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Chinese land purchases are against Australia’s interests

The move by Chinese interests to purchase 1.3% of Australia (the Kidman properties) for $300m is against Australia’s economic and political interests.  The land will be used by the Chinese to pursue pastoral activities in Australia using imported Chinese capital resources and, at least down the line, Chinese workers.  In fact the land – apart from taxes paid to the Australian Government – will effectively become part of China.  Moreover, the taxes paid will be minimized by transfer pricing of the meat and other products produced so that the transfer of ownership will be effectively complete with Australia gaining little if anything.  The only possible economic benefit to Australia will be the pathetically small contribution of $300m to the Australian land owners.

Gains-from-trade and from trade in factor flows rely on increasing the value of non-traded goods and factors.  Foreign investment will drive up the value of the wages of non-imported labour and land.  Foreign labour flows will drive up the value of non-traded capital and equipment and land.  International trade increases the return to non-traded inputs and to locally-owned land.  All these changes from gains to Australia. But if all inputs are foreign owned then all gains go to the foreign owner except perhaps for those small profit tax receipts that cannot be transfer priced away. The difficulty here is that the underlying land asset does not exchange at its value – the Australian vendors of the asset cannot benefit from cheap Chinese labour and cannot transfer price as the Chinese will do.  The land value reflects the value that the Australian vendors can realize.  The economic losses are the difference between the gains that accrue to Australia from having Australian-owned land and from the resulting profits being taxed and accruing to the Australian Government.

The measure goes through because although there is a benefit to the private vendor Australia loses.

Politically this type of move is disastrous for Australia since it sets up a totally Chinese enclave in Australia. Australia loses autonomy with respect to land management policies such as environmental policy.  Indeed what incentives do the Chinese face to observe Australian environmental standards on the fragile landscapes they have purchased?  I have focused on this particular sale because of its scale.  But the analysis applies to any fixed land asset.  We should welcome Chinese trade and investment but not their ownership of our primary factors.  This is Australia not China.

This land sale if it proceeds will be a really poor policy decision. I would base the 2016 election campaign based on o.  Who supports it and who opposes it opposing this terrible move? The deal is anything but complete. Indeed the position has not really changed since last November when it was announced that Kidman had been sold – the Foreign Investment Review Board (FIRB) still have to approve the sale and they have said this will not occur until after the federal election, which is tipped to be held on 2nd July. Furthermore, the Kidman offer is scheduled to close on 5th August

6 comments to Chinese land purchases are against Australia’s interests

  • Henry Haszler

    I agree Harry.

    But I think you/we should distinguish between selling off the farm, the mine, or almost whatever,to Chinese government related entities as opposed to private interests in China, or in fact in any other country.

    Staying with China, imposing such restrictions would cut off a lot of Chinese investment because the Chinese Government seems to be still highly connected to the economy — through direct and indirect Government-firm relationships and through relationships between members of the elite and their kids. But I would rate the possible loss of investment as just too bad because aside from the issue of the realised economic benefits there is the small strategic matter of retaining control of our country. I suppose we could try to set things up so we controlled the labour movements and tax income issues but good luck with all that because on those issues we have not exactly starred so far.

    I’m concerned here about the different motivations of private as opposed to government interests. There will usually be a price at which we could buy back the farm from a private concern but governments pursuing their power interests may not relinquish ownership at any market determined price. And I reckon an entity such as the Chinese Government would not be slow to start pushing its weight around.

    I don’t see why we don’t make the distinction between government connected and private investment generally under the FIRB arrangements and point out to our various trading partners that we are prepared to offer say 25 or 50 year leases on real estate rather than allowing outright purchase. I recognise that the latter suggestion has its problems. But whatever we do I would want to see reciprocity.

    One problem with the issue of investment from China is that political Right and those selling off the assets start to label any questioners as xenophobic and it is difficult to get around being so labeled, rightly ow wrongly.

  • I am and will always be Not Trampis

    I agree with Henry.

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  • derrida derider

    I don’t get it. Why is having the Chinese buy a lot of semi-desert dirt for cattle different from having, say, the Poms buy the same dirt to dig up & sell as iron ore? It’s not as though there are any security implications about some clapped out scrub, they’ll be no worse environmentally than any other cattle station and rather less likely to employ illegal immigrants than backpacker-hiring poms. Hard to believe that it’s not simple xenophobia operating here.

    Of course you’re right that the political optics would be disastrous leading up to an election. But don’t confuse politics and economics.

