Iceland rejects land deal with Chinese tycoon

REYKJAVIK Fri Nov 25, 2011 11:47am EST

REYKJAVIK Nov 25 (Reuters) - Iceland said on Friday it had rejected a bid by a Chinese tycoon to buy a 300-square kilometre (186 sq mile) chunk of isolated land on the North Atlantic island for green tourism as it did not meet legal requirements on foreign ownership.

The plan by Huang Nubo, who was 161st on the Forbes list of the richest Chinese in 2010, had led to suspicions he was a stalking horse for Chinese expansionism.

Analysts had questioned the deal's security aspects, given Iceland's strategic location between Europe and the United States, and its proximity to the Arctic where a number of nations are competing to make resource claims.

The 55-year-old, poetry-writing millionaire and former Chinese government official, had agreed to pay 1 billion Iceland krona ($8.3 mln) to buy Grimsstadir farm in northeast Iceland, where he planned to build a golf course, hotel and outdoor recreation area.

The interior ministry said in a statement the deal did not meet Icelandic legislation for ownership of land and requirements laid down for the sale of such to parties outside the European Economic Area (EEA).

"What we have is not an individual but a Chinese company in which Huang Nubo is among the main shareholders. The company did not meet the requirements set by Icelandic law," Interior Minister Ogmundur Jonasson told Icelandic media.

The main requirements for such a sale would be that the legal entity buying property is domiciled in Iceland, directors need to be Icelandic citizens and to have been permanent residents for at least five years, the ministry said in a statement.

The ministry said 80 percent of shares in the firm should be held by Icelandic citizens. It stressed there were no precedents for such a large area of land -- 0.3 percent of the country's landmass -- being sold to a foreign entity.

The deal would have marked the first major Chinese investment in Iceland, which is still recovering from the collapse of its banks in 2008 during the global financial crisis. It would have been the latest in a growing trend of Chinese asset purchases in the West. ($1 = 120.3150 Iceland kronas) (Additional reporting by Anna Ringstrom and Simon Johnson; Editing by Sophie Hares)

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