Why China's Ma Xingfa bought 705,700 hectares of northern Australia
Australian Financial Review | 1 September 2015
Ma Xingfa, third from left, is looking to expand overseas and potentially take part in the next big boom, which he says just might be Australian agriculture as Chinese people seek out higher-quality food products.
Why China's Ma Xingfa bought 705,700 hectares of northern Australia
by Lisa Murray
In the reception area of an unassuming six-storey office block on the outskirts of the eastern Chinese city of Hangzhou, a small woman is wedged between a large freezer and a pair of scales.
Surrounded by cabinets displaying a variety of ball bearings, she is weighing, pricing and labelling chunks of beef before placing the parcels neatly back into the freezer.
The parcels are labelled "Austeak," the only hint this is the headquarters of Australia's newest cattle baron.
Five floors up, Ma Xingfa, the founder and chairman of Tianma Bearings Group, is tapping away at his Apple computer, which sits atop a desk made of intricately carved wood.
His office is sparsely furnished and there is no receptionist. A month ago, Ma bought two cattle stations on the Northern Territory and Queensland border for $47 million, an investment he describes as an "experiment" in his first interview since the purchase.
While Ma is looking to diversify his business operationally and geographically, and Tianma's latest annual report clearly earmarks agriculture as a "growth engine", the chairman still has reservations about Australia. And that's after building up an agricultural portfolio over five years that includes three other cattle stations and two wineries.
He explains almost as soon as we start talking that his main concerns are local opposition to foreign investment and a lack of adequate infrastructure.
"I've been to Australia more than a dozen times but I still don't think I have a good understanding of the country so I'm not comfortable making very big investments," he says.
"All of our investments are relatively small-scale, pilot projects. We are still trying to lay the groundwork for where we go. There are big differences between the two countries, legally and culturally, and while the bilateral trade is a large number overall, there are some unsmooth parts. We are taking a cautious approach."
Ma is a cautious person.
While he agreed to be interviewed about his recent and widely reported purchase of the Wollogorang and Wentworth stations, a total of 705,700 hectares, he declined to be photographed and was reluctant to give too many details about his background.
The son of rice paddy farmers from Hangzhou, Ma set up his first ball bearings factory in 1986. By the end of the 1990s, he began pushing his way up the country's rich list as a two-decades long construction and manufacturing boom boosted demand for high speed trains, planes and heavy equipment, all of which needed ball bearings.
The business peaked in 2009, after China embarked on an infrastructure spending frenzy to shield the local economy from the global financial crisis. At that time, Ma was ranked the country's 123rd richest man, with a fortune estimated at 6.8 billion yuan ($1.5 billion), according to research group Hurun.
But since then, Ma's fortune has declined in line with the country's manufacturing sector, which has been hit by slowing growth and the shift toward a consumption-led, services-based economy. Ma's last showing on the rich list was in 2012, when he was ranked 628th with a fortune of 2.8 billion yuan.
Now he is looking to expand overseas and potentially take part in the next big boom, which he says just might be Australian agriculture as Chinese people seek out higher-quality food products.
Australia came onto Ma's radar screen as an investment destination after his son, Ma Wenqi, who also goes by the English name Paul, began studying mechanical engineering at Melbourne University in 2007.
Last year, Tianma's listed company, which is just under a third owned by the Ma family, set up an Australian arm, Tianma Agri Holdings, to pursue its agricultural investments.
And Paul has been enlisted to help his father expand this new business. After four years study in Melbourne, he moved home to head up Tianma's wine business, which includes the Ferngrove winery in Western Australia and South Australia's Stonehaven winery.
Over a lunch of prawns, Australian beef in soy sauce and beans with minced pork at the company canteen on the sixth floor, the 29-year old says Tianma now brings over 100 containers of Australian wine into the country every year.
He says the group is unlikely to buy any more wineries at this stage. The focus, instead, is on cattle. Wentworth and Wollogorang have a combined 40,000 head of cattle, a number that could be increased over time.
In its 2014 annual report released in April, Tianma said it would "continue to invest," look for "high quality projects" and make agriculture "a growth engine" for the company.
With this aim in mind, Tianma Agri has recently run the ruler over bigger acquisitions including Consolidated Pastoral Company and North Australian Pastoral Company.
However, the younger Ma said he believed both were too expensive.
"We are very careful not to get too emotional," he says.
"We can wait for something at the right price."
They are also concerned about the negative sentiment surrounding foreign investment amid a flurry of agricultural deals in the past few years involving Chinese buyers.
"I think Australian agriculture needs foreign investment," says Paul.
"There is no need to be afraid of Chinese investment. Once we buy a station we invest more, we create more jobs and they are all Australian. They are not Chinese people. We employ locals.
"What we invest in stations, we can't bring back to China. It stays there. If the two countries become more friendly and the governments build better relationships, more money will come in .
"If the views of the Australian government and people are positive we will buy more. If they don't like it, we will stay where we are."
The elder Ma says the Free Trade Agreement will be a "big boost to the happiness index of the two countries."
But he is less enthusiastic about the live cattle agreement that was recently signed. After a decade of negotiations Australia and China reached agreement on a cattle health protocol in a much heralded deal which is expected to pave the way for significant live cattle exports.
Tianma Agri conducted a "deep investigation" into whether this would be a growth opportunity for the company, according to Paul, but concluded "the shipping costs are very high," and "cattle feed is not cheap in China."
The group is also not looking to invest in an abattoir at this stage, focusing instead on cattle stations.
However, the lack of adequate infrastructure, particularly in remote parts of the country, is a big challenge for the group as it looks to build scale.
"In China there are so many highways and the towns are all connected," says Paul. "Australia is a very big country but the infrastructure is not good."
Facing issues like these, Ma Xingfa says the company could look at expanding its agricultural business in Brazil or South Africa but working in its favour, Australia is closer and more politically stable.
Within Australia, Tianma faces strong competition from other Chinese investors. Earlier this year Hailiang Group, one of China's top 500 companies, bought more than $40 million worth of cattle stations east of St George in southern Queensland. Meanwhile beef producer Chongqing Hondo Agriculture Group Co told The Australian Financial Review in May it was looking to buy up to $100 million worth of cattle stations in Australia within the next year.
Tianma Agri will also be on the look out.
"The most famous brand in Australia is Australia," says Paul.
"The next big driver of China's growth is going to be consumption and people want to eat healthily."
with Lucy Gao
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