7 November 2017
WHEN gold was discovered in Australia in the 1850s, Chinese immigrants arrived in droves in search of their fortunes. After the gold rush, many took to rural regions to help clear land for farms. Now, more than 150 years later, the Chinese are returning to rural Australia for another gold rush — this time, ironically, to buy the farm.
Cubbie Station in Queensland, the Van Diemen’s Land Company dairy operation in Tasmania, Nicoletti Farms in Western Australia and a share in the vast S Kidman & Co cattle empire are just some of the well-known farming businesses now wholly or partially in Chinese hands.
In the past year alone, Chinese investors have been on an unprecedented buying spree of Australian farmland. According to the latest Register of Foreign Ownership of Agricultural Land, Chinese ownership of Australian farmland has increased tenfold in the past year, to 14.4 million hectares.
China is set to overtake the United Kingdom as the biggest foreign owner of Australian farmland, a mantle dating back at least to the last gold rush. The buying spree comes with the blessing of the Chinese Government at a time when it is worried about the flow of capital out of China.
In August, China’s State Council set out new rules for overseas investment by Chinese companies, dividing them into three categories: “prohibited”, “restricted” and “encouraged”.
The prohibited category covers casinos and military technology, while restricted includes hotel and property development. But agriculture and infrastructure investment is encouraged.
Melbourne property consultant Susan Zhao established Great Southern Land Group to help small-to-medium size Chinese investors — those with up to $20 million in their pockets — buy farms in Australia, mostly family farms. Zhao says many Chinese are willing to invest in Australia but often misunderstand property values and rates of returns on their investments.
“They come to Australia to buy land and the bigger the better. But they often don’t understand that in some cases, you are not only buying land but water as well,” she says.
She says Chinese investors see a large Australian dairy farm of 3000 cows and don’t understand why it is so small and expensive. In China, dairy farms can have up to 20,000 cows.
“If you tell them the return on investment will be about 4-6 per cent, they think that’s too low. If they invest in China, they expect to get returns of 20 per cent. We have to educate them more, but their views are changing.”
The foreign ownership register was set up by the Federal Government in 2015 to appease critics of Chinese investors buying big farms in Australia. It not only includes foreign nationals but companies with more than 20 per cent foreign ownership.
The first register, for 2015-16, showed 14.1 per cent of Australia’s 371 million hectares of agricultural land — or about 52.1 million hectares — had some level of foreign investment. More than half that foreign investment land was in Queensland and the Northern Territory.
NSW had the largest number of foreign investors, with nearly 1800 foreigners owning or leasing 1300 hectares of farmland on average.
Foreign investors were mostly interested in the livestock industry, which accounted for nearly 88 per cent of total hectares of foreign investment in 2015-16.
About 80 per cent of the foreign investment is in leased land. Agribusiness Australia chief executive Tim Burrow makes the point leasehold land generally has a lower value and productivity than freehold land and, hence, is worth less in Australian dollar terms.
In 2016-17 the total area of agricultural land with some foreign investment fell to 50.5 million hectares and West Australian farms rose in demand to almost equal that of the Northern Territory. The total area of actual foreign investment remained at 36.5 million hectares. But the composition of that investment had changed dramatically.
In 2015-16, the United Kingdom was the biggest foreign investor, accounting for 27.5 million hectares, or more than half the total overseas landholdings. As at June 30 this year, the UK slice of Australian farmland had fallen to 16.4 million hectares, although it was still ranked No. 1. The Australian Taxation Office, which administers the register, has determined the actual UK ownership of farmland in 2016-17 was 9.7 million hectares, once the Australian share in a venture was accounted for.
The US has long been the second-biggest foreign owner of agricultural land in Australia. In 2015-16, individual Americans and US companies had an interest in 7.7 million hectares but this has shrunk to 2.7 million hectares in the latest report. Actual US ownership is 2.6 million hectares. The Netherlands, Singapore, China, Philippines, Switzerland and tax haven Jersey ranked behind the US in 2015-16.
But China has leapfrogged the US and nearly displaced the UK on the landholding ladder. Chinese nationals or companies had some investment in 1.5 million hectares of Australian agricultural land, in 2015-16. That jumped to 14.4 million hectares in 2016-17, with the actual Chinese portion at 9.1 million hectares. The rise was largely due to the Australian Outback Beef joint venture between mining magnate Gina Rinehart and Chinese partner Shanghai Cred buying the 10 million hectare S Kidman & Co cattle empire.
Rinehart owns 67 per cent of Australian Outback Beef, while the remainder is in the hands of Shanghai Cred. The Chinese company is essentially a silent partner in the venture, although it has extensive cattle operations in its own right in Western Australia. In 2016, Shanghai Cred, through its local arm Zenith Australia Investment Holding, bought Yakka Munga and Mt Elizabeth cattle stations and another property at Marvel Loch, WA, totalling more than 400,000 hectares. It also has about one million hectares of leased country in the state’s Goldfields region.
On a much smaller scale is Rifa Salutary Australia, owned by Chinese textile giant Zhejiang Rifa Holding Group, which bought 11 properties in Victoria and NSW during the past year. The register shows Chinese investors hold less than 2.5 per cent of total Australian agricultural land.
Tim Burrow says while Chinese investment increased substantially during the past year, foreign ownership of Australian agricultural land fell. He says the Australian industry or community should not be overly concerned about foreign investment and particularly from the Chinese.
“There was a whole lot of mystery out there (about Chinese ownership of farmland). When reality hits, we see they don’t own the whole country and this register tells us they are not going to own the whole country,” Burrow says.
“We still believe there is a need for significant investment in Australian agribusiness, not just land, to capture the opportunities in front of us. The challenge of supplying our northern neighbours is significant and one of the ways of doing business with them is to join forces, as Gina Rinehart has done.”
While some may be xenophobic, the farm ownership register shows there is nothing to fear. In fact, Australian agriculture needs all the investment it can get to capitalise on the current gold rush.