More food assets on the menu for Chinese cash

Chelsea Sugar Refinery in Birkenhead. Photo / Martin Sykes

Bright Food's A$1.5 billion ($1.9 billion) tilt at CSR's sugar business, including New Zealand's Chelsea Sugar, is a taste of things to come as China looks to acquire assets in the Australasian resources and food sectors, market sources say.

However, finding accessible opportunities is likely to prove more difficult on this side of the Tasman.

Commentators have noted that Shanghai-based Bright Food's potential offer for CSR's sugar division shows China's pursuit of hard assets, previously focused on mining and resource companies, has now spilled into Australia's wider economy.

The spending spree is backed by China's Government, which is reported as viewing investment in hard assets as an attractive use for its US$2.3 trillion ($3.1 trillion) in foreign currency reserves, rather than US Government debt securities.

Investment adviser and market commentator Arthur Lim characterises the most recent and visible Chinese investments in New Zealand - whiteware giant Haier's investment in Fisher & Paykel Appliances and Beijing-based Agria's investment in PGG Wrightson last year - as opportunistic rather than strategic.

"But what is very clear, looking at the CSR investment as well as other investments the Chinese have targeted in Australia, is that they are cash rich.

"They are consciously looking to use that money to secure access to resources as well as positioning themselves in areas where they feel there are benefits for Chinese companies to be able to access expertise and technology.

"That's where I think in New Zealand the focus will be."

However, Lim believes Chinese investment in New Zealand, where the crucial and probably most attractive sector - agriculture - is barely represented on the sharemarket, will be constrained by a lack of opportunities.

His view is broadly shared by Goldman Sachs JBWere strategist Bernard Doyle, who told the Business Herald he expects this year will bring more Chinese investment in New Zealand, "but it will be somewhat less prominent than what you'll see into Australia".

Apart from this country's lack of large resource and mining companies, access to what we do have is not easy.

"Whether it's the Chinese or anyone else, the menu of things you can, in a liquid sense, purchase here is pretty limited whereas in Australia on resources there's far greater scope for transactions."

Outside the listed market, opportunities were even more limited due to regulatory issues.

"That's not to say you won't see it happen, though. Chinese investment has quite a long time horizon and I think a lot of assets in New Zealand would look quite attractive."

Lim believes areas Chinese companies and investment funds would be looking at closely include forestry or forestry companies that hold land capable of being converted to dairying and also dairy processors.

The chairwoman of the China and New Zealand Business Council, Linda Zhang, said China was "a good source of investment when money is insufficient elsewhere in the world" but it was often unfairly criticised.