The island state of Tasmania lies off the southern coast of mainland Australia and is known for having the cleanest air in the world, fertile farmland and coastal waters abundant with seafood. This month, Tasmania will get its first direct international flight. The destination is Ningbo in northern China, and the plane will carry not people, but milk.
Chinese investment is transforming Tasmania. Chinese President Xi Jinping's visit to the island in November 2014 unleashed a surge of investment activity. In February last year, the Australian Foreign Investment Review Board approved the sale of Australia's largest dairy to Moon Lake Investments. The Chinese entity paid US$200 million (S$283 million) in cash for the dairy which stretches over 19,000ha of pastoral land in Tasmania.
Milk from the dairy will be flown weekly direct to Ningbo. Seafood is another key industry in Tasmania; abalone divers in the state can fetch double for their catch compared with five years ago, thanks to Chinese demand. More than 90 per cent of Tasmania's abalone and lobster catch already goes to China, and exports will be further boosted by the China-Australia free trade agreement, under which tariffs on both abalone and lobster will be eliminated by 2019.
New hotels are springing up around the state, funded by Chinese (as well as some Singaporean) investors. Five years ago, most visitors came from Britain and the United States; today, by far, the largest groups come from China and Hong Kong.
Tasmania is a microcosm for what is happening across Australia. China is already Australia's largest trading partner, accounting for 40 per cent of Australian goods exports every year, and has recently overtaken the US to become the biggest source of new foreign direct investment (FDI).
Stories abound of Chinese turning up to famed Australian vineyards, carrying millions of dollars in cash in a duffle bag - to buy the vineyard, not just the wine. The Chinese binge for downtown residential property has driven up prices in Sydney and Melbourne, forcing local residents to look further afield.
Australia is of great strategic value for China. A shortage of agricultural land, exacerbated by systemic pollution and recurrent food contamination scandals, has made food security a pressing concern and created an appetite for Australia's vast farms and dairies. Last year, a Chinese entity made a bid to buy 80 per cent of S. Kidman and Co, Australia's largest cattle ranch, which stretches over 1.3 per cent of Australia's total land area.
China's advances have not been universally welcomed in Australia. The bid for S. Kidman and Co was initially rejected by the Treasurer after a public outcry. Some have warned against the risk of becoming too dependent on China, citing uncertainty over the health of its economy and the opaqueness of its regulatory system. The US ambassador reflected the concerns of many locals when he spoke out last year against the amount of Chinese money swirling around in Australian politics.
Popular anxiety over Chinese acquisitiveness prompted the government to toughen up foreign investment procedures, impose a new property tax on foreign buyers and undertake a review of foreign-owned agricultural land. Ultimately, the report found that China accounted for just 3 per cent of foreign-owned land in Australia (compared with 53 per cent for Britain), but this failed to placate far-right Senator Pauline Hanson, Australia's answer to US President Donald Trump. Last September, Ms Hanson warned that "if we keep heading down the path of selling our land and our houses and everything, we will be swamped by the Chinese", offering a more pinpointed diagnosis than her famous maiden speech in 1996 in which she spoke of Australia "being swamped by Asians". Some Singaporean investors are starting to find they are being tarred with the same brush.
This simmering anti-Chinese sentiment across the country has forced China to adapt its strategy.
After an initial knockback on S. Kidman and Co, the Shanghai-based investor decided to team up with local tycoon Gina Rinehart, diluting its own shareholding to 33 per cent. The deal was subsequently approved last December. Agriculture and real estate deals are set to follow in the same pattern.
In rhetoric, too, China is beginning to take a different tack. In his visit to Canberra last week, Chinese Foreign Minister Wang Yi sought to present himself as an ambassador not for China but for global trade. He was there not to promote China but rather to stand up for a rational, rules-based "open world economy". The visit was serendipitously announced a day following the revelation of the disastrous phone call between Australian Prime Minister Malcolm Turnbull and Mr Trump.
Where Mr Trump delivered what felt like a national humiliation, Mr Wang offered blandishment and reassurance. His comforting words on the importance of free trade echoed not just Mr Xi's speech in Davos but also Mr Turnbull's own address to the Australian National Press Club a week earlier. In this major speech, Mr Turnbull had lambasted "political opportunists" who "offer the false promise that subsidies and trade barriers, under the banner of Australia First, are the answer to protecting jobs".
He also defended closer economic partnership with China by presenting it as part of a benign, pan-Asian market keen to "buy Australian": The mention of Aussie beef being served in Guangzhou and Shenzhen was carefully followed by references to shiraz sold in Tokyo and macadamias in Seoul. Mr Turnbull seemed to be taking a page right out of the Chinese playbook - play down the "Chinese" element of Chinese investment.
As China assumes the mantle of champion of global trade, in places such as Australia, where Chinese "going out" has not necessarily translated into a local "welcome in", global trade is also being deployed as a cipher by politicians on both sides to assuage concerns about Chinese investment.
It's worth noting that China may be jumping on the bandwagon of open economies but has hardly lashed itself to the mast: The Organisation for Economic Cooperation and Development ranks China the second-highest in its FDI restrictiveness index, behind the Philippines. In Australia, China's prospects will depend on whether future ventures - as in the case of the S. Kidman and Co deal - can take on more of a local rather than a Chinese flavour.
• The writer is Asia director of Global Counsel, a strategic advisory firm with headquarters in London and offices in Singapore and Brussels.
A version of this article appeared in the print edition of The Straits Times on February 15, 2017, with the headline 'Taking the 'Chinese' out of Chinese investment in Australia'. Print Edition | Subscribe
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