Australia is tightening scrutiny of foreign ownership in agriculture and real estate to combat public fears that Chinese investment is forcing up house prices and could potentially undermine the country’s food security.
From next month, purchases by foreign investors of agricultural land worth more than A$15m (US$11.6m) will be subject to regulatory approval from Australia’s Foreign Investment Review Board. The previous threshold was A$240m.
The Australian tax office will undertake a stock-take of agricultural land ownership by foreign owners, and new rules on foreign investment in residential real estate will be outlined in “coming weeks”, according to Canberra.
“Foreign investment is important to us, but it’s got to be investment that serves our national interests,” said Tony Abbott, Australia’s prime minister.
The ruling Liberal-National coalition has previously said that Australia was open to foreign investment, and last year signed trade deals with China, Japan and South Korea.
However, the agricultural sector is a sensitive issue among the National party’s rural base — a fact underlined when the government in 2013 blocked a A$3.4bn takeover of GrainCorp by US company Archer Daniels Midland.
Foreign ownership of agricultural land was a hot topic before the 2013 election, with a Vote Compass Survey by state broadcaster ABC finding that three-quarters of people wanted more restrictions on land sales.
A Lowy Institute poll last year found that 56 per cent of people thought there was too much Chinese investment in Australia, compared with 37 per cent who said it was the right amount.
“There is concern among a rural constituency that land will be bought by Chinese investors, who will export all the products and distort export prices,” said Hans Hendrischke, professor of Chinese business at Sydney University.
“But the fact is that investment in agriculture is needed and the volume of Chinese investment in agriculture is lower than many people think.”
Between 2006 and 2012 Chinese investors sank A$1bn into Australian agricultural businesses, which amounted to 2 per cent of total Chinese investment in the country.
This compared with A$36.8bn investment in mining, according to a report, titled “Demystifying Chinese Investment in Australian Agribusiness”, compiled by KPMG and Sydney University.
But agreement on a trade deal between China and Australia in November has heightened interest in Australia’s agricultural sector. Chinese group New Hope is investing up to $500m in Australian dairy farms and processing plants as part of a deal with Freedom Foods, a company listed on the Australian Stock Exchange.
Chinese state companies have also set up the Beijing Australia Agricultural Resource Cooperative Development Fund, a $3bn fund to invest in agricultural opportunities.
But there are concerns that scrutiny of foreign deals is insufficient.
Simon Talbot, chief executive of the National Farmers Federation, said while foreign investment was important to Australia’s booming agriculture sector, it was critical that the government had a full picture of who owned agricultural assets, where and why.
Similar concerns have been expressed about a lack of proper scrutiny of foreign investment in real estate, which has been cited by some as a factor in fast-rising house prices in Sydney and Melbourne.
A parliamentary inquiry recently recommended the creation of a new database of foreign buyers and the introduction of a fee on processing purchases.
Credit Suisse said last year that Chinese investors and newly arrived immigrants had spent A$24bn on Australian property over seven years. The bank forecast they would spent an extra A$44bn in the next seven years.
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