Shane Taurima interviews David Mahon
David Mahon is managing director of Mahon China Investment Management. He's a New Zealander who's lived in China for a quarter of a century, and he says we have to get real. Shane spoke to him earlier and began by asking him how the deal is being perceived in China.
DAVID MAHON - Mahon China Investments
The deal's being watched by particularly Chinese dairy companies who have a single interest, and that is to try and get protein from New Zealand - not so much land. But there is a view here, I think, in certainly government circles that Chinese investment has been singled out from other investment, and there is a prejudice simply because if it's Chinese investment. And so, in a sense, New Zealand is under some scrutiny.
Is New Zealand being perceived as being anti-Chinese?
DAVID I think to the contrary. New Zealand has been perceived as one of the few non-aligned relationships that China has enjoyed, really, over the last 15 years or so, and also that New Zealand as a society is an integrated and a very multi-cultural society. It isn't lost on the Chinese that relationships between Pakeha and Polynesian in New Zealand have got a lot further than in many other countries in the world where native land rights and issues of language and education have not been dealt with well. So New Zealand is looked upon as being a very advanced and sympathetic country to China. Therefore this Crafar deal, the court case that was brought against it is being looked upon with some surprise, and I think the Chinese are quite perplexed.
SHANE Do we run the risk of having that reputation being tarnished if the deal doesn't go through?
DAVID We do. Certainly this would be something that not just in China, but throughout Asia with our major trading partners and these sizeable economies - India, Indonesia - would look upon this as being New Zealand as a narrow country after all, that New Zealand actually is racist in terms of its view of who it would like to be its business partners, which I think would be a sad misreading of New Zealand, because I don't believe that New Zealand is actually racist. I think that this particular Crafar deal has triggered some unfortunate debate in lesser media, and I think it has become politically useful to some in New Zealand, given the fact that, um, you know, we have a very dynamic democracy. And so, in a sense, the real issues, I think, have been lost. But if this doesn't go through, New Zealand will have a lot of repairing to do across Asia and certainly in China.
SHANE So can you tell us exactly what China wants? Is this just one deal or the start of China targeting our resources?
DAVID China actually wants resources - whether they're fibre, timber, wool - or whether it is protein. In the case of the Crafar farm deal, it's a search for protein. The Chinese aren't looking to buy land and to own land around the world; they're looking to secure the resources that their own narrow agriculture base doesn't supply them. And given the fact that Chinese are urbanising in such great numbers, and the demand for food is increasing, there is an urgency for the Chinese to secure good lines of supply.
SHANE So does that mean that a close New Zealand economic relationship with China isn't reliant on the Chinese being able to buy land?
DAVID Well, it's reliant on New Zealand sorting out where it stands in terms of selling anything to Chinese interests, and once that is done, it would actually relate to all our relationships within the WTO, all our partners. And, in essence, the confusion is what is agricultural land in New Zealand? How can it be sold to anybody? The situation in China is there is a rule in terms of acquiring land. It can only be leased or rented by Chinese or foreigners. We're all on exactly the same base. So there's no discrimination if a foreigner comes and wishes to acquire agricultural land in China through lease. So what New Zealand, I think, is challenged to do in this situation is to move away from the narrow argument about, 'This is a Chinese bidder for a New Zealand asset,' but come up quite quickly with something that is comprehensive in terms of how we deal with transferring title in some form in terms of agricultural land. And it's that bigger argument we need to get engaged in.
SHANE And do you think that New Zealand can do or can achieve what you suggest?
DAVID I think it must, otherwise we're going to find that we have piecemeal debates and court cases in situations where it almost is plainly absurd. If you look at the Crafar deal, already these farms have been owned by Australian banks. Effectively you're transferring Westpac debt, largely, into Chinese equity. So the land was already lost to New Zealand by the time the company went into receivership. So, in a way, it's a rather spurious argument on this particular asset. But the fact that it's generated so much debate in New Zealand shows that there is a need for New Zealand to look at the issue. There are solutions. Perhaps there could be a trust that acquires agricultural land from anybody. So farmers can sell, in a real sense, get value for their land, and then foreign buyers coming in acquire land through that trust. And that trust could base sales on the fact that all land purchased in New Zealand was leasehold. But if we're going to actually bring in a rule for foreign investors in a globalised market, in a market upon which New Zealand is crucially dependent, we need to have a rule that applies to everybody. And New Zealand is dependent upon China, it is dependent upon its future markets in India and Indonesia. Asia is New Zealand's future, and we need to understand that, and we need very strong political messages to that effect so New Zealanders understand the detail and not just the snippets they pick up in newspapers or hear in the very nuanced debates where, in many cases, those engaged have deep agendas.