Investment from overseas can sometimes be controversial but it has since the earliest times been integral to ensuring New Zealand’s productivity and competitiveness.
As China has emerged in recent years as one of our most important sources of foreign direct investment the need to better understand China’s investor role in NZ has also grown.
There’s a disjunct between perceptions and reality about the scale and direction of Chinese investment. Most New Zealanders believe incorrectly that China is NZ’s largest investor and that hotels, commercial property and residential housing are the top areas in which China invests in NZ.
For these reasons the NZ China Council has commissioned new research to clarify the picture on Chinese investment and address some of the gaps in understanding. We need a good, factual base if we are going to build resilience and momentum into this critically important relationship.
In terms of overall ranking, the research shows China, including Hong Kong, is now NZ’s second biggest source of foreign investment, providing just over 7.6% of total foreign direct investment in 2017 but a long way behind Australia, which provides over 55%.
When you consider that China is the world’s second largest economy and our largest trading partner, the investment relationship appears to be underweight.
As for the perception that Chinese investment is focused on a narrow range of sectors, in reality there is quite a diversified range of Chinese investment with a strong interest in agri-food but in a good number of other areas including infrastructure, utilities, commercial buildings and hotels.
What’s more, investment from China is spread evenly between the main centres and in the regions. According to our analysis about 50% of Chinese investment is directed to the regions. Otago and Southland, for example, have the second highest equal concentration of investment after Auckland and Waikato.
As far as the dairy industry is concerned there is no shortage of stories about investment from China bringing high-value job creation, innovation and increased exports of key products through improved access to markets and distribution.
Take the example of the old cheese factory at Kerepehi on the Hauraki Plains, which had been derelict for years. Thanks to Allied Faxi the factory now exports ice cream direct to China, sourcing milk locally from nearby farms. In 2018 more than 3000 tonnes were exported and the company aims to increase that by 50% this year.
The former Crafar Farms in the central and upper North Island are another proof point. It was clear whoever took over the properties would need to invest heavily and the successful bidder. Shanghai Pengxin, injected $27 million into capital projects including new staff housing, regrassing, upgraded effluent ponds and irrigation.
Through its NZ entity, Milk NZ, connections are being built into China’s booming e-commerce market with Alibaba now a strategic investor in the company’s dairy export business unit.
Yili’s recent purchase of Westland Dairy, finalised after our report was prepared, is the latest example.
Though the sale has attracted criticism from some quarters it was backed by the vast majority of farmer shareholders.
The challenge we face as a country is both to tell the story of what has happened following the investment and to find ways to keep the momentum going in the investment relationship. While China’s outward investment has been strong in NZ in recent years, that trend is changing as China adjusts its outward investment policies.
Whatever views we as individual Kiwis have about foreign investment we know the success of the dairy industry is pivotal to the wider economic success of NZ. With better understanding of how investment partners like China can contribute to this success we can look forward to working to continue to build these relationships in ways that can lead to improved outcomes and value generation for our communities.
