September 28, 2010

 

New Zealand warns over China's farmland investments

New Zealand's central bank on Monday (Sep 27) warned the country must carefully manage growing trade relations with China, as its rising interest in New Zealand's dairy products in recent years have stoked concerns about farmland falling into foreign hands.

 

Reserve Bank of New Zealand governor Alan Bollard said relations with China raised questions about who should own the country's export industries and where the exports should be processed.

 

"In some commodity areas, processing is already moving to China. There are questions about how much of that is inevitable and how much isn't and can be done in New Zealand," he said.

 

China is New Zealand's second largest trading partner, with two-way trade last year totalling NZD9.4 billion (US$6.89 billion), according to official data.

 

Exports to China, which have ballooned since New Zealand became the world's first developed country to sign a free trade agreement with the Asian giant in 2008, consist largely of dairy products, timber and wool.

 

But as the relationship has grown, there have been concerns China will seek to guarantee its dairy and timber supplies by using its financial muscle to buy farms and land, rather than simply importing from New Zealand producers.

 

Bollard said the country's situation was similar to Australia, which has experienced a sharp rise in Chinese investor interest in buying assets in its vast resources sector.

 

His comments came as Wellington announced new measures giving ministers more power to veto foreign ownership applications for farms.

 

Finance Minister Bill English said the new rules would allow ministers to consider whether selling a farm to an overseas investor was in the best interests of the wider New Zealand economy.

 

"It's important that we welcome beneficial foreign investment and recognise the positive contribution it makes to New Zealand through increased jobs, capital and access to export markets," English said in a statement.

 

"At the same time, the government recognises there are genuine public concerns about aspects of certain types of overseas investment."

 

Debate about foreign ownership of New Zealand farms has been sparked by Hong Kong-listed Natural Dairy (NZ) Holdings Ltd's application to buy a bankrupt group of dairy farms.