NeW

Anxiety in New Zealand as Chinese buy dairy farms

AP News
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Posted: Jan 27, 2012 1:47 AM
Anxiety in New Zealand as Chinese buy dairy farms

Chinese investors are buying New Zealand farmland for the first time as economic ties with the Asian powerhouse grow ever deeper, sparking considerable anxiety in a country where livelihoods are heavily reliant on agriculture.

New Zealand's government Friday approved the sale of 16 dairy farms to a company controlled by the Shanghai Pengxin Group, run by wealthy property developer Jiang Zhaobai. Pengxin hasn't revealed how much it is paying but says its total investment will be more than 200 million New Zealand dollars ($164 million).

New Zealand's center-right Prime Minister John Key has defended the sale, pointing out that less than 1 percent of the country's farmland has been sold to foreign investors. The central North Island farms bought by Pengxin came up for sale after a bankruptcy and total about 7,900 hectares (20,000 acres).

But nationalist voices have lined up against the sale, saying it will open the floodgates to foreign ownership. A consortium of local farmers and businessmen led by merchant banker Sir Michael Fay are taking legal action to try and stop or reverse the sale, which is due to close next week, in hopes they can buy the land themselves at a cheaper price.

"Our New Zealand farmers will never be able to compete with the overseas guys with deep pockets," said consortium spokesman Alan McDonald. "The government has just declared open season on our farms."

Some commentators have suggested there is an element of xenophobia at play, after previous sales of New Zealand farmland to investors from the U.S. and Germany went ahead without much debate.

There is little doubt, however, that the prospects for New Zealand's economy and the prosperity of its 4.4 million people are increasingly tied to China.

In 2008, the two countries signed a free-trade agreement, the first such agreement China signed with a developed nation. China has overtaken the U.S. to become New Zealand's second-largest export market, behind only neighboring Australia, and by far its largest buyer of dairy products _ a commodity that makes up a fifth of New Zealand's export earnings. And the number of Chinese tourists visiting New Zealand has rapidly increased as well.

Xiaoming Huang, a professor of international relations at Victoria University, said the sale marks a turning point in the relationship between the two countries. He said Chinese officials had become concerned about the opposition to the sale in New Zealand and the time it took to finalize.

"We all understand it's a sensitive issue, politically and otherwise," said Huang.

He said China does have some strategic interest in securing energy and food supplies _ but doesn't think the sale of these particular farms reflects that.

"The farm is a very small amount of land from the Chinese point of view," he said. "It doesn't much matter for them, so I don't think it's part of some huge plot. I think the system itself is more fragmented than we think."

Huang said it's inevitable that Chinese investment in New Zealand will increase as the nation of 1.3 billion looks globally to deploy its growing wealth.

In New Zealand, rural land can be sold to overseas investors only with approval from a government agency which attempts to determine whether those investors are of good character and that their investment will benefit New Zealanders.

In buying the farms, Pengxin agreed to certain conditions, such as having its milk products processed by a New Zealand-owned company. Pengxin spokesman Cedric Allan said Pengxin also intends to have New Zealanders run and manage the farms.

Allan said a growing Chinese middle class is interested in consuming a diet filled with more protein and Western-style products such as yoghurt and cheese.

He said some Chinese are wary of consuming their own dairy products after some were found to be contaminated with the chemical compound melamine that killed at least six infants and sickened 300,000 children in 2008.