Chinese private investment into overseas agri gathers pace

Agriculture was one of the top 10 sectors attracting overseas M&A investment by Chinese companies in 2014, according to KPMG’s China Outlook 2015 report.

Alongside other sectors such as mining, real estate and electronics, food and agriculture was the fifth busiest sector for overseas M&A by Chinese companies and KPMG expects this to grow in 2015; Chinese companies spent some $7 billion in overseas food & agri sectors, according to Dealogic, which provided KPMG with data for the report.

In 2013 food & agri was ranked 20^th and in 2012 it was 15^th, according to Dealogic.

“Chinese companies have been encouraged by the government to extend their upstream agribusiness value chain overseas,” reads the KPMG report. “Chinese privately owned companies are getting more ambitious and completing larger transactions,” it adds.

The country’s free trade agreement with Australia makes the Australasian country a particular target for future investment, according to the report.

“The conclusion of negotiations for the China–Australia Free Trade Agreement (ChAFTA) was announced in November 2014. ChAFTA is expected to stimulate Chinese investment in a number of strategic industries, including agriculture, animal husbandry, food processing and infrastructure,” it reads. “These are pillar Australian industries that are eager for Chinese capital; in return they have high-quality resources, technologies and experience that can help Chinese companies move up the value chain.”

KPMG’s finding are backed up by investment professionals on-the-ground who are getting increasing amounts of business from Chinese companies.

Brian Healey, national head of the Agribusiness practice at Holding Redlich, an Australian law firm, is working with various Chinese companies that are controlled by wealthy individuals – as opposed to state-owned enterprises – as well as private individuals that want to invest into Australia’s agriculture market.

“A lot of investors from China aren’t agribusinesses as such but have accumulated wealth in other areas – such as mining and real estate – but have seen opportunities in agriculture as an investment class in itself,” he said. “They often understand hard commodities and so look at agriculture as a commodity. They are also interested in getting premium produce back to China.”

The trend for these companies to look at investing in Australia has really only kicked off in the last six months, he added. Much of Healey’s work with these types of investors surrounds helping them to understand the local regulatory environment and setting up local structures for them.

Andrew Hill, co-founder of National Land Lease and Australian Agribusiness Partners, an agriculture investment partnership firm, has noticed particular interest in beef farming from Chinese investors, he told Agri Investor.

Chinese investment firms are also likely to look for agriculture opportunities overseas, motivated by relatively higher, stable returns in overseas markets, argues KPMG. Investment from financial investors such as private equity firms, insurance companies, banks, government financial investment arms and private investment companies, increased during 2014. The consultancy expects even more in 2015.