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Syngenta-takeover will increase the strategic importance of ChemChina

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ChemChina is in line for a ratings upgrade if its takeover of Syngenta goes through, as the deal will make increase its strategic importance to the Chinese government, Fitch Ratings said.

The ratings agency maintained a positive outlook for state-owned ChemChina, saying that the successful takeover of Syngenta will prompt it to be moved up a grade, to A-.

ChemChina's takeover of the Swiss-based agricultural input group is currently facing scrutiny by legislators, including in the European Union, in order to see if it meets anti-trust regulation.

Close to the government

Fitch said the current rating of BBB+ reflects the ChemChina's "strong linkages" with the Chinese government, due to its "key positions in the agriculture and aerospace sectors".

ChemChina is wholly owned by the state-Owned Assets Supervision and Administration Commission of the State Council.

"ChemChina is China's largest and the world's seventh largest crop protection producer, excluding Syngenta," Syngenta said.

"It has been tasked by the government to enhance China's crop protection sector, which is crucial to crop output and food safety, both through research and development, and acquisitions of more advanced foreign producers."

Enhancing agriculture

The Syngenta takeover would only increase the importance of the company.

"The acquisition of Syngenta raises ChemChina's overall strategic importance to China's agriculture and food industry, as the Swiss company is the world's largest crop protection company and a leading seed corporation."

"Enhancing agricultural yields is important for China, as it has more than 20% of the world's population but less than 10% of the planet's arable land."

"In addition, Chinese agricultural yields are more than 40% lower than those of most Western countries."

By William Clarke

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