© Bloomberg
Experimental feature

Listen to this article

Experimental feature

Australia has approved the sale of the country’s largest dairy to a Chinese investor in a bid to end a controversy that risked souring Sino-Australian relations and dividing communities on the remote island of Tasmania.

The sale of Tasmanian Land Company, which has a 30,000 strong dairy herd across 25 farms, to a company controlled by Lu Xianfeng in the latest in a series of purchases by Chinese investors of agricultural land and assets — part of a wider move to secure food supplies in the Asia-Pacific region. This has prompted controversy in Australia and New Zealand, where regulators are toughening scrutiny of proposed deals while attempting to remain open to foreign investment that boosts agricultural output and rural jobs.

Scott Morrison, Australia’s Treasurer, said on Tuesday he had approved the TLC sale to Moon Lake Investments subject to tax transparency conditions — a reform to foreign investment rules introduced by Canberra this week amid simmering public concern about the rapid pace of Chinese inflows.

“A breach of these conditions could result in prosecution, fines and potentially divestment of the asset,” said Mr Morrison, adding that the review had considered the deal’s implications for national security, competition, the economy and the community.

Opponents labelled the approval of the A$280m (US$200m) deal a “sellout” for ignoring local bidders.

“This is Australasia’s biggest dairy with huge potential [if kept] in local hands to expand and provide premium dairy products to Australia and the world,” said Nick Xenophon, an independent senator. “This lost opportunity shows how the current ‘national interest’ test is as clear as mud and virtually meaningless.”

Last year Wellington rejected an NZ$88m ($US59m) bid by a subsidiary of Shanghai Pengxin for the 13,800-hectare Lochinver sheep and cattle station. A month later Mr Morrison blocked Chinese buyers, including Shanghai Pengxin, from acquiring S Kidman & Co, a company controlling land about three-quarters the size of England, on national security grounds and welcomed news a local bidder could emerge.

Australia began a review of its foreign investment rules last year when it was revealed the Northern Territory government had leased Darwin port to a Chinese company without a full examination by the Foreign Investment Review Board. This week Mr Morrison introduced new rules linking foreign investors’ tax compliance with their licence to operate.

TLC is owned by New Zealand’s New Plymouth District Council. Tasmanian company TasFoods launched a legal action against the transaction when it was narrowly outbid for the asset, which was later settled. Jan Cameron, founder of clothing company Kathmandu, then entered the fray with a lobbying campaign aimed at blocking the deal and returning the dairy to Australian ownership.

On Tuesday Ms Cameron said politicians from the main Australian parties were short-sighted as they did not see the importance of food security.

“The Chinese get it — that is why they are buying up as much farm land as they can,” she said. “There are different ways to structure these deals and Australia shouldn’t be selling the land.”

Lu Xianfeng controls Moon Lake Investments and is also founder and largest shareholder of Shenzhen-listed Ningbo Xianfeng New Material, which has a market capitalisation of $1.5bn. He recently wrote an article for a local newspaper in Tasmania explaining that Moon Lake Investment’s business strategy would mean “growth for all”.

Will Hodgman, Tasmania’s premier, also backed the deal, telling the Financial Times that if local objections blocked the deal it risked alienating future Chinese investors.

Mr Morrison cited pledges by Moon Lake to invest A$100m in the dairy, create an extra 95 jobs and maintain the same level of milk supply in Australia in his decision.

“Ongoing foreign investment remains a key part of growing Australia’s output and employment and, through this, our standard of living,” he added.

Get alerts on Chinese politics & policy when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Follow the topics in this article