Peer reviewed analysis from world leading experts

Chinese investment in Australian agriculture and public concerns

Reading Time: 4 mins

In Brief

Community opinion on foreign investment in Australia is mixed at the best of times. But when that investment concerns the purchase of agricultural land, public opinion is clear: a 2012 Lowy Institute Poll found that 81 per cent of Australians were against ‘…the Australian Government allowing foreign companies to buy Australian farmland to grow crops or farm livestock’.

Share

  • A
  • A
  • A

Share

  • A
  • A
  • A

The same poll also showed that 56 per cent of Australians felt the government was allowing too much Chinese investment, mainly because of the notion that Australian mining and agricultural companies should remain in Australian hands.

Chinese investment in Australia’s agricultural sector entered the public consciousness following the 2011 revelation that a Chinese firm, Shenhua Watermark Coal, had purchased 43 farming properties in New South Wales with the intention of using the land for coal exploration.

The main fear surrounding such investment from China is its potential impact on Australia’s food security — firstly, in the case that agricultural land is diverted to minerals production, and secondly, because any agricultural output produced may be ‘sent back to China’, rather than being made available to Australian consumers at affordable prices. There is also a concern that Chinese firms distort the normal competitive market because they are government backed and, as a result, are able to outbid potential domestic buyers. Such fears have begun to feed into the process of policy formation by the major political parties, as seen in a recent discussion paper produced by Australia’s opposition party.

There are several key points to note about Chinese investment in Australia’s agricultural sector. Firstly, despite the headlines generated by the likes of Shenhua Watermark Coal’s purchases, the scale of Chinese investment in agriculture is grossly exaggerated, as is the case with Chinese investment in Australia more generally.

In the latest annual report of the Foreign Investment Review Board (FIRB) (2010-2011), approved investment in the agriculture, forestry and fishing sector amounted to just $1.38 billion, or less than 1 per cent of total foreign-investment approvals. In the case of China, approved investment in this sector amounted to just $4 million, and the actual amount may have been even less.

Chinese investment in Australia’s agricultural sector was vastly overshadowed by the likes of investment by the US ($38 million), the UK ($189 million), Canada ($104 million) and Switzerland ($150 million). The 2010-2011 reporting period was consistent with data in other recent FIRB annual reports.

The above data from the FIRB are supported by what is probably the largest private database concerning Chinese investment in Australia, which has been jointly collated by KPMG and the University of Sydney. This data, covering the period September 2006–June 2012, contends that the value of completed deals in agriculture amounted to $567 million over this period, and nearly 90 per cent of this was located in just one Australian state, New South Wales. Put bluntly, the above data render mute any claims that Chinese investment in Australia’s agricultural sector has compromised our food security, or distorted our agricultural markets more generally.

Secondly, the particular concerns directed at Chinese investment are all the more puzzling in that they frequently have nothing to do with the country of origin of investment capital. For example, the concern that food security might be diminished through the conversion of agricultural land to minerals production is a land-use question, not a foreign-investment one, and in any case, such conversion would require state-government approval.

Other concerns surrounding foreign investment can also be readily dealt with using the existing regulatory framework. For example, the national-interest test applied by the FIRB could conceivably be used to prevent significant importation of foreign labour to work on a given foreign-funded project.

What is clear is that Australia desperately needs to diversify away from minerals production, which in the year to June 2012 accounted for 56 per cent of our total merchandise exports. The dangers of an over-reliance on mining include the fact that our terms of trade are determined by price fluctuations in just one sector of the economy, and that ultimately, the ability of the mining sector to produce output has a use-by date.

Mining aside, the agricultural sector is one in which Australia has a distinct comparative advantage. With a rapidly growing middle class in many countries in our region, notably China, the prospects are good for both the volume of agricultural output likely to be demanded, and the price at which this output will likely be traded.

If foreign capital is needed to develop this production and export capacity, then, as a matter of general principle and as has long been the case in mining, its presence in Australia ought to be encouraged, not blocked. Ironically, there is perhaps no country that has better utilised foreign capital to develop export capacity than China, where foreign-invested firms have long been responsible for producing more than half of the country’s total exports.

In this context, a joint study supported by both the Australian and Chinese governments into how Chinese capital might be used to boost Australia’s agricultural output and exports is a welcome development.

James Laurenceson is Senior Lecturer at the School of Economics, University of Queensland. 

Comments are closed.

Support Quality Analysis

Donate
The East Asia Forum office is based in Australia and EAF acknowledges the First Peoples of this land — in Canberra the Ngunnawal and Ngambri people — and recognises their continuous connection to culture, community and Country.

Article printed from East Asia Forum (https://www.eastasiaforum.org)

Copyright ©2024 East Asia Forum. All rights reserved.