China Buying up Australia’s Land

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China Buying up Australia’s Land
By: Michelle Innisoct, The New York Times
31 October 2016

The land at stake is in Australia, but the focus is on China.

SYDNEY—Gina Rinehart, a mining magnate, is very rich—and very Australian.

Her ancestors immigrated to the country’s hardscrabble western reaches in the 1830s. A mountain range there is named after her family. In public, she sometimes adopts a characteristically Australian distaste for pretension—what one historian called the country’s “democracy of manners”—such as the time she climbed onto the back of a flatbed truck with a bullhorn to excoriate a mining tax.

On Friday, Ms. Rinehart added further to her local bona fides as she became the sole remaining bidder for iconic Australian grazing land bigger than Portugal. But her apparent victory will probably add to unease among some Australian leaders over a major foreign buyer: Her partners in the bid are from China.

Australia already depends heavily on China’s vast appetite for its rocks, milk and meat. Now it is soaking up billions of dollars’ worth of investment from China; the total reached $11.1 billion last year, according to KPG, the consulting firm. That has led to worries among members of the public that Chinese investors are buying up significant parts of the Australian economy and driving up already hefty home prices.

While critics of that stance say fears of China buying crucial Australian assets are largely unfounded, some Australian leaders have begun to act.

The Australian government in August blocked a joint bid by a Chinese and a Hong Kong company for Ausgrid, an electricity company and one of Australia’s largest infrastructure assets, with Scott Morrison, Australia’s treasurer, saying such a deal would be “contrary to the national interest.” Instead the government approved giving majority control of Ausgrid to two Australian pension funds in a $12.3 billion lease deal that valued the company at less than what the earlier bidders had offered.

The government also weathered the furor caused when the local authorities leased part of the port in the Australian city of Darwin to a Chinese company. United States Marines rotate through Darwin for joint military exercises as part of the Obama administration’s pivot toward the region.

Steven Ciobo, the trade minister, said in September that the government would consider updating its foreign investment guidelines so Australians could be sure that proposed investments were “good for the country.” Mike Smith, the former chief executive of Australia & New Zealand Banking Group, a major lender, went further. Last Monday, he said Australia should make a list of “no-go assets.”

On Friday, four big Australian landowners withdrew a joint offer to buy S. Kidman & Company, which controls more than 38,600 square miles of land, after a group led by Ms. Rinehart topped their offer with a $294 million bid on Thursday.

Before their retreat, the landowners criticized Ms. Rinehart’s bid as not Australian enough. While Ms. Rinehart controls the group bidding for Kidman, the Chinese property company Shanghai CRED owns a one-third stake.

The bid from the landowners did not rely on “getting money out of the People’s Republic of China,” said Sterling Buntine, one of the landowners, in comments that came days before his group bowed out. Instead, he told lawmakers, it “will see Kidman 100 percent Australian-owned.”

The Kidman properties account for 2.5 percent of Australia’s farmland and include a pastoral lease across a weapons range classified as sensitive by the Australian government. The Rinehart group’s bid excludes the areas abutting the weapons range.

Mr. Morrison, the treasurer, had already rejected bids for Kidman from two Chinese companies. When Ms. Rinehart emerged with her Chinese partner, Mr. Buntine and his fellow cattle ranchers quickly countered.

“My father carted cattle for Kidman for many years,” Mr. Buntine said. Other consortium members, the Oldfield family and the Brinkworths, were cattlemen on Kidman properties or drovers. Malcolm Harris, the fourth member, runs cattle farms in Western Australia and the Northern Territory.

Ms. Rinehart’s camp dismissed the idea that the presence of a Chinese partner would take valuable Australian land out of the hands of locals.

“You don’t get much more Australian than fourth-generation Australian Gina Rinehart,” said Garry Korte, the chief executive of Hancock Prospecting, Ms. Rinehart’s investment vehicle.

Shanghai CRED did not respond to requests for comment.

Ms. Rinehart, who is well known in Australia for her strong conservative political views and legal fights with other members of her family, has stressed her connections to the Kidman properties. Her grandfather, she says, ran several businesses with the company’s founder, Sidney Kidman. “They respected each other and were friends,” she said.

In a poll before national elections, which were held on July 2, the Lowy Institute, an independent research center, found that 87 percent of Australians were against foreigners’ owning Australian farms and that 59 percent did not approve of Chinese investment.

“Most Australians have little or no direct connection with Kidman,” said Simon Venus, a lawyer acting for the landowners. “But culturally, it is very significant. There’s a romantic nostalgia around the properties.”

So far Chinese investors hold only modest amounts of Australian land. Investors from Britain are the largest foreign holders, with 68 million acres, followed by those from the United States, according to Australian trade officials. Investors from China ranked fifth, holding 3.7 million acres.

Critics of the growing anti-China stance from some politicians say it amounts to pandering. Indeed, many Australians believe homeownership is out of their reach because Chinese investors are pushing prices higher.

“The process for the sale of big-ticket assets is utterly politicized,” said Jeffrey Wilson of the Asia Research Center at Murdoch University in Perth.

But the government is grappling with rising discontent among junior and independent lawmakers who are uneasy about foreign investment. Two lawmakers, Nick Xenophon, a senator from South Australia, and Bob Katter, a lower-house lawmaker from Queensland, said last Monday that the government should stiffen the rules governing the entry of foreign buyers.

Mr. Xenophon said he supported foreign investment but was considering pressing for new laws that would give tax breaks to Australian pension funds to help them buy Australian assets. “It means profits stay here, jobs are created here,” he said.

Original article

Emily Feng in Beijing contributed research.

Photo: Herding cattle in Queensland, Australia. A recent poll found 87 percent of citizens were against foreigners owning Australian farms and 59 percent did not approve of Chinese investment. Source: David Gray/Reuters.

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