Failing the test

Chinese investment in New Zealand took a sharp and surprising turn yesterday when Government ministers rejected the sale of Lochinver Station to Shanghai Pengxin.

The deal had received approval from the Overseas Investment Office and was expected to sail through because, in reality, not much Chinese investment had been rejected recently.

Opponents kayaked down the rivers within the station, pointing out the glorious scenery which could be lost to New Zealanders if the property was sold.

The OIO had recommended to Associate Finance Minister Paula Bennett and Land Information Minister Louise Upston the $88 million sale met the requirements for sales of sensitive land to foreigners and included improvements such as conversion of forestry land to dairying that would have increased the output of the 13,843ha station.

Shanghai Pengxin already owns Crafar Farms, a holding of Synlait Farms and properties in Auckland and Queenstown.

The ministers turned down the deal because there was not enough of an overall benefit for the size of the station.

Interestingly, given previous opposition to the sale, Ms Bennett claims public opinion did not come into the decision to reject the OIO recommendation. Ms Bennett says she takes heavily the responsibility of the sale being substantially and identifiably of benefit to New Zealand. She has no qualms in saying she made the decision in the best interests of New Zealand, rather than bowing to public opinion.

It is difficult to take Ms Bennett completely at her word.

Public opposition to Chinese investment in New Zealand has been growing, mainly due to the so-called heated property market in Auckland.

Labour fuelled the debate by saying people with Asian-sounding names are buying up Auckland houses.

That was later proven to be incorrect.

But there is some xenophobia emerging in parts of the country about Asian immigrants and now, the opening of New Zealand borders to Syrian refugees.

Some politicians continue to feed that particular debate in the hope of gaining popularity.

This Government is very poll-driven and sensitive to its focus groups.

It is unlikely those focus groups were unaware of growing concern about foreign investment.

The decision on Lochinver will have some interest for farmer suppliers of Silver Fern Farms which announced earlier this week it had reached agreement with Shanghai Maling, 38% controlled by the Chinese Government, to form a joint venture company.

Shanghai Maling, which is a listed company in China, will pay $261 million to take a 50% stake in a new company, Silver Fern Farms Ltd, with the farmer co-operative having the other 50%.

The deal needs farmer approval but also approval from the Overseas Investment Office and Chinese regulatory authorities.

Until yesterday, approval by the OIO seemed a formality.

The main difference for Silver Fern Farms is it is only giving Shanghai Maling access to its high-quality protein and a New Zealand brand to market into China.

The Government's rejection of the Lochinver sale causes some issues, not the least being what happens to the station now.

It is owned by the Stevenson Group which wanted to complete the sale to free up capital to reinvest in other businesses such as expanding its quarry in Drury and investing in a West Coast coal mine.

It is unlikely a New Zealand buyer with $88 million can be found, reducing the value of the property on the open market.

In 2010, the Government tightened the rules around foreign ownership by way of an ''economic interests'' factor in the OIO's consideration.

A ''substantial and identifiable benefit'' test was also incorporated into the overseas investment decision framework in 2010, further bolstered in 2012 by a High Court decision adding a ''with or without'' test.

This test has been a key determinant of the Government's decision over Lochinver.

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