Impact of Seed Regulation Reform on Licensing Fees of Varieties in China

Abstract

Listen

Translate article

ABSTRACTCrop breeding research and seed industry development are critical to promoting sustainable growth in agricultural production and ensuring food security. The Chinese government introduced a significant reform to the original seed regulation system, which was overly focused on market access management. This revision can profoundly impact the licensing market of seed varieties in China. However, the licensing issue in the seed industry has barely been tapped owing to the limited availability of real licensing data. This study aims to analyze the impacts of the seed regulation reform on the licensing fees of varieties in China based on some unique actual transaction data of variety licensing. We employed a nationwide in‐person survey of seed companies and used a multivariate analysis. The results indicate that most seed companies in China were obliged to buy licenses for new varieties bred by others. An upfront lump‐sum fixed‐fee payment had also been the most used strategy for variety licensing. The estimation results of the multivariate analysis indicate that seed regulation reform in China led to an average decline of nearly half of the licensing fee of a variety. After the reform, the licensing prices of conventional rice varieties decreased the most, followed by maize varieties. By contrast, the reform did not significantly affect the licensing fees of hybrid rice varieties. The reform resulted in a 63% drop in licensing fee of a public‐bred variety, while having no significant impact on that of private‐bred varieties. Post reform, the licensee fee of a variety paid by smaller seed companies and non‐state‐owned enterprises (SOEs) decreased by 62% and 65%, respectively, while the fees paid by bigger seed companies and SOEs were not significantly affected. Moreover, the results confirm that newer varieties and the varieties with higher yield and exclusive contracts have significantly higher licensing fees, and large seed companies paid significantly more on a variety license. These results have important implications for market participants and policymakers in China's seed industry as well as other industries.