Prime Minister John Key says the Government did not have any valid reasons to refuse approval for the Chinese bid from Shanghai Pengxin to buy the 16 Crafar farms - and blocking it may have broken the law.

The ministers responsible for overseeing Overseas Investment Office decisions - Maurice Williamson and Jonathan Coleman - announced this morning their approval of the Pengxin bid.

But strict conditions apply, including that the owners continue to be of good character, invest $14m in the properties and cannot become majority owners of milk processing facilities in New Zealand.

They must also agree for Landcorp to manage the farms, and they must sell them if an agreement cannot be reached.

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Mr Key said Pengxin "well and truly exceeded" all the conditions they had to meet under the law.

"Ministers could have overturned that decision, but there were no reasons to do so. The OIO correctly interpreted the legislation, and had they turned it down simply on the basis of being Chinese, it would not only be unlawful but unacceptable and would have been overturned in the courts."

He said the Government could change the law if he felt an unacceptable amount of farmland was being sold to foreign buyers, but he did not feel that was the case.

Less than one per cent of New Zealand was foreign-owned, he said, and in the last 18 months 72 farms had been sold - mainly to German, UK and Australian buyers.

"There are always going to people who have concerns about investment that comes from countries like China. I acknowledge their concerns, but we have pretty tight conditions around sales in New Zealand.

"As a country, we need foreign investment to grow."

Mr Key said it was up to the receiver to decide who to sell to, and then the Overseas Investment Office had to apply the law.

"It's not for the Government to say that a liquidator should accept a lower price by selling to a New Zealander."

Fight against sale continues

The Michael Fay-backed Crafar Farms Purchase Group has vowed to continue to fight against the land from being sold offshore and says today's decision to approve the farm sale to Shanghai Pengxin Group "sets up open season for foreign buyers".

The group said the decision was "wrong in law and, if not overturned by Judicial Review, sets up open season for any foreign buyers wanting New Zealand land".

The group confirmed today that it would proceed with a Judicial Review launched earlier this week to try to stop the land from being sold offshore.

Group spokesman Alan McDonald said Shanghai Pengxin did not meet the criteria for overseas investment in New Zealand.

"By its own admission, Shanghai Pengxin Group does not have experience in dairying which is why they are trying to use the New Zealand Government's own SOE, Landcorp, to put the veneer of a Kiwi face on this deal. The fact that Shanghai Pengxin does not have this dairy farming experience makes them nothing more than a passive investor and on this basis we believe the application should have been rejected." he said.

Group member Hardie Peni of Tiroa E and Te Hape B Trusts said his people were "dismayed but not deterred" by today's ministerial decision.

"All public opinion polls have been overwhelmingly against the Shanghai Pengxin bid, with more than 80 per cent of New Zealanders against the sale of large parcels of productive farm land to overseas buyers," he said.

"This is one issue where all Kiwis, Maori and Pakeha, urban and rural, stand together. Kiwis are right to be mightily concerned that this National/Maori Party Government has stood by and waved foreign buyers through our farm gates."

Recommendation to sell accepted

Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman today announced that they have accepted the recommendation of the Overseas investment Office (OIO) to accept the bid from Milk New Zealand, a subsidiary of Pengxin.

"It is clear that all criteria under sections 16 and 18 of the Overseas Investment Act 2005 have been met, therefore we accept the recommendation of the OIO to grant consent," Mr Williamson said.

The offer is believed to be for $210 million.

See the OIO decision here.

Milk New Zealand intends to engage Landcorp Farming Limited (Landcorp) to manage the farms. The Overseas Investment Office considers that the involvement of Landcorp makes it more likely that the expected benefits will occur.

If an agreement between Milk New Zealand and Landcorp cannot be reached, Milk New Zealand will have to sell the properties.

Labour leader David Shearer said the Pengxin bid had no value for New Zealanders.

"Landcorp, the Kiwi SOE which itself made a bid to buy the farms, will now be paying a Chinese Government-backed company a touted $18 million a year to rent and manage the farms for it.

"This latest decision will be a massive kick in the guts for the local group of iwi and farmers who also put in a bid. They were very keen to take over the land and make it productive again. That would have provided jobs for Kiwis, not seen profits disappear offshore.''

But Mr Key fired a shot at Mr Shearer, asking if it was Labour's policy to refuse all land sales to foreigners.

"If he's going to tell us that he intends to change Labour's policy to no sale of farms to foreigners, he should tell us now. Or if he's going to be a Prime Minister that's going to break the law, that would be an interesting proposition.

"Mark my words, when I go to the very many Chinese functions that I go to as Prime Minister, more often than not accompanied by the Labour leader, I bet you he won't be getting up in those meetings and telling them they're not welcome in New Zealand.

The approval follows the receivers, KordaMentha's acceptance in late 2010 of bids for the farms.

Milk NZ claims its bid will upgrade the farms and create jobs for New Zealanders, increase competition and supply high quality dairy products into the Chinese market.

Conditions of consent to be policed by the OIO will ensure that Milk New Zealand's investment benefits New Zealand.

These include:

* The individuals with control of Milk New Zealand must continue to be of good character

* Milk New Zealand must invest a minimum of NZD $14m in the properties

* Milk New Zealand and their associates must not acquire an ownership or control interest in milk processing facilities in New Zealand unless a 50 per cent or more ownership or control interest in those facilities is held by non-overseas persons

* Milk New Zealand must establish an on-farm training facility for dairy farm workers and must meet the capital cost of establishing this facility

* Milk New Zealand must give two scholarships of not less than NZD $5,000 each year to students of the on-farm training facility with the first two scholarships to be awarded by 31 December 2013

* Milk New Zealand must use reasonable endeavours to assist Landcorp to extend its business to, and market its products, in China

* Milk New Zealand must provide public walking access over Benneydale Farm and Taharua Station, in consultation with the Department of Conservation and the New Zealand Walking Access Commission

* Milk New Zealand must take reasonable steps to protect and enhance existing areas of significant indigenous vegetation and significant habitats of indigenous fauna and flora on the properties

* Milk New Zealand must register a heritage covenant in respect of the Te Ruaki pa site on Tiwhaiti Farm

* If required by the Office of Treaty Settlements, the Applicant must transfer the Nga Herenga pa site (approximately 1.6ha located on Benneydale Farm) to the Crown for nil consideration

Overseas ownership of NZ farms:

The 16 Crafar farms have a combined area of approximately 7,893 hectares.

In the last two years, consent was granted for overseas persons to acquire 357,056 hectares of agricultural land.

Consents granted involving agricultural land by country of majority ownership, are:

* United States to acquire 25,306 hectares of farm land

* Germany to acquire 6,834 hectares of farm land

* Switzerland 9,727 hectares of farm land

* Australia 3,861 hectares of farm land

* United Kingdom 22,600 hectares of farm land

* Hong Kong to acquire 759 hectares of farm land