Lands Minister Maurice Williamson's decision to approve Chinese firm Shanghai Pengxin's latest application to acquire the 16 Crafar dairy farms appears robust.

The big question is whether the Government has the guts to rewrite New Zealand's foreign investment laws or continue with a regime where the Overseas Investment Office appears to be be actively managing political risk on its behalf.

It is notable that Associate Finance Minister Jonathan Coleman, who co-signed the ministerial approval (dated April 16), was yesterday far away in Afghanistan, leaving Williamson to front on his own any public backlash to their decision.

Coleman had apparently taken an inordinate amount of time to make sure their joint ministerial approval was sufficiently bulletproof to withstand another attempt by the Sir Michael Fay-led consortium to overturn it at court level. This is understandable given the public humiliation the pair experienced when Justice Forrie Miller overturned their initial approval.


But the delays did cause much frustration within the Beehive. Other senior ministers had wanted the issue put to bed before Jia Qinglin, China's number four, visited New Zealand this week.

What is interesting about this latest OIO decision summary is a clause noting it will advance the NZ Inc China Strategy (a significant government strategy), one of the aims of which is to "increase bilateral investment to levels that reflect New Zealand's growing commercial relationship with China".

This is the first time the China strategy has been cited in an OIO decision. This will send a clear signal to China that its companies are welcome to invest here and ought to make the Fay consortium think twice before trying to overturn this latest decision at the High Court.

Reliable political sources suggest another reason for the deferral.

Put simply, Prime Minister John Key also wanted Williamson and Coleman to postpone the public announcement until he was back in New Zealand from his official visit to Indonesia and Singapore.

Key had been concerned that if the announcement took place while he was abroad, the Government's political opponents would have accused him of stage-managing things so he did not have to face any political music.

So - despite being a done deal for the best part of a week - the announcement was postponed.

On the surface this is a remarkably defensive posture for a Government that is actively seeking foreign investment. Key himself has been overseas persuading major funds such as Singapore's Temasek to invest in the rebuilding of Christchurch, or in potential joint-ventures with companies such as Mighty River Power and Fonterra to leverage opportunities in Asia.


With the Crafar decision behind his Government, the time is ripe for a domestic sales pitch to support increased foreign direct investment (FDI) in New Zealand. Some thought is obviously going into the political management of the issue.

Unlike in January, when the ministers had little support from influential players for their initial approval for Shanghai Pengxin to buy the farms, this time round Federated Farmers and various business voices have supported their decision.

The Crafar approval is good news for Shanghai Pengxin, which has borne the brunt of xenophobic opposition to the "Chinese bid".

But potential overseas investors have found it difficult to come to grips with the opaque nature of New Zealand's current foreign investment regime.

The problem is the OIO is focused on sensitive rural land, not a modern foreign investment regime. The two have become confused. The Overseas Investment Act is full of inconsistencies because successive Governments have made ad hoc changes to it to defuse or stop outright politically controversial deals.

Inside word is that some investors - including Hong Kong business magnate Li Ka-shing, who walked away from a multimillion-dollar bid for Powerco rather than jump through the OIO's absurd hoops - now view New Zealand as "too hard".

This is not the kind of reputation such a capital-starved country needs.

Li's "no-confidence vote" will not surprise any of the Kiwi lawyers, accountants or bankers who have been tearing their hair out trying to explain to overseas investors why New Zealand's foreign investment regime is now decidedly opaque.

Trying to convince clients to dress up their bids to meet the new OIO test set by Justice Miller's judgment on the Crafar farms decision has proved difficult. The problem is major business assets on "sensitive land" are also caught by the Miller ruling, not just farmland.

Li's Cheung Kong Infrastructure bought the Wellington electricity network off Vector in 2008 in a $785 million deal. China's power grid operator State Grid was also in the running.

The asset has previously been in United States and Canadian ownership - and got through the OIO's hoops with relative ease. Adding Powerco - which is New Zealand's second-largest electricity and gas network - would have consolidated Cheung Kong Infrastructure's investment in New Zealand.

But meanwhile it's "no cash in".