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Chinese company to build $210m NZ milk processing plant

Yashili International Holdings, which manufactures and distributes infant milk formula products in China, is the latest Chinese company looking to invest in New Zealand, with plans to build a 1.1 billion yuan ($210 million) processing plant.

The Chaozhou City, Guangdong-based company's board signed off on a project to set up a manufacturing facility in New Zealand to process up to 52,000 tons of finished and semi-finished products, including base milk powder, by the second half of next year, according to a statement on the Hong Kong Stock Exchange.

Yashili currently sources most of its raw milk from New Zealand.

The company will spend 950 million yuan on acquiring land and building the plant, and a further 150 million yuan as working capital for a New Zealand subsidiary.

The local unit, Yashili New Zealand Dairy Co, was incorporated in July last year, Companies Office records show, and has entered into a conditional agreement to buy land where the facility will operate.

The acquisition is subject to certain conditions, including approval by the Overseas Investment Office.

The investment comes a month after China's Inner Mongolia Yili Industrial Group flagged plans to spend some $214 million buying and upgrading Oceania Dairy Group's South Canterbury milk powder plant.

Chinese investment in New Zealand has been a heated topic in recent years after bids to buy large tracts of farmland forced the government to announce a U-turn on its plans to free up overseas investment and a High Court ruling made the OIO impose a more rigorous analysis of foreign purchases.

Yashili was set up by brothers Zhang Lidian and Zhang Likun in 1998 and is ultimately controlled by the Zhang family.

US private equity firm Carlyle Group bought a stake in the company in 2009 to ramp up its research and production, and raised $HK2.7 billion when it floated a minority share in Hong Kong the following year.

The shares gained 0.4 percent to HK$2.38 in trading yesterday, and have almost doubled in the past 12 months.

Chairman Zhang Lidian is on the Chinese committee of the International Dairy Federation, and serves as a representative for the Guangdong province in the National People's Congress, according to Yashili's website.

(BusinessDesk)

Comments and questions

Good news. Now I'll wait for the usual nonsense from the anti brigade.

As this investment involves adding new productive capacity to New Zealand Inc rather than just taking control of what is already here, I don't think this will excite much anti, as you put it, interest at all.

New Zealanders are right to be concerned about placing large tracts of their finite farmland and productive industries under foreign ownership and control. It's disappointing (and probably self-serving of you) that you dismiss those legitimate concerns as nonsense. Have you learnt nothing from history??

No.

My concern is the hysteria surrounding any Chinese activity in NZ. Nothing is said when Scandinavians, Americans, Australians and other nationalities buy farms, forestry, etc.

You are concerned over the "hysteria surrounding any Chinese activity". Well, after half a lifetime trading with them both here and in mainland China I can only ask you the question: why are you not surprised?

Unlike all the other nationalities mentioned, as a national, military, political collective they cannot be trusted.

Even my many Far East friends continuously caution me and help where possible. I prefer not to trade with military despots and slavers.

The Scandinavians, Americans, Australians and other nationalities do not lock up their own people for speaking out against their government, nor do Tibetan monks set themselves on fire in protest at the way they are treated by the Chinese. Many websites are blocked in China and so if they get their hold on NZ, it won't be long before the original people who live here are a minority, then they will get a political party here, etc. Why are people naive to think this will not happen here?

Right. Like they are going to take this valuable investment, package it up and take it back to China? It isn't going anywhere as far as I can see...

And what have you New Zealanders learnt from history?

Have you learnt :

1. To live within your means and stop borrowing?

2. To invest in productive assets rather than in finance companies and coastal properties?

3. To stop social welfare cheats and curb baby production as a lifestyle choice?

Why did no New Zealanders put up their hands to invest in Synlait when the company was put up for sale?

One word - losers. That's what most New Zealanders are.

With name like Dragon I presume which continent you are from. If we are such losers why are you living in our country?

Losers are there to be taken advantage of.

Get it?

While it is clear to see the short-term benefits of this overseas investment, like more local employment, once the company ties up some farmland to supply their factory, company profits will be channelled through tax havens. Long term, this will come at a big cost to NZ Inc.

Fonterra's business model is starting to look sick with this. Had the local dairy companies remained, they would not have let a local business opportunity like this slip into someone else's hands. More NZ Inc profits look likely to be exported.

