Stock & Land | 11 July 2011

China sweet on rural assets

MATTHEW CRANSTON, AFR

CORPORATE Chinese interest in Australian rural land assets is gaining momentum and there are several players on the hunt across a wide spectrum of ­sectors.

Rural land producing sugarcane, cotton, wool, tomatoes or grapes for wine is being targeted, reports The Australian Financial Review .

Several new companies such as ­textile producer Shandong YuYi Huagong and private equity firm Olympus Capital Holdings Asia have been looking at large-scale mixed farming assets in Australia including Cubbie ­Station in Queensland.

A subsidiary of China International Trust and Investment Corporation has also been taking a renewed interest in farming operations despite some recent financial troubles and China's biggest food manufacturing and agribusiness company – Chinese Oil and Food Corporation – is also on the lookout for tomato operations after paying $80 million for control of Australia's fourth largest sugar mill.

China's heightened interest in Australia reflects the country's rapidly growing overseas expansion which to date has been particularly high in African countries such as Zimbabwe.

China's interest also comes as the United Nations' Food Price Index, released on Thursday last week, showed yet another increase, keeping it almost 30 per cent higher than this time last year.

However, large land deals with the Chinese in Australia are not being executed due to difficulties in communication, points of exclusivity in due diligence and negative sentiment towards overseas government-backed operations which compete in the market at higher levels.

The federal Coalition has gained the support of the Greens in the upper house to launch an inquiry into foreign purchases of agricultural land which is expected to clear the way for more transparent reporting of sales activity and possibly stricter requirements by overseas government backed companies.