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Large Asian investment 'not surprising' - Key

Published: 2:01PM Friday May 27, 2011 Source: Newstalk ZB / ONE News

Prime Minister John Key says it is hardly surprising a Chinese sovereign wealth fund wants to invest in New Zealand.

There have been reports that a possible $6 billion is being lined up for investment in New Zealand. Market analyst Peter McIntyre, of Craigs Investment Partners said it may have caused the kiwi dollar to rise to a three year high of 81 cents against the greenback.

"There have been reports that the Chinese foreign exchange reserves are looking to diversify around about 1.5% of their assets into New Zealand denominated assets like government bonds, companies and dairy farms," he said.

The Prime Minister said it is hardly a surprise the Chinese are doing this as China's been buying more and more New Zealand bonds.

He said it makes sense, given they have a high domestic inflation rate and the returns from New Zealand are quite high, because our financial security is stable.

Further Asian investment could also be attracted to New Zealand according to the Finance Minister Bill English.

He has recently been on a visit to Singapore, Hong Kong and China and told Radio New Zealand those countries are keen to invest in government bonds, and it makes sense to borrow money from them.

"There's been a big shift in the economic balance in the last few years where the Asian countries have very large reserves and our traditional markets have big piles of debt, so when you have to borrow as we do, you tend to borrow from the people who've got the cash," he said.

English said while he was aware of Asian interest in New Zealand he did not know the exact sums.