It's time business managers started to think long term, rather than fatten their short bonuses, and disappear elsewhere.

Tenants in our own country, here we come.

What a load of sensationalist nonsene! "Tenants in our own country." Meantime, Fonterra is obligated by law to supply milk to NZ consumers at extremely low margins rather than export it as product and make significantly greater returns for the NZ owners and investors. Your rhetoric would indicate the logic is that China shouldn't allow us to operate business interests over there. Like we should all operate as islands on this planet. Doesn't make any sense to me...

"Meantime, Fonterra is obligated by law to supply milk to NZ consumers at extremely low margins . . . "

Really? Who knew?

Everbody who bothered to establish the facts - that's who.

If you are a tenant does it really matter if the landlord is in Beijing, Sydney or Auckland?

What is important is that someone wants to invest in assets in this country. High wage rates require a large investment in capital to make labour more productive. Since New Zealanders prefer consumption over investment the only way to maintain high wages is to allow foreigners to do the investing and to own the assets.

These investment opportunities only exist because Kiwis are not willing to take them up themselves.

It matters that you are owner/occupiers because investors are purely driven by return, and bugger the social consequences of their actions.

The US corporations are an example of maximising returns, while the balance of its society deals with high unemployment, the worst violent statistics in first world society, a health system only for the privileged, and periodic mass shootings.

These are all byproducts of corporate greed and tax avoidance by the overpaid elite. How can a corporation pay one employee $10,000,000 plus, yet another $30,000? Time to cap salaries, or tax them at 90% or pay people at the bottom more.

What this and NZ governments need to do is encourage NZ Inc to invest locally. The biggest problem NZ Inc has got is over investment from outsides, when allowing for the present government borrowings and expatriated profit is currently creating an annum deficit in the region of $30 billion.

OK, so you're missing the point.

I didn't discuss owner/occupiers, not that it matters.
Investment is investment, doesn't matter who does it. Pay rates are at the discretion of private companies. It is up to the shareholders if they are comfortable with paying one man $10m, as it is them who are paying, not you.

Maximising returns is actually a good thing. You fail to understand what money and prices really are - they are signals that keep things near equilibrium. Maximisation of returns is merely responding to the preferences of the people participating in the economy.

Expatriation of profits is only a monetary transaction, the result of which is a lowering of the exchange rate. Eventually, a balance will be found, as foreigners who invest in a country with future deficits will see (and forecast) a devaluation of their investment in terms of their home currency.

My comment did implicitly recommend encouraging Kiwis to invest. But over-investment from outsiders is not a problem, it is a response to the under-investment of NZers - a response that is protecting our economy and standard of living.

They are taking parts of the nation, not investing in assets.
The corporations are the only ones that have the financial ability to exploit the cr*p out of the tax base and take the nation and its high-value assets offshore.

No. The new infrastructure investment discussed in this article is not "taking" anything.

Apart from this, foreigners are purchasing from willing sellers who can choose to do other things with their freed-up capital. New Zealand assets are so high valued because of the lack of interest in ownership of them by citizens.

Corporations are merely entities, they don't have any special powers. They don't have financial ability, their shareholders do. And who are the biggest shareholders? In most cases, it is pension funds and people who are willing put aside their income to invest in the future.

The tax base is only as large as it is because of the large investment in capital that there is in this economy.

Yes, it is taking a part of the nation. Look up the definitions of our nation.
The milk, the nation, really are things.
Most New Zealanders are not in the same situation as the multinationals. They are unable to use pension funds and create money from nowhere, and they also have to pay taxes and work. They don't just skive around buying up other nations.

Where will the plant be built and farmland bought?

Somewhere near cows.

When is all this selling NZ to overseas companys going to END> Any NZ goverment is in it themselves, What's going to go next ?

It will end as soon as ACC, the Superannuation Fund, EQC, all the private Kiwisaver funds, other retirement funds,open-ended general investment funds, share investors, etc, cease the evil and immoral practise of buying shares, equities, businesses and properties, both rural and commercial, all over the world.

