Chinese interest in Australian farms is high but action is slow as China calls for reduced scrutiny from the Foreign Investment Review Board

Sweet deals; Cofco, a Chinese State Owned Enterprise, has expanded into grain ports and wine distribution since snapping up Tully sugar mill, in far north Queensland, in 2011. (Photo: Tony Allan)
ABC | 28 October 2014

Chinese interest in Australian farms is high but action is slow as China calls for reduced scrutiny from the Foreign Investment Review Board

By Sarina Locke

Chinese investment in Australian agriculture has two speeds - the interest is high, but action is slow.

There's no question that after five years of investing about $60 billion in the Australian resources and power sectors, the focus of Chinese investment is now on food.

China's policy is to invest a further $90 billion in Australia over the next five years, across the board.

KPMG's head of Asia Business, Doug Ferguson, is busy flying to and from China, doing due diligence on private companies trying to invest in Australian agribusiness.

"A lot of them will be property developers or they'll have different business interest in China, and private companies, so there might not be as much public information about them.

"A lot don't have a direct track record of experience in agribusiness. So it takes longer for us to meet with them and make sure they have the bona fides to go ahead with the transaction."

Mr Ferguson says we're witnessing a fascinating development, with State Owned Enterprises partnerships.

"We've seen recently some major new funds put together out of China to combine Chinese capital and a state-owned partner to create a global fund.

"And at least 50 per cent is spent trying to improve China's own domestic infrastructure, around cold storage, logistics, food safety.

"So it's not just investment into Australia or New Zealand or elsewhere. They're trying to solve the logistics and distribution issue back in China."

Last month, two Chinese investment groups established a $3 billion fund to source the raw products for Chinese processing.

"Beef cattle could be grown and killed in Australia, quartered and maybe deboned to a certain extent, but then sent back to China. Currently it's frozen, but it could be returned to chilled soon, hopefully, to be finally deboned in a more cost-efficient manner."

At the offices of VC Group in Sydney, Hui Li helps Chinese find agribusinesses to buy.

"We help clients acquire Australian farm assets, covering grain and oilseeds and sheep and cattle. One of major clients has cotton farms, and wheat and sorghum.

"We're also helping a Chinese investor in the dairy industry, a joint venture arrangement, and also in the wine industry. "

She says the investors come from a strategic position, shoring up grain and beef processing in the north of China, where beef and lamb is produced, and State Owned Enterprises (SOEs) from Beijing.

AUDIO: Chinese investment in Australian agriculture taking time and persistence, says KPMG's Doug Ferguson and VC investment Group Hui Li (ABC Rural)

Dairy farmers complain they've seen a lot of 'tyre kicking', with active inquiries only gradually resulting in deals.

It took three years for an organic dairy in Gippsland Victoria to sell, and across in Western Australia, weekly inquiries have resulted in just one large dairy sale at Capel for about $8 million.

Dairyman Ross Woodhouse, at Scott River, says there's 'lots of interest but no commitment'.

"We'd call that tyre kicking."

Mr Woodhouse also mentions the Ravenshill farm near Albany, a large 1,000-head dairy farm, which attracted a deposit before the Chinese pulled out 12 months ago.

Chinese investments in Australian agriculture

Private enterprise investments
2012: Shandong Ruyi buys Queensland's Cubbie Cotton Group for $277 million *
2012: Beidahuang Group buys Dennis Joyce's family cropping companies in Western Australia for $23 million *
2012: Ferngrove buys Tianma Bearing Company vineyards in Western Australia for $15.5 million *
2013: Song Yuangan property developer invests $30 million in Gemtree winery in McLaren Vale
2013: New Hope Investment Fund buys Kilcoy Pastoral abattoir in Queensland for about $60 million
2014: Sydney and Chinese businessmen Wang buy South Australia's Chateau Yaldara at Lyndoch for $15 million ('businessman Wang' - is that his name)
2014: Hong Kong Yingda Investment Co buy majority stake in Hollick Wines in the Coonawarra SA
Source: *KPMG, 2013

Chinese state owned investments
2011: Shanghai Bright Food Group buys Manassen Foods in New South Wales for $530 million
2014: Manassen buys Mundella dairy processing in Western Australia for an undisclosed sum
2011: Manassen buys Margaret River dairy and olive company Don Vica of Fremantle, Western Australia
2011: COFCO buys Tully Sugar in Queensland for $146 million
2014: COFCO enters 50/50 joint venture with Hastings Fund Management in exporting $1.8 billion in grain from Newcastle Port
Source: KPMG 's update in 2014

Chinese investment under investigation
Nanshan Group Co Ltd: wool investments Tasmania and New South Wales *
Shaanxi Kingbull Livestock Co: 5,000 hectare cattle station to source 10,000 cattle a year *
Huishan Co: dairy and cattle investments *
Shandong Taifeng Textile: investigated $25 million in a 20,000 hectare cotton property *
Shanghi Xiangfu Real Estate Investment Co: investigated $350 million in farmland in Western Australia and Queensland *
Snow Dragon, owned by the Xuelong Industrial Group: investments in cattle properties
Chinese real estate group Shanghai Zhongfu: sugar mill construction at Western Australia's Ord Stage Two expansion.

source Media reports: * Fairfax, KPMG, Canegrowers Australia
Original source: ABC

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