Finance Minister Bill English made a pitch yesterday for more foreign investment, especially by China, saying New Zealand's standard of living would be lower without it.

But he also said he would not be surprised if the 16 farms bought by Shanghai Pengxin from the Crafar receivers ended up back in local ownership.

He made the comments in a speech on foreign direct investment (FDI) to a conference on contemporary China in Wellington, run by Victoria University and Peking University.

He said that without foreign investment, the cost of capital would increase. That would constrain businesses' ability to grow and reduce employment opportunities and household incomes.


"New Zealand's standard of living would be lower without access to foreign investment."

He said the fears of foreign ownership are "frequently overstated".

While it was true that returns from foreign financing contributed to New Zealand's current account deficit, it was important to consider a bigger picture, he said.

"The outcome for the economy is positive overall when foreign capital raises worker productivity and national income increases by more than the return on investment.

"FDI is profitable because it introduces ideas and brings new capital to countries. Foreign investment is a vote of confidence in the quality of New Zealand's institutions and the quality of its workforce."

Businesses built up under foreign ownership could move or return to New Zealand ownership, Mr English said. He cited the examples of Shell petrol stations being bought by Z Energy, the meat processing sector that was now largely New Zealand-owned, and farm ownership.

Asked if he expected the 16 farms bought by Shanghai Pengxin to revert to New Zealand ownership, he said: "In the long run I wouldn't be surprised, but they have clearly made an investment with goodwill. They have stuck in through a fairly testing period of several years to get going."

Mr English said the level of Chinese investment in New Zealand was "remarkably low" considering the level of trade, as was New Zealand investment in China.

China was New Zealand's second largest trading partner but its 11th largest investor, investing $1.8 billion last year (FDI was less than half that amount).