China firm eyes controversial 58-sq-mile Australia farm project

Wed Jul 25, 2012 4:18am EDT

* Australia opens far north for farming, eyes foreign investment

* Chinese investment remains controversial, subject to review

* China, world's most populous country, desperate for food

By Maggie Lu YueYang

CANBERRA, July 25 (Reuters) - A Chinese property conglomerate is bidding for a 58-sq-mile (15,000-hectare) farming project in the Australian outback as Canberra looks to open the remote north for farming to tap booming demand for food from Asia, especially China.

Shanghai Zhongfu Group is bidding for the Ord East Kimberley Expansion project in Western Australia state, with plans to develop agriculture business in the sub-tropical region, but may face opposition from politicians increasingly concerned about foreign investment in Australian farms.

"It's just a good business opportunity for us, as our boss found it might be profitable," Zhongfu's vice president, Larry Yan, told Reuters. "We have engaged local lawyers and experts to work on this."

The Chinese bid for the Kimberley project comes as Australia and China examine plans to allow Chinese investors to unlock Australia's far north for agriculture.

China, the world's most populous country, does not grow enough food to feed its 1.4 billion people, and central planners have long worried that the lack of self-sufficiency leaves the country vulnerable to sharp fluctuations in international prices for soybeans, grains and other edible commodities.

Some Chinese companies have responded by attempting to acquire land overseas to grow crops for export back to China, in some cases sparking local unease over the threat of a Chinese land-grab.

Australia is the driest inhabited continent, but its tropical and sub-tropical northern regions have plenty of water in areas which are largely undeveloped, remote and where there is little infrastructure.

The Kimberley project would open new tracts of farmland to irrigation from the waters of the Ord River and Lake Argyle, which holds enough water to fill 21 Sydney Harbours.

Zhongfu had no agriculture projects in China and the Kimberly project would be its first investment in Australia, Yan said, declining to comment on details of the bid.

Local media have reported the project is likely to include a A$400 million ($411 million) sugar mill and a 500,000-head-a-year abattoir.

The Western Australian government's project director, Peter Stubbs, said the Kimberley project needed investment of at least A$500 million over six years.

"The strongest interest has been from investors interested in sugar and cotton," Stubbs said, adding a decision on the project was due in October.

China's top beverage maker, Wahaha Group, also plans to invest in the agriculture sector in Western Australia, probably to build dairy farms to sell milk powder back to China, a spokesman for Wahaha told Reuters.

Australia outlined its ambition to become the food bowl for Asia in its first draft National Food Plan last week.

BUYING UP THE FARM?

World food demand is expected to rise 77 percent by 2050, and will double in Asia, the destination for 40 percent of Australia's food exports, the plan said.

Last year, Australia and China set up a joint study on how to attract Chinese investment into under-developed regions. Commerce Minister Chen Deming is overseeing China's side of the study, which is likely to be finalised later this year.

Any deals with Chinese firms, however, would need to overcome political concerns about Chinese ownership of farmland, and may have to win Foreign Investment Review Board (FIRB) approval.

Opposition leader Tony Abbott raised the issue in Beijing earlier this week, airing concerns about investment from state-owned enterprises.

"It would rarely be in Australia's interests to allow a foreign government or its agencies to control an Australian business," Abbott said.

About 11 percent of Australian agricultural land was owned by foreign investors at the end of 2010, government data shows, and just A$17 million of investment from China and Hong Kong was approved by FIRB in the year to June 30, 2011.

Far from "buying up the family farm", the amount of foreign-owned farmland in Australia had grown only marginally since the 1980s, Trade Minister Craig Emerson told a conference in Sydney last week.

"If we start putting the walls up and we get big-headed and think that Australia is the only place that China has to invest, that would be disastrous," Emerson said. ($1 = 0.9739 Australian dollars) (Additional reporting by James Grubel in Canberra, Jane Wardell in Sydney and Lucy Hornby in Beijing; Editing by Nick Macfie)

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