China’s quest for food security is growing more urgent, as the number of people farming the country’s limited arable land declines. The latest possible solution is vertical farming, with rows of crops grown on shelves so that more can be produced from small spaces with fewer people involved. The country’s first ‘vertical plant factory’ opened in Chengdu in December, showcasing the potential future of Chinese agriculture. 

At just under 10 meters high and covering 200 square meters, the fully automated plant — developed by the Chinese Academy of Agricultural Sciences — can produce about 50 tons of vegetables per year, according to a report by state broadcaster CCTV, from an area smaller than a tennis court. Traditional farms would need about 60 acres of land to produce the same annual amount — roughly equivalent to 45 football fields. 

A graphic from the academy’s website shows how a vertical plant factory, also known as a plant factory with artificial lighting (PFAL), works. Food is grown on vertical surfaces in a room where temperature, humidity, light and water are controlled remotely. 

Workforce scarcity and declining profits from farming have stimulated the search for solutions such as vertical farming. Trends such as urbanization have drawn workers away from China’s countryside to its cities, leading to a steep drop in the percentage of China’s working population employed in agriculture in the last three decades.

Producing grain at home has in turn been more costly than the output’s value for nearly a decade in China, according to the UN Food and Agriculture Organization, thanks to factors such as rising land costs and overuse of pesticides eroding soil quality. The cost of grain production in China was on par with the U.S. in 2007, but is now twice as high, according to research by investment bank Goldman Sachs.  The charts below show how grain production costs have risen leading to widening losses for Chinese farmers in recent years.

These trends have opened up opportunities for agritech. 

“Since 2020, China has been focusing on new approaches called ‘dashiwuguan’ — I normally translate it as the “greater food concept,”” says Ryan Xue, chairman of AgFood Future, a Beijing-based non-profit organization advocating for a transition to alternative proteins. “Initially the focus was always on safety, on quality, but now there’s an increasing emphasis on nutrition, innovation and sustainability.”

Meanwhile, Chinese leaders have been trying to promote agricultural self-sufficiency, both in the aftermath of the COVID-19 pandemic lockdowns and due to the increasing frequency of extreme weather events. 

While China continues to produce the majority of its grains, the charts below show how imports of wheat and corn have risen in recent years. 

Corn imports averaged 23 million tons per year between 2020 and 2023, while wheat imports averaged 11.5 million over the past five years. And though China remains all but able to feed itself in rice, its level of self-sufficiency has dropped to 93.3 percent for wheat and 92.7 percent for corn, meaning it has to import more to make up the shortfall. 

Investment activity in China’s agricultural sector has been on the rise. Deals involving venture capital investment, mergers and initial public offerings amounted to more than 40 billion RMB (over $5.5 billion) last year, according to data compiled by agricultural data firm VCEarth. The largest deal came in February, when COFCO Fortune, the grain and cooking oil division of state-owned food manufacturer COFCO Group, received 21 billion RMB ($3 billion) from investors including the state-run National Council for Social Security Fund, COSCO Shipping and China Chengtong Holdings Group.

Initially the focus was always on safety, on quality, but now there’s an increasing emphasis on nutrition, innovation and sustainability.

Ryan Xue, chairman of AgFood Future, a Beijing-based non-profit organization

“Agriculture is still a closely guarded sector and largely dominated by the public sector,” says Xue from AgFoodFuture, adding that the private companies with the best chance of success are those able to enter partnerships with government entities. 

Private Chinese companies have been exploring areas of agricultural innovation including remote sensing systems, data platforms allowing farmers to better map their land, as well as agricultural drones.

Among those seeing business opportunities in the push for food security are former Ant Group CEO, Hu Xiaoming, who set up a company in December 2023 called 1.8 Meters Technology that focuses on aquaculture products as a sustainable source of protein. Former Alibaba chairman Jack Ma holds a 10 percent stake in the company, according to WireScreen. 

The below graphic shows other agricultural startups offering new technologies which have received backing from the venture capital arms of some of China’s largest firms. 

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