Yes, well, of course if the electorates hadn't voted for so many election bribes and lifestyle handouts during the past 60 years, we, as NZ, would have the investment capital to build and operate large manufacturing industries.
Listen carefully to the prattling of Shearer and company. There are more bribes coming. 'Housing', and more disincentives towards the motivated, all supported by the 'don't build or develop anything anywhere' brigade, and the whole lot capped off with 'price controls', and a capital gains tax to support the unmotivated who vote for these bribes.
TV1 is already electioneering on behalf of the socialists, and this is only 2013, 20 months before the election.
You have been warned.

Well put!

If people are worried about this, raise capital and build a plant yourselves, export the milk powder, keep the profits and retire rich. Easy as...

Where is the milk going to come from?

I don't think there is any hysteria. It is unfair, especially when China has the money to buy processed infant milk off NZ .
It is exploitation as the benefits only go one way.

How is it that the benefits only go one way? Will they be stealing the milk and bringing their own building materials and labour?

Yes, maybe they are stealing prime national assets. Our cows and milk products that will be used for infant formula that they were buying from us. Will they be bringing the NZ land, kiwi know-how on farming and cows? Will they be using cheap Filipine labour the same as dairy?
You get a reality check, buddy.
It's great if we want to lower or exports and overall "wealth". Are they the benefits you mean?
No one wants to pick on a big corporation that is buying up the fastest-gaining in value assets of a smaller country to the economic detriment of its people.
Why don't you enrich them further, surfguy, by buying their stock, inflate the cr*p out of it , yeah that makes it fair - if you get into the feed trough.
You can't be turning this one-sided land and nation equation into "communism". It's unfair, full stop.

Further to my comment above, go buy some shares of the company, as they are listed in HK.

No imputation credits available to NZ shareholders. Double taxation is hardly an incentive to invest offshore, yet our Government lets offshore shareholders benefit from our liberal taxation system.

Time to level the playing field government, and work for this country rather than pamper to the offshore elite.

Meat Industry ala 1980s - too much capacity being added...

Just outside Kaikohe is my guess...

Good call, Buster.
This is just the sort of economically deprived, and educationally illiterate, area that communists favour for their infiltration indoctrination. Then they can watch the seeds spread. It is the technique they have used worldwide. Look at central Africa.

Well, someone’s buying up land in Kaikohe... Probably them.

I would have said Kaikohe has large areas of under-used quality land and large number of under-used people. Good on the Chinese for spotting it.

When you consider net 45,000 Kiwis leave New Zealand each year and are replaced by foreigners, and that New Zealand is virtually insolvent and therefore selling its state owned assets to foreign companies and encouraging foreign investment like this Chinese developent, New Zealand will look and feel a very different country in 10 years. Some good, some bad in there, but those are the facts.

First they came for the communists,
and I didn't speak out because I wasn't a communist.

Then they came for the socialists,
and I didn't speak out because I wasn't a socialist.

Then they came for the trade unionists,
and I didn't speak out because I wasn't a trade unionist.

Then they came for me,
and there was no one left to speak for me.

Better start polishing up on your Mandarin.

First we borrowed,

Then we borrowed some more,

Then we kept borrowing.

Then we had to sell assets because we had borrowed too much and lived well beyond our means for too many decades.

We did not need to borrow as we could have created the money ourselves.
"We" don't have to sell our assets. "We, the people," can just tell the central bank cartel NOPE. It's not our debt.

Argentina, Greece and Spain - here comes NZ to join the club of the debt defaulters.

Rejoice that there are such profound losers in NZ.

Dragon, it wasn't our debt to start with.
It's not defaulting any more than if you were refusing to pay for pies that Margaret Thatcher had stolen and eaten without your consent, (she had used your identity and told the banks to bill you with pie interest).
That you would work you whole life in slavery unconsciously adopting the ideals of the corporation like a mindless drone.
Wake up.

Scandinavians, Americans and Australians don't bribe immigration agents to get visas to displace Kiwi workers. Scandanavians, Americans and Australians don't come from racist states that refuse to allow Kiwis to own land in their countries.

http://www.yashili.hk/attachment/20120906161701001499125_en.pdf (for 2012 interim report).

I once heard that Australia was going to be the New China. Maybe NZ is going to be Little China. Who knows?

