A brief history of Chinese agricultural investment in Australia

China has sought to support its investment agenda in a number of ways.

Firstly, by sophisticated and evolving use of bilateral investment treaties.  A bilateral investment treaty – or BIT – is an agreement between two states in which they give assurances about the treatment of the other’s foreign investors.  These treaties are typically between developed and developing states – developed states seek protection for their investors, and developing states want to assure foreign investors that they are a ‘safe’ destination.

Beginning with Sweden in 1983, China began to conclude BITS in its reform and opening period.  China’s early treaties were designed to reassure against a slide back into Maoist state socialism.  Absent was the idea that Chinese enterprises and individuals would be significant outward investors.  China was a capital importer, and wanted to attract foreign capital, technology and know-how.

By the 2000s, China had begun negotiating greater protection for its own investors in its BITs.  It was increasingly becoming a capital exporter – and wished to protect both its private and state-owned enterprises as they went abroad.

This investment agenda has, from 1999, been underpinned by the ‘Go Out’ policy, which encourages Chinese firms to seek a global presence, and underpinned by specific assistance programs.

However, this entwining of Chinese trade and investment goals has stymied efforts to conclude an Australia-China FTA – which has been a goal of successive Australian governments.

Two key Chinese demands, remain sticking points: higher foreign investment thresholds, and treatment of SOEs (which hold around 40% of PRC GDP and dominate Chinese investment in Australia) in line with non-government entities.

This pushes hot buttons in Australia in ways that trade, tourism and cultural engagement do not.

To date, Chinese direct investment in Australia has focused almost entirely on mining and energy.  A 2012 joint KPMG/University of Sydney report, Demystifying Chinese Investment noted that, of $45 billion worth of Chinese investment in Australia between 2006 and 2012, 95.5% was in mining, oil and gas and renewables.

In agriculture – despite the high-profile purchase of Tully sugar mill and Chinese participation in a consortium to buy Cubbie station – PRC investment is still comparatively small.  A 2010 Australian Bureau of Statistics report found that the level of foreign ownership of Australian agricultural land had been virtually unchanged since 1983.  A joint 2012 RIRDC/ABARES report, Foreign Investment and Australian Agriculture, replicated the finding and also noted that Chinese agricultural investment was often for minerals exploration.

Despite its small size, Chinese agricultural investment has managed to attract substantial political and media controversy.  Images of SOEs buying up Australian farmland to secure integrated supply chains for their own domestic markets loom large.

However, the trajectory of Chinese engagement with the world is clear.  To cement trade ties, Australian politicians and business will need to get better at explaining the benefits of Chinese investment.