Fran ‘Sell it all’ O’Sullivan is fuming over the Court decision putting aside the approval of Pengxin’s application to buy Crafar Farms. She knows that Pengxin can’t satisfy the actual legal test because its bid has never been about bringing benefit to New Zealand. Its been about securing strategic assets for China. But some of her whining really needs to be pulled up.
Repeatedly, O’Sullivan sneers that New Zealand bidders for the farms are offering “below market price” by which she appears to mean the price offered by Pengxin. What she conveniently ignores is that Pengxin is no ordinary market player. It’s heavily linked to the Chinese government including, it is thought, receiving interest-free loans from Beijing to finance its buy up of arable land around the world. Free money allows Chinese companies to pay more now than locals can for land and become long-term holders for the resource crunches that China sees coming in the next decades. That’s not a real free market.
Now, if our government had supplied Landcorp with an interest-free loan to buy Crafar Farms, O’Sullivan would be screaming blue murder. She would complain that Landcorp had an unfair advantage – its much lower cost of capital allowed it to outbid the private sector. She would also complain about more farmland falling under the control of a government-linked company.
So, one has to wonder why the same logic doesn’t apply to Pengxin. The Chinese government does have a lot of that free money to chuck around but I’m sure O’Sullivan has never benefited from any of it.
O’Sullivan makes a related argument that farm prices will fall if Pengxin is prevented from buying the Crafar Farms. She says it like it’s a bad thing. But I’m struggling to understand why that is. Farms, like houses, have experienced a massive price bubble which hasn’t really popped yet. Everyone, including foreign investors, got in expecting capital gain and bid up the prices. The result is that many farms are barely profitable. The agricultural sector owes $47b (four years’ worth of dairy exports), mainly to the Aussie banks and Chinese-owned PGG Wrightson, and dairy spends 18% of its income servicing debt.
Again, the market is being distorted by foreign companies with government-backed free money outbidding our farmers. That’s not a ‘market’, Fran. It’s a game that we are suckers to play.
We have got to get off this debt cycle that is leaving us more and more in hock to foreign interests that don’t give a damn about the health of our society and the wealth of our people. Letting ourselves get outbid for our land by those interests just makes the situation worse. We need lower farm prices, which New Zealanders can afford to buy without getting in debt up to their eyeballs.