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New Hope eyes Aussie exports in China free trade zone bet

New Hope Group, which could invest A$1bn in Australian agribusiness over the next three years, is opening the first Sino-Australian free trade zone near Shanghai.

Chinese food and agri group New Hope could begin negotiating deals for trade and operations for the first China-Australia free trade zone by the middle of 2017.

The free trade zone, which the group will run, is on Zhoushan island between the major ports of Ningbo and Shanghai. It will include food and agriculture-related trade facilities, according to New Hope Group managing chief executive for Australia and New Zealand, Nick Dowling. The project will see New Hope invest $600 million, with co-investors including Hong Kong-based Harvest Fund and Andrew Forrest of Australia’s Fortescue Metals.

“We are in the process of completing the industrial scope of operations and finalising the economic operating model,” said New Hope Group managing chief executive for Australia and New Zealand, Nick Dowling. “We are already […] putting together the infrastructure […]. There is not [enough] precise detail to be specific when talking to business about the opportunity at the moment. I hope that will happen in the first quarter or half of next year.”

Dowling said that the free trade zone would provide opportunities for New Hope’s agribusiness partnerships in Australia.

“In time the importance of our project at Zhoushan will be a key driver of a lot of what we do,” added Dowling. New Hope chairman Liu Yonghao has said he has plans to invest around A$1 billion ($750 million; €680 million) in Australian agriculture over the next three years. Its current investments include beef processor Kilcoy Pastoral Company, dairy Australian Fresh Milk Holdings, and Australian NaturalCare, a supplements company.

New Hope and its Australian Fresh Milk Holdings consortium partners have increased capacity on Moxey Farms to 10,000 cattle, which Dowling says makes it the largest single-site dairy in Australia. “We are actively thinking about dairy exporting,” he added.

The company is looking to increase capacity at its beef processor, whose clients include McDonalds and Shake Shack, and preparing to sell NaturalCare products to the Chinese market when new regulations kick in on May 11 2017.

“For Australian producers and processors of agricultural and food commodities, this is an absolutely wonderful way [of] getting product into a market of around 40 million people within two hours of Zhoushan.” Zhenhai, about one hour from Zhoushan, has already been issued with one of 12 licenses to import Australian cattle. Unlike frozen meat, live cattle are due to face zero tariffs by 2019.

Liu traveled to Australia last week to discuss existing and new business with government regulators and business partners. He also officially opened the New Hope office in Sydney, which has a staff of around six people. That includes general manager and associate project director Frank Ru and David Johnson, formerly at China’s state-backed Greenland Group in Australia.

New Hope Group , which started in 1982, is also the main stakeholder behind Beijing Hosen Investment Management, which is raising its third fund dedicated to food safety, food security and agricultural modernisation. Fund III will target $400 million, according to the International Finance Corporation, which is considering investing $30 million into the fund. Hosen is also a co-investor in Kilcoy, according to Dowling.