A brief history of Chinese agricultural investment in Australia

Since 1972, Australian governments of both political stripes have pursued closer relations with the People’s Republic of China.  During that time, China’s position in the world economy has shifted.  From an autarkic communist regime, it became the workshop of the world, and is now a nascent foreign investor boasting competitive global brands.

Conclusion of an Australia-China FTA has, since 2005, been elusively close.  Key sticking points remain around the vexed issue of Chinese investment.

Our national debate casts these issues in stark terms – Chinese state enterprises buying up Australian farms to supply their domestic market.  Instead, Chinese investment should be seen as an opportunity, and a natural outgrowth of Chinese economic growth.

Agriculture in the People’s Republic

The small farm occupies a unique place in Chinese history. 

The 1940s land reforms – a form of land to the tiller – cemented peasant support for Mao Zedong and created a system dominated by hundreds of millions of small farms.

In the late 1970s, small farms formed the basis of Deng Xiaoping’s ‘Household Responsibility System’ – an early experiment with market pricing in the reform period.

Today, China’s agricultural sector remains dominated by two hundred million small farms, with an average size of only 0.6ha.  Amazingly, the average size has actually shrunk over the last 30 years.

Economic transformation has stretched the limits of productivity growth in this system.  Modern farm management techniques are difficult to apply when your farm is the local playground, the gap from the letterbox to the road, a shared backyard or the easement by the local creek.

Nor is there capacity to retreat to Maoist economic strategies of continually ‘scaling up’ production.  There is insufficient uncultivated arable land, with the growth of mega-cities placing yet more pressure on farmland.  While Chinese food production is increasing, China’s domestic produce is not sufficient to meet the consumer demands of its growing middle class – for safer and more nutritious food – particularly given the expected doubling of the domestic demand for food to 2050.

This demand growth has lead to an explosion in agribusiness trade – beef exports from Australia up nearly 400% from 2012 to 2013 alone, and the size of the New Zealand dairy industry tripled after the NZ-China FTA conclusion.

As the Chinese economy has grown, so have the policies and goals underpinning its foreign investment agenda.

Thirty years ago, China was an impoverished, quasi-isolationist state seeking to assure foreign investors that it was serious about its retreat from Marxism.  It wanted to attract capital, tech and know-how.  In 2014, it is a sophisticated global investor with nascent global brands.  Huawei, Lenovo and Haier have significant overseas sales.  Alibaba is preparing for US listing, and four of the world’s tens largest banks are PRC-based.  Chinese investment in African and South American natural resources has likewise ballooned.