should not only be developed, but used as
well. This message was seen as the "final word" on the subject and
a strong signal to reluctant bureaucrats that they could and should
move forward and begin approving biotech events without fear of
career suicide if problems arose or there was negative public
reaction.


11. (SBU) Chinese researchers in all agricultural fields have been
encouraged by Wen Jiabao's support and the new commercializations.
Not only does it mean that existing research can now accelerate, it
also means that the Ministry of Agriculture will no longer be
reluctant to distribute the billions of dollars that have been
pledged to agricultural research. China will now likely forge ahead
with many of the first generation products that provide benefits to
producers and also second generation traits that are more consumer,
plant stress and environment focused. During bilateral meetings,
China has repeatedly emphasized that their top priority is
drought-tolerant traits in corn and other food crops.

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12. (SBU) Background regarding China's biotechnology research and
regulatory process can be found in FAS China's Annual Biotechnology
Report. The most recent update was published on August 3, 2009, and
is labeled as GAIN Report CH9060. It can be found at
www.fas.usda.gov.

PRODUCERS EXPECTED TO BENEFIT FROM CHANGES
--------------

13. (SBU) Bt technology has a long history of use in the United
States, including Bt potatoes, Bt corn, Bt sweet corn, Bt sugar
beet, and Bt alfalfa. In the case of Bt crops, the gene of interest
produces a protein that kills harmful plant pests and allows growers
can use Bt traits as an alternative to spraying insecticides. The
-Bt delta endotoxin was selected for many crops because it is highly
effective at controlling Lepidoptera larvae at the stage when they
cause the most damage to the plant. The protein is very selective,
generally not harming insects in other orders (such as beetles,
flies, bees and wasps).

14. (SBU) Phytase is currently used as an additive in animal feed
to breakdown phytic acid in corn, which holds 60 percent of the
phosphorus in corn. Phytase increases phosphorus absorption in
animals by 60 percent. Phosphorus is an essential element for the
growth and development of all animals, and plays key roles in
skeletal structure and in vital metabolic pathways. Phytase, as an
additive for animal feed, is mandatory in Europe, Southeast Asia,
South Korea, Japan, and other regions for environmental purposes.

15. (SBU) Phytase transgenic corn, developed by and licensed by
Origin from the Chinese Academy of Agricultural Science (CAAS) after
seven years of study, can allow feed producers to eliminate the need
to phytase and corn separately. It will also eliminate the need to
mix the two ingredients together, thus saving time, machinery, and
labor for feed producers.

16. (SBU) Origin's GMO phytase-producing corn is expected to reduce
the need to add inorganic phosphate supplements to feed as the
animals will directly absorb more phosphate. The replacement effect
reduces feed cost. Additionally, inorganic phosphates may be
contaminated with fluorine and heavy metal residues created in the
manufacturing process. These fluorine and heavy metal residues in
the feedstuff are toxic to animals and dangerous to humans.


17. (SBU) As described above, these traits are not directly related
to yield. The benefits of these traits largely mean lower input
costs for farmers (Bt rice) or the feed manufacturing chain (phytase
corn),which ultimately benefit the farmer through lower input costs
or a premium sales price. There will be some yield advantage to Bt
rice because of reduced pest damage, but the primary yield
attributes of the seed remain its conventionally-bred genetics.

NOT SO FAST - PRACTICAL IMPACT LIMITED FOR NOW
-------------- --------------


18. (SBU) While granting the biosafety certificate is a milestone
in terms of public policy, it will likely be several years before
these seeds are in the hands of farmers. First, seed companies will
need to register each biotech seed variety with provincial
authorities and prove stability and effectiveness. [Note. This
requirement applies to conventional varieties as well. End Note.]
Testing can take two years or more. Following provincial approval,
the company will then need to replicate enough seed for commercial
sale. As a result, Chinese farmers may not see these seeds on sale
until the 2012 planting season or beyond. Though farmers and
livestock producers may want to see the technology in fields sooner,
this is a normal timeframe for the development and marketing of new
seeds in China, conventional or biotech. Another puzzling
limitation is that the crops were each authorized for planting in
only one province, which will severely constrict their commercial
viability if the scope of use is not later broadened. Sources
suggest that this limitation was the trade-off for being the

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pioneering commercialization.


