The Overseas Investment Office approved the sale of the 16 Crafar farms to Shanghai Pengxin despite the Chinese bid stumbling at several important hurdles - such as job creation, introducing new technology and allowing New Zealand control in the business.

But these factors formed only part of the whole picture, and the OIO decided overall that the Pengxin bid passed the test of adding "substantial and identifiable" value to New Zealand, given the expected increase in primary production and exports.

Yesterday Government ministers Maurice Williamson and Jonathan Coleman announced they would not oppose the OIO's recommendation to approve the sale of the Crafar farms to Milk New Zealand, a subsidiary of Pengxin.

But strict conditions apply to the sale, including that they only invest in milk processing facilities that are at least 50 per cent New Zealand-owned.


Pengxin - whose offer is believed to be about $210 million - must also agree to Landcorp managing the farms.

Pengxin will now keep a close eye on the judicial review proceedings that have been filed by rival bidder the Crafar Farms Purchase Group - backed by Sir Michael Fay - which is expected to be heard in the High Court at Wellington next week.

It is the company's first move in a drive to supply high-value New Zealand dairy products to China and Asia.

The decision prompted political outrage from Labour, New Zealand First, the Greens and the Maori Party. Labour leader David Shearer called it unpatriotic and the beginning of a slippery slope to becoming "tenants in our own land".

But Prime Minister John Key said the ministers, who could have overturned the OIO recommendation, had no choice but to agree to the deal because Pengxin "well and truly exceeded" all the conditions they had to meet.

"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.

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

But the OIO report found that the deal would not introduce new technology to New Zealand and would only create at least two jobs - although Pengxin claimed there would be up to eight new jobs and the retention of existing ones.


The office found no basis to believe that a ministerial veto with a valid reason would harm New Zealand's trade relations. Nor did it find that New Zealanders would be able to participate at a control level, even if Pengxin hired New Zealand directors and managers.

"The OIO considers that New Zealanders will have little or no opportunity to participate in or oversee [at an ownership or control level] the overseas investment."

While these factors were considered of "high relative importance", overall the office was satisfied the bid represented a sufficient benefit to New Zealand.

Other tests that had to be passed included good character, relevant business acumen and financial commitment.

The office found no evidence to support claims of commercial bribery and competitive underworld killings involving principal owner Jiang Zhaobai (99 per cent owner) and his brother Jiang Lei (1 per cent).

The condition of creating a joint venture company owned 50/50 with Landcorp satisfied the requirement for relevant dairying expertise.


David Shearer said New Zealanders should be first in the queue to buy New Zealand land.

But Mr Key asked if it was Labour's policy to refuse all land sales to foreigners.

"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."

Pengxin spokesman Cedric Allen said a deal with Landcorp might de sorted in the coming days, but Pengxin would not settle the purchase before 5pm on Friday.

Sale conditions include
* The owners must continue to be of good character.
* Invest a minimum of $14 million in the properties.
* Cannot invest in milk processing facilities in New Zealand unless at least 50 per cent of the facility is New Zealand-owned.
* Establish an on-farm training facility for dairy farm workers and must meet the capital cost of this.
* Give two scholarships of not less than $5000 each year to students of the on-farm training facility.
* Use reasonable endeavours to assist Landcorp to extend its business to, and market its products, in China.
* Provide public walking access over Benneydale Farm and Taharua Station.
* Take reasonable steps to protect and enhance existing areas of significant indigenous vegetation and indigenous fauna and flora.
* Transfer, if required, the Nga Herenga pa site to the Crown at no cost.