By Alex Tarrant
Prime Minister John Key has defended Chinese investment in New Zealand, citing Bright Dairy's purchase of Canterbury milk processor Synlait as a good example where Chinese capital inflows were helping the economy by creating jobs, while that capital was not just used to buy up land.
Meanwhile Key said high Chinese domestic inflation meant China was looking to invest its foreign savings in assets around the world, such as US Treasury bonds, and New Zealand government bonds, which it had been buying "for a long time now".
Speaking on TVNZ's Breakfast programme on Monday morning, Key said a good example of Chinese investment doing well in New Zealand was with Bright Dairy's Synlait investment.
"It’s a milk powder plant in the South Island, they’ve come in, they’re investing heavily, you’re starting to see them produce baby formula," Key said.
"So they’re not buying the land. They are bringing in capital, and that’s creating jobs. So I don’t think we should be totally xenophobic about investment in New Zealand – it doesn’t matter whether really it comes from China, Australia or the US,” he said.
Meanwhile, asked whether there should be worries about reports the Chinese sovereign wealth fund had earmarked about NZ$6 billion to invest in New Zealand assets, Key said the one thing New Zealanders should be worried about was being overly indebted to foreigners, "and that’s why our plan gets us back into surplus in three years".
Interest.co.nz reported on Thursaday that the China Investment Corporation may have set aside up to 1.5%, or about NZ$6 billion, of China's massive foreign exchange reserves to invest in New Zealand assets, including government bonds, companies and potentially dairy farms.
"Bluntly, we don’t want to keep owing the level of debt we have to the rest of the world, and we certainly don’t want it to rise forever," Key said on Breakfast.
“Ultimately, no, it probably doesn’t matter whether it comes from China or somewhere else," Key said.
“The truth is that China is the big saver around the world. Because of its domestic inflation, it can’t bring that money home, and so for a long time now they’ve been buying New Zealand Treasury bonds, as they are big buyers of US Treasuries – they pretty much own all of the US Treasury bonds,” he said.
“What I would say is we want to own our future. If you want to do that, then you want the government to be saving, you want individuals to be saving, and you want to be able to control that investment, and you do that when you lift your savings rate.
"That’s our whole argument as a government. Over the last nine years of a Labour government, we spent money we didn’t have, we borrowed it from people from overseas, we had far too much consumption and not enough savings and investment, and we need to rebalance that economy – that’s the purpose of that," Key said.
"In the end, if you don’t put yourself in that position, you’ve only got two options – don’t borrow the money and therefore don’t invest, or borrow it from someone else, and they’ll come from overseas," he said.
(Update 2 with further Key Breakfast quotes)