China, whose quest for foreign farmland has stirred debate worldwide, came a step nearer control of nearly 1,000 square kilometres of Australia when it gained consent for the purchase of a huge cotton grower.
Wayne Swan, Australia’s treasurer, on Friday approved a request by a consortium led by China-based textiles giant Shandong Ruyi to buy Cubbie Station, a Queensland enterprise which has been run in administration since financial collapse in 2009 under Aus$320m of debts.
The approval clears the way for Shandong Ruyi and Australia-based Lempriere, the minority partner in the consortium, to bid for Cubbie Station, which has been valued at up to Aus$500m, although the groups are believed to be considering an offer of below Aus$300m.
But it comes amid a growing concern at Chinese interest in acquiring foreign farms, deals which, given the country’s huge needs for imports of crops such as cotton and soybeans, have prompted some governments, such as Brazil’s, to curb foreign ownership of land.
In Australia, where China’s Shanghai Zhongfu Group is bidding for a 15,000-hectare farm Ord East Kimberley Expansion project in the Western Australian outback, opposition politicians have called for tighter controls on farm purchases by foreigners, and for a register of land ownership.
However, relations with China are of great importance for Canberra, given that the country is an important trade partner, and large importer of Australian raw materials such as iron ore besides, in 2011-12, wheat too.
Mr Swan listed a series of conditions for approving Shandong Ruyi’s bid, including that the Shandong-based group – which booked 15.3bn yuan ($2.4bn) of revenues last year – cuts its ownership from 80%, as envisaged in the consortium set-up, to 51% within three years.
Lempriere, “part of an Australian family-owned group of companies”, will be responsible for running the Cubbie operations “in conjunction with the existing management team,” Mr Swan said, placing limits on the business’s crop sales strategy too.
“All cotton will be sold on arms-length terms in line with international benchmarks and standard market practices.”
Furthermore, the consortium would be limited in its use of the property’s huge water reserves, which amount to rights over 537,000 mega litres of water.
The approval comes ahead of the findings of a probe by Australia’s Senate into land ownership which are expected to be reported next month, and expected to add press on the government to tighten up ownership rules.
Australian opposition politicians have proposed a cut to Aus$15m in the threshold for foreign purchases of land requiring approval.
Australia’s Foreign Investment Review Board, which estimates that less than 1% of investment from abroad in 2010-11 went into agriculture, is currently obliged to consider only deals valued at Aus$244m or more.