New Zealand court stops sale of dairy farms to Chinese investors, says government overstated economic benefits investors would bring when sale of 16 farms was approved
WELLINGTON, New Zealand
February 15, 2012
– A New Zealand court Wednesday halted the first ever sale of dairy farms to Chinese investors, the latest twist in a saga that's dividing a country reliant on agriculture for much of its export earnings.
High Court Judge Forrest Miller ruled the New Zealand government overstated the economic benefits that the Chinese investors would bring when the government approved the sale of the 16 farms last month. Miller said the government needs to review the sale again using stricter evaluation criteria.
Supporters of the sale — which would have been the first to Chinese investors — say it would encourage international trade, while others say farmland needs to stay in the hands of New Zealanders if the country is to remain prosperous.
The potential buyer is Shanghai Pengxin, run by wealthy property developer Jiang Zhaobai. The company says it wants to spend more than 200 million New Zealand dollars ($164 million) buying and improving the farms.
A consortium of local farmers and businessmen led by merchant banker Sir Michael Fay filed the court action seeking to block the sale. The group earlier offered to pay 171 million New Zealand dollars ($140 million) to buy the land itself.
"We're very pleased with the decision from Justice Miller," said consortium spokesman Alan McDonald. "Our view is that Shanghai Pengxin never brought any real economic benefits to New Zealand."
The judge essentially ruled that the New Zealand government used a false comparison when evaluating the benefits the Chinese would bring to the farms, which are currently in bankruptcy and poor repair. The judge said the benefits from the Chinese needed to be measured not against the farms' current state, but against the benefits a New Zealand buyer would bring.
Cedric Allan, a spokesman for Pengxin, said he believes the Chinese investment will benefit New Zealand under either measure, and he said he expects the sale will still go ahead after a second government review.
"Personally, for me, the ruling is a big surprise, I hadn't read the Overseas Investment Act in that way," he said. "We're still pressing ahead as fast as we can, and we're still confident we are going to get the final signoff."
The case has been watched closely by Chinese officials, who earlier expressed concern at delays in the sale.
New Zealand relies on China to buy much of its farming exports, including its dairy products. In 2008, the two countries signed a free-trade agreement, the first such agreement between China and a developed nation.
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