Australians are not strongly xenophobic about Chinese investors buying into our farm sector, but many mistakenly fear the newcomers will degrade the land and put profits ahead of local communities and workers.
The Chinese themselves concede new buyers have not always done enough homework before landing in rural Australia with big plans and plenty of money to spend.
They are, however, starting to see the need to work closely with good quality ag industry advisors, find local business partners and listen to the public mood if they want to succeed.
A detailed report into how Australians and Chinese view the recent rush of investment in Australian agriculture has provided some sobering advice to would-be investors, highlighting the importance of gaining community acceptance.
Money can’t buy Aussie love
Chinese investors may win Foreign Investment Review Board (FIRB) approval for farmland or agribusiness purchases, but they must realise “there is no federal or state authority which awards social licences to foreign buyers”, said the study’s joint author, Alistair Nicholas.
Among those who appeared to “get it right”, being open minded to Australian sensitivities and doing full due diligence before buying, were the New Hope Group with its Moxey Farms joint venture with Freedom Foods and the Moxey and Perich dairying families, and Shandon RuYi’s partnership purchase of Australia’s biggest cotton farm, Cubbie Station.
Those who “got it wrong from the outset” included Ningbo Dairy Group’s purchase of five Victorian Gippsland farms.
The report said the Chinese failed to discuss ambitious production plans with locals and had a “ham-fisted” understanding of local government approval processes and public relations.
It said for foreign investors to succeed in Australia they must demonstrate a commitment to society that went well beyond profits.
They should have Australian managers or partners, engage with employees and local suppliers, and be committed to community causes, including schools, charities and infrastructure projects.
Mainland China became Australia’s seventh biggest overall foreign investor in 2015 – a 60 per cent jump on the previous year.
Mr Nicholas’ report, for strategic corporate affairs and public relations firm, Powell Tate Australia, acknowledged Australians often misunderstood Chinese buyers, including believing they were mostly government-run enterprises or those working with government firms.
Big spending Chinese were also blamed for overheating the real estate market.
Lessons for Australia
The report noted Australians generally should be better educated about foreign investment’s benefit to agriculture and farming’s serious need for outside capital to grow.
Many of those interviewed said politicians, in particular rural MPs, were politicising foreign investment and over-reacting to the detriment of farmers and the national interest.
Despite the public backlash and suspicions, Mr Nicholas said the Chinese were still keen.
They would keep buying Australian farming, mining and real estate investments because of the favourable exchange rate, the slowing economy and because the recent free trade agreement with China created business opportunities.
Chinese investors will keep buying Australian farming, mining and real estate investments because of the favourable exchange rate, the slowing economy and because the free trade agreement with China brings business opportunities
- Alistair Nicholas, Powell Tate
They liked Australia’s proximity to China; our “relatively cheap land and strong return on investment potential”; competitive natural resources; positive bilateral relations with China, and our robust legal and political structures.
They were not greatly worried about the tougher new federal government scrutiny threshold levels applying to their investments here.
Few China-based investors were aware or spooked by the long-running and intensely debated S. Kidman and Company pastoral estate sale, which was twice blocked to majority Chinese bidders.
Released in Beijing last week, Powell Tate’s The Licence That Matters report, was based on interviews in China and Australia with key agricultural, government and investor sector figures.
Lessons for China
It emphasised a Chinese investment’s survival often came down to joint venture partnerships, and in many cases, including the Kidman and Co deal, accepting a minority Chinese shareholding.
“Chinese investors should think seriously about the joint venture model, as New Hope did with its dairy investment in NSW.
“Their attitude has been ‘we aren’t here to buy lots of land or farms, we’re here to partner with farmers who want the opportunity and capital to innovate and expand’,” said Mr Nicholas, Powell Tate’s executive vice president.
New Hope had the Chinese supply chain, marketing connections and corporate business credentials, but it needed the Moxey family’s local ties and farm management skills.
“I’d like to think more foreign investors generally will adopt that sort of approach,” he said
“Owning the enterprise outright is not as important as succeeding.”
Mr Nicholas observed, too, despite our mostly urban population, Australians generally felt strong links to the bush and well known food business entities, which made foreign investment a sensitive issue if it impacted on these areas, regardless of whether the bidders were Chinese, Japanese or American.