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Current as of 18/12/14 01:00PM NZST

Christopher Adams

The Business Herald’s markets and banking reporter.

China's own "foreign buyer" fears on Fonterra deal

Some of the land on the "Crafar" farms purchased by China's Shanghai Pengxin. New Zealand Herald Photograph by Christine Cornege NZH
Some of the land on the "Crafar" farms purchased by China's Shanghai Pengxin. New Zealand Herald Photograph by Christine Cornege NZH

A high-profile Chinese dairy commentator is calling for China's government to block Fonterra's investment in Hangzhou-based infant formula maker Beingmate, showing criticism of foreign investment isn't a purely one-sided affair when it comes to the business relationship between New Zealand and its biggest trading partner.

Foreign investment, particularly from China, has returned to the forefront of public debate in this country since it emerged that Shanghai Pengxin, the owner of the Crafar Farms, wants to purchase the more than 13,000 hectare Lochinver Station in the central North Island.

Opposition parties have opposed the potential sale and NZ First leader Winston Peters has gone as far as vowing to buy back strategic farmland from foreigners.

But it looks like New Zealand is copping a bit of its own medicine in China.

Industry expert Lei Yongjun told China's Xinhua news agency that for the "long-term safety" of China's dairy industry the Government should veto the partnership between Fonterra and Beingmate, which will involve the local cooperative purchasing a 20 per cent stake in the Chinese firm for around $615 million.

Beingmate and Fonterra will also set up a joint venture that will purchase Fonterra's Darnum manufacturing plant in Australia.

Lei said Fonterra already had control over "milk pools" in China through its farming operations in that country and securing access to downstream operations -- Beingmate's manufacturing capacity and distribution capabilities -- meant the New Zealand firm would gain too much power in the Chinese market, according to a translation provided to the Herald.

An interesting aspect of Lei's comments is the fact they were published through the Xinhua agency, which is viewed as the Chinese Government's official mouthpiece and is used by Beijing to promote the party line on big issues.

Fonterra hopes the partnership will greatly expand sales of its Anmum baby milk brand in China's booming infant formula market, where annual sales are expected to grow from the current $18 billion to $33 billion by 2017.

Beingmate has access to around 80,000 retail outlets across China, Fonterra has said.

Chinese infant formula makers Yili and Yashili are in the process of setting up manufacturing operations in New Zealand.

- NZ Herald

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