Labourers to the Chinese if we are lucky. We give them our secrets cheaply, they buy our land and force up prices and import their families and don't pay tax on their cash businesses. The only good is they keep the jobs going in the casino.

John Key, wake up and restrict foreigners from buying our land and having a free open door.

I'm sure he has made several Auckland purchases after his new policies to flood the counrty with immigrants.

You should immediately inform the IRD of those who are not paying tax. They'd love to know. Also I'm sure this newspaper, and its readers, would be interested in publishing the addresses of these properties the PM has bought. As far as these secrets go, I'm not sure what 'our secrets' are, or rather were, before they stopped being secret. But, obviously, we can't give them 'cheaply'. If they are cheap we must be getting paid. So what are they - and how much underpriced are they?

Why, Lizzie, don't you know they are aware of it?
"The multinationals use intellectual property to avoid paying taxes. Obama made it easier to obtain and get a patent so that you can avoid paying taxes by hiding your IP in foreign countries."
Go ask Peter Dunne for a complete list. He was the last man seen discussing the fact these multinationals don't pay taxes in NZ and how it destroys all competition as small and medium businesses are made to pay taxes.
So the NZ govt is well aware of the mulitinationals that pay no taxes - don't be naive.

I'm none the wiser. Who are these multi-nationals who pay no tax on their cash businesses? You should provide details and evidence to the IRD.

I'd luv to see the IRD pull finger and visit the Mt Albert shops to investigate cash business. The entire village would shut down.

Why don't you supply the evidence of this to the IRD? They regularly check small businesses for compliance, but obviously you know something they don't, so do your bit for the rest of us taxpayers. Pronto, please.

This will be good for NZ farmers as it will offer them competition for buying their milk and higher prices. That extra money gets invested in NZ. Probably good for Fonterra as it will keep some pressure on them to improve and become more efficient. Nobody wins when one company has 90%+ market share. It will be good for the NZ companies and workers who build and run the factory.

The down side is that some of the processing profits go to the new company, but it is mostly interested in securing supply. It will still have to compete for farmers and their milk, so profits will be tempered by the costs of production.

Overall, a net win for NZ when considering all factors.

This will not offer competition for NZ farmers in the dairy monopoly.
It just takes a piece of the nation.
When big overseas corporations buy parts of NZ the money does not end up here as it is taken offshore.

The only questions that need to be asked are: Why is Fonterra not investing in these types of plants? Or why aren't they expanding any baby milk formula packing facilities they already have?

Clearly, there is a huge demand not being met if these two significant investments are being planned.

The reason why Fonterra is not investing is that it is owned by farmers alone, and no one other than a New Zealand farmer who supplies milk to it is allowed to be a member. As farmers are already maxed out on their borrowing capacity, they have no more capital to give Fonterra to build new plants.

As the farmer-owners will not allow anyone else (eg, other NZ investors or - horror - a foreign investor) to invest (it must remain a co-operative), there is no free, readily available, capital to undertake the investment.

The reality is capital is not 'free' and it cannot be 'invented' in response to an opportunity. It must be 'invested' by those who already own it. If foreigners do not invest, there is no other readily available capital in NZ to undertake these investments. Most NZers prefer to tie up their capital in land, bricks and mortar, and mortgage themselves to the hilt in order to consume cars, overseas holidays and even more expensive over-priced, over-inflated housing rather than investing it - or the funds that can be borrowed against it - into productive assets.

If the majority of NZers got real they would realise that it is not "NZers as a whole" that own NZ's productive exporting assets, but a small handful of dairy farmers. The reality is that the 95% of NZers who do not own farms are already tenants in their own land - or more appropriately, "beneficiaries of the wealth created by the 5%".

If the 95% with such strong views about who should own NZ's farming assets start putting their own cash into them, then they will be entitled to express their views on ongoing ownership by selectively selling only to NZ buyers. If they can't afford to or will not invest themselves, then what right do they have to deny others the opportunity to invest in NZ-based productive activity?

It behoves these critics to think about where the capital came from to develop NZ agriculture to the point it is now. It was foreign investment from Britain, backed up by an ongoing commitment by British consumers to purchase goods produced by British-controlled firms operating in New Zealand (and, in effect, aided and abetted by government-controlled marketing boards that sold all produce to the British firms).

