Pengxin chairman understands opposition but is determined to invest in NZ agriculture, writes Fran O'Sullivan
Chinese multimillionaire Jiang Zhaobai is philosophical about the intense opposition he has encountered in New Zealand to Shanghai Pengxin's plan to buy the 16 Crafar dairy farms.
Jiang observes that Chinese overseas investments in the oil and petrochemical industry, particularly by large state-owned companies, have been boycotted.
"In New Zealand we encounter similar issues which are disappointing," Jiang says."But I don't feel surprised because I know that these are caused by differences in political systems, the staggering fast growth of China and differences in culture.
"When China had just opened its doors, a lot of preferential policies were granted to foreign investors which were opposed by many Chinese people at that time. But it is no longer an issue now."
When Jiang first sat down with the Herald at ANZ's offices in Auckland in early February he was too busy conferring with his lawyers and bankers about the impending judicial review (of the decision by two Cabinet Ministers to approve Shanghai Pengxin's application) for a lengthy formal interview via an interpreter.
He had just flown in from a short Queenstown holiday with his son and was prepared to talk informally but not on the record at that stage.
Inquiries within China reveal that in the wake of Justice Forrie Miller's decision to overturn the Ministerial approval, Jiang faced a "please explain" from the Shanghai Commerce Commission. "Shanghai Authorities are watching the case closely, " an insider told the Herald. "Some officials are little bit confused about whether New Zealand is still a market economy.
"We have faced some difficulties explaining how a closed public tender can be challenged by a low offer bidder one year later, and how the Overseas Investment Commission will compare an unconditional offer with a conditional offer from a domestic buyer who is not bound by the Overseas Investment Act and could make any promise without obligation."
Informed sources confirm Shanghai Pengxin has also racked up more than $10 million in additional costs due to lengthy delays in gaining approval to purchase the farms. The holding cost of capital has been increased by exchange rate movements and foregone interest in the 18 months since the company made its $200 million plus offer to receivers KordaMentha.
But says an insider, "The biggest cost is lost business opportunities... you cannot easily estimate that in terms of money."
If the Sir Michael Fay-led consortium appeals the second Ministerial approval, those costs will clearly continue to escalate. But there is no sign that Shanghai Pengxin will withdraw from the fray even if the legal battle continues.
Jiang says his generation has been given "unprecedented business opportunities along with onerous historical responsibility" as part of the mission to drive the advancement of Chinese society through reforms since China opened its door 30 years ago.
"I think that only when a man finds a goal will a man be happy," he told the Herald. "Although the pursuit of dreams is very difficult, it is full of happiness. I get up every morning and take new challenges, filling my heart with excitement and happiness.
"Larger business means larger taxation liability and creating more job opportunities which keeps me working hard."
That approach has clearly paid off. The 48-year-old is listed at number 284 on last year's Forbes' 400 Richest Chinese list with assets of US$630 million. His younger brother Jiang Lei who is president of Shanghai Pengxin, is ranked at number 14 on China's top 20 "young billionaires" list. The pair made their money in the Chinese property sector.
Jiang says escalating Chinese overseas investment is the "inevitable result" of the growth of the Chinese economy and world trade.
"Given the huge population and scarcity of resources in China, Chinese enterprises are pushed to seek resources globally."
But it is important that Chinese companies should create mutually beneficial, win-win partnerships, promote the development of local economies, respect differences in economic systems and culture, enhance communication and build up mutual trust and understanding.
"The investments in South America and Africa by Pengxin are successful and recognised by local governments, people and partners, in the light of which we are confident that we can do better in New Zealand."
The Crafar farms group was put into receivership in October 2009 owing about $216 million to its lenders Westpac, Rabobank and PGG Wrightson Finance.
Shanghai Pengxin is estimated to have tendered over $200 million - a sum the Fay group maintains is not financially sustainable.
But Jiang sees a clear value proposition as "New Zealand enjoys the best pasture farming land in the world and New Zealand milk is well recognised for its high quality.
"Safety and quality are inherent to New Zealand dairy products, which, I believe, is also the most important reason that makes New Zealand dairy products so valued as a fast-growing middle class become more and more conscious about food safety and food nutrition, especially in China. "
Shanghai Pengxin aims to add value to raw milk from the farms by developing new export products for the booming Asian market. "We anticipate that through making additional investment and collaboration with Landcorp, we will be able to improve these farms and increase the milk production.
"Meanwhile, we will look for partnership co-operation with local dairy companies for the manufacturing of value-added dairy products such as UHT milk, fresh milk and formula milk powder to export to China and other Asian markets."
He points out that China obtains 45 per cent of its dairy imports from New Zealand (the world's biggest dairy exporter)."I believe our investment will help boost the bilateral economic development and co-operation between China and New Zealand in the future."
The 16 Crafar farms are the first step in Shanghai Pengxin's New Zealand investment strategy. As the adjoining story reveals, Jiang is also a member of the consortium which made a successful bid for some assets at Gulf Harbour.
"One of the important concerns in our agribusiness development strategy is to make investments in agriculture in New Zealand. We will not turn down any valuable investment opportunity offered in New Zealand."
He has also pledged to have exchanges with all local dairy plants in the district where most of the Crafar farms are situated.
Some New Zealand brands have already been registered.
But Jiang says he does not rule out building a joint brand with local dairy companies.
Shanghai Pengxin has leveraged the capital markets to accelerate its investment and development. Its African copper mine will be injected into China-listed Shanghai Synica in which it is the major shareholder. It may consider more IPOs in future.
As a final note, Jiang adds: "Globalisation is the main feature of the world economy at present and China has made good use of it. The 30-year fast growth of the Chinese economy should be attributed to the ever-growing world trade, investment flows and exchange of technology.
"China will play a more important role as a locomotive of the world economy together with other Brics countries (Brazil, Russia, India, China and South Africa), offering numerous trade opportunities to those countries which have economic complementarity with China."