  • Henry Haszler

    Hi Derrida

    Read my post of 20 April for your answer, remembering it’s not just economics and politics but that strategic issues concerning national sovereignty are relevant also.

    For me the issue is that in selling large chunks of Australia to foreign interests when we sell to Chinese interests we face the risk of selling to GOVERNMENT owned-related-influenced interests, that is unless we do some very careful vetting of the proposals.

    In a strategic sense — and I think in relation to the theoretical economics of free trade — it makes all the difference whether we sell to governments or individuals. And in the Chinese case let’s be realistic and understand that if the Chinese Government wants to influence Australian policy it will not be remiss in making sure its subsidiaries and other related entities put the pressure on our Government.

    In relation to that pressure I think it important to distinguish between government to government pressure politics and large private firms peddling influence at any government level that may be relevant. Don’t the Chinese have a word for this — Guanxi? Look it up here on Wikipedia:

    For what it’s worth, I’m not aware of British, German, Malaysian or Peruvian government related entities buying land and other assets in Australia, apart from the grounds of their embassies and consulates.

    It is also important to realise that there are alternatives to the investment in — and buying part of — Australia for, say, reasons of food security in China. Surely long term – say 25, or 50 year — leases or long term supply relationships could achieve similar results. Sure they may be less certain to the Chinese but they would also be less uncertain to us.

  • Jaques

    When I was young we had crown land sales and the opportunity to get a start…Chinese opportunists were notable in buying more than their allowance and holding blocks rather than build on them. The sales demised. Now we have a more professional arrangement selling at market value but times have changed…this is no longer “Australia”…this is a sort of “prune-faced” international market place with ‘no such thing as a ‘real’ Australian’ anymore according to one multicultural supporter. Apart from a different style of cuisine and a willingness to work long hours to move from $40-80/fortnight to $700+/week… what have ‘they’ brought to Australia?…certainly not tolerance or respect or jobs or anything outside their own mini-nations.

    The sell-out to China is not new… 30 years ago I worked in units, for example at the Harbour Bridge area bought for huge sums by Chinese rich …many millions, never inhabited so long that the hot water systems corroded and leaked.

    The buy up of Rural lands and port facilities is spectacular…and shows that “Aussies” would sell anything to anyone….as Warrigal said in “Robbery Under Arms”…you white men…you got no country”.. The buy up of dairies in Victoria was over 80 this year along with abbattoir, Port, and an Ag college….and more. They pick the prime enterprises pay prices no one can match and use the ‘free trade’ to send goods to China. The LNP allows their ‘tradesmen’ to come here with no testing…another part of the great sell out….tried-on in the National Licensing fraud….which I helped fail.

    Without starting on Chinese Real Property agenies and ‘facilitators…or Pakistani Petrol Station chains….Australian Ag lands are about 40 million hectares. If Chinese own 1% they own 450,000 hectares, a considerable area…however they own in it prime property, highly productive, highly profitable and arrogance and disrespect are submerged Chinese and Korean features. Because you think they are less than you and respectful you have not seen the other face. The Chinese government and businessmen think of us as ill educated, ill conceived impatient, The comment on the Cubbie, I understand but it betrays not much knowledge of rural landscape and usage.

    The Kidman property is seasonal but once a Nation using human excrement for fertiliser gets on it even the desert aspect will devolve. Control will be impossible. It will be a great excuse to have Chinese coming here under the nonsense that Reinhart spews out about ‘can’t get workers’ when she doesn’t even try.

    I agree with leasing, so long as lands are maintained to at least their ‘as bought’ condition and Australians prosper from fully applied taxes. As far as being the ‘food-bowl of Asia” …what pathetic, grovelling, humbug!!

    That the Chinese would pay up to 10 times the value of any place is an indicator of their desire to control anyone in their way. Unfortunately we have been fed the image of the hardworking wonderful Chinese immigrant so badly treated at Sofala and the wonders of “China Town” to the extent millions were spent building one at Darling Harbour. Avoided are the criminal activities, the tax evasion in cash businesses, the people who refuse to learn English even after say 27 years here….”why should we…we don’t need to…” (translated from Mandarin), the refusing to allow an Aussie to intermarry..the real bigotry is imported, it didn’t exist here other than in small quarter. Now as suburbs become ‘spot the Aussie’ it’s the migrants who believe they ‘own’ an area and say some other nationality should not enter ‘our area’ who are the problem, Lebanse and Asians around Granville Parramatta are just one example I heard battling it out.

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