Milk and added value products are hilarious - one day the Chinese will finally realise its in the genes and no matter how much of the stuff they consume they won't end up looking like Ritchie McCaw and that dem bones are dem bones.

Monopolies? Hmm - building products - who controls 90% of the market?
Answer is easy - the future? Chinese will move in to this sector also and some of their products will be world class and others... will fall over. Interestingly, Qatar building 11 airconditioned soccer stadia for the future football World Cup in the middle of the desert has given the Chinese the flick recently and is now using mainly Korean contractors.

Nevertheless, we could have used, say, 3000 of the hard-working ones for the blue collar stuff in Chch but such an approach would hardly be politically correct, I guess.

Anyway, truth is our young country has been built on foreign investment for getting close to two centuries. For example, TransAlta came in in 1992 and invested a billion or so in our electricity sector, made hundreds of Kiwis redundant and sent all profit back to Canada. Does anyone ever talk about it ? No, never.

We need to get over ourselves a bit - smarter stuff will be around picking patterns (eg, buying up Kaikohe?), advanced technology for milk-based products and so on.

Who cares, anyway? We are all going to be brown Kiwis in 50 years, apart no doubt from such North American and Hungarian economic refugees. Smart folk will still turn a buck but it will be the Chinese version of Goldman Sachs who will be the smartest guys in the room.

By then the baby boomers will be ancient and death duty will be back in force to make up for the inter-generational interim theft. So good luck with your asset planning.

Dunno what the All Blacks will look like by then but no doubt they will still be drinking milk and eating Weetbix and Marmite.Perhaps we will live to see our first-ever Chinese hooker?

Farmer Joe - tell the truth, would ya, as I suspect you live in Remas and have a 4 wheel drive? Or are you true tangata whenua, smokin' Joe?
Perhaps you mean NZ will become an entrepot like Singapore or Hong Kong? Most likely we will need to export a few saltie crocs to keep the Ockers out as their country burns and burns, as Mad Max says.

New Zealand - the most deregulated of all OECD countries and the easiest place in the world to do business ... yeah, right!

Anyway, the skies are blue, the fish are biting so stop your bitchin', you grumpy old Poms!

It has already been noted by another commenter that the multinationals have a monopoly. Arms dealers and other assorted crims haven't mentioned they have any trouble doing business, nor have I heard them say NZ was over-regulated. Even US movie studios have exclaimed how easy it is to change NZ's employment laws.
You speak as a generalising racist with a skewed perception and lack of vision.
Careful with your "Chinese hookers" that you are so excited about seeing (mind the new strain of anti-bacteria resistant gonorrhea) .
I don't share your greed , or your love of seeing the exploitation of people and the unauthorised sell-off of NZ while you say losing parts of the nation and our prime assets is positive (or even acceptable) and we should be happy about it.

Hopefully, the local iwi will turn up and demand the local youth are all given jobs so that Yashili's Chinese-only workers policy cannot be put into practice after NZ Immigration gives them all visas.

Kiwiwi - top of the morning to you, floss.

Thanks for your well considered response.

Clearly, you are a rock star of your own little chat room as you sit there with sweaty palms all by yourself wondering why everyone else always leaves the room. Or perhaps a monarchist who would prefer we do not become a banana republic.

Look at all the pollution in China. They don't care as long as the dollars keep rolling in.

Shame NZ has no money or the government could have brought into this company with a 50% shareholding and everyone would be winning.

NZ could have owned it 100%.
The right our nation has to create money allows for that.
Shame about the idea that they have to be in the multinationals' pockets and have to borrow money.

Two way street. Fonterra is looking to invest up to $1 billion as it continues to expand its operations in China (and India and Brazil).

There's a real danger here that 1.3 billion Chinese consumers will develop a taste for NZ's main export. Quick OIO, stomp on it!

New Zealand is already an Asian country. It must surprise tourists when they come to Auckland in the ocean liners that dock in the viaduct that NZ is actually a British colony as it's now "spot the white person".

All we want is a level playing field, so we can buy freehold land in China, see controls on pollution, get welfare and have OSH, etc. When all those things are in place in China then it is fair Chinese can buy land and have businesses in NZ.

Totally agree, but the govt in NZ is so weak and blind it does not see what's going on.

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