19. (SBU) The commercialization of these crops in China could pose
challenges for U.S. regulators, especially if China decides not to
seek import approval. U.S. regulators have no/limited knowledge of
these events and, despite Chinese assurances, the events could get
into trade channels, thus raising the possibility that a biotech
event unapproved for use in the Unites States is being imported.


20. (SBU) Chinese (whole grain) rice exports are about $24 million
and corn exports are very minimal. However, rice and corn
by-products are pervasive in small quantities as food ingredients in
processed foods, which make up the bulk of Chinese exports of food
products to the United States. This makes exports of corn or rice
containing products much larger but also hard to precisely
determine. Though trade is small, how will China deal with exports?
Will the Chinese companies seek regulatory approval for their
products in export markets like the United States? MOA has stated
to AgAttache that foreign registration is the company/developer's
responsibility, though they will provide some informational
resources in a way similar to what FAS does for U.S. companies.


21. (SBU) China has already had problems in biosafety containment
with experimental Bt rice, which is somewhat similar to the U.S.
experience with biotech rice. According to the Chinese Government,
there was "a case of illegal use" of Bt 63 rice in Hubei province in
2005 that resulted in the limited but unapproved planting of the
rice in 2005 and 2006. Though China claims to have eliminated Bt
rice from cultivation, it was detected in export shipments to Europe
and New Zealand in 2007 and 2008. Thus, questions about China's
next steps relating to export markets in terms of deregulation and
potential certification of food products have significance for U.S.
regulators and consumers. Discussions on this subject were
initiated by U.S. biotechnology regulators during the 2009
U.S./China Biotechnology Working Group meeting.

PRESS NOT INVITED SO FAR
--------------


22. (SBU) Surprisingly, the news about phytase corn was not even
initially released in China and Bt rice not mentioned at all. The
corn news was released by Origin for benefit of its US shareholders
and Reuters announced the Bt rice event. The Origin CEO told
AgAttache that MOA recommended that he not release the news, though
he finally persuaded them to the valuable nature of the news for his
investors. MOA is very conservative and risk averse when it comes
to biotechnology policy and controversy and the Chinese have very
close reign on negative comments about biotechnology in agriculture.
[Note. MOA publically ignored the EU complaints about Bt rice
contamination of export shipments and, with the exception of a
subdued Greenpeace, the Chinese press did not even run the story.
End Note.]


23. (SBU) However, given that rice is such a staple part of most
Chinese citizens' diets, a public campaign to promote Bt rice seems
inevitable either now or when the rice hits the consumer market.
Given the high profile of certain rice researchers/academicians and
the developer Zhang Qifa, China is likely to roll out a
high-visibility campaign to laud the achievements of its own
researchers and smiling peasants whose health will improve due to
using less pesticides. The first indications of a tentative press
rollout are a series of small articles published in the People's
Daily appearing on December 1 and 3.

COMMENT - GLOBAL SIGNIFICANCE
--------------


24. (SBU) This move by China may prove to be the concluding chapter
in the initial debate about plant biotechnology. Though around for

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decades, various actors have promoted doubts about safe use of the
technology, especially in developing countries. Though almost
thirty countries plant 140 million hectares each year, the big
developing countries have not moved into biotech food crops in a
significant way with the exception of large food exporters. As
China moves to start using plant biotechnology, largely for domestic
purposes, the size and interconnectedness of the country will expand
the sheer numbers of farmers growing biotech crops, consumers eating
the derived food, and products developed outside of the
multinational technology companies. China's sheer size encourages
other developing countries to follow its lead and marginalizes those
blindly opposed to the technology itself. If the indications are
correct and India also approves biotech food crops, the world will
be a much more receptive place for the safe application of the
technology than just a few years ago.


25. (SBU) However, forging ahead with the promise of biotechnology
is predicated on China's safe use of it. While China has been
rightly blamed for negligence in other instances regarding safety
issues, the current application and safety assessment of
biotechnology generally appears to have been done reasonably well
with close attention paid to human, animal, and environmental
impacts. China's increasing investment in this area and its
potential impact on the U.S. consumer and environment suggest that
cooperation with China grows more important as it becomes a global
leader in this technology.

HUNTSMAN