PM Key defends Chinese investment in NZ, says Synlait model good; acknowledges China big buyer of NZ govt bonds

PM Key defends Chinese investment in NZ, says Synlait model good; acknowledges China big buyer of NZ govt bonds

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)

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Reminds me of Don Brash 20 years ago - telling us we'd all be better renting.

 

So his nounce is as good today as it was 20 years ago, LOL.  Mind boggling that his supporters have not found a better head honcho.....or maybe because none of them want to front up....they's rather lurk in the shadows and pull the strings like good little puppet masters....where the light of day isnt shone for the voters to see...

regards

 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.

BANG! Bernard, wudda u reckon about that.

You heard it from the Prime Minister - property is our most valuable asset.

Thanks Johnny for backing me up on this one.

President of Property

Yeah.. well said pdk..

The lie of foreign direct investment is that it ...."creates something"....and is good for NZ.

Generally this foreign money simply buys existing enterprises... Synlait existed before the Chinese bought a share in it.

I would welcome foriegn direct investment... if it truly created something NEW .... if it truly created new employment ....  new earnings.... new innovations.

Chinese money will always be able to outbid New Zealand investors...  The chinese are making their money in an economy that has far...far.. fewer costs and regulations than NZs'.

I think it is really naive to think that foreign direct investment is , on face value, a good thing.

The synlait example simply supports my point of view.....

Key sounds more like a politician every day...  in that regard ...he has been a quick learner...  :)

cheers  Roelof

 

 

Roelof: You have it right. Selling existing businesses to foreign "investors" is crazy. Experience shows they run the local operation down, then build a new one somewhere cheaper...and we then import what we used to make here. The skills go. The capital goes...and our kids work at McDonalds.

Worse, the barriers to entry becomes insurmountable as any exports from the foreign-owned company in NZ will not be allowed to compete with other plants owned by the same company elsewhere. 

The lid sinks lower and lower and lower. 

That this government hasn't caught on to this in 30 years of it going on daily says a lot about how their ideology has blinded them to the reality of foreign "investment". 

What toothpaste do you use? If it's Colgate, it used to be made in Petone....but now it's made in Thailand. Rinse and repeat across the whole economy. 

How anyone can be dumb enough to vote for National is an indictment on our education system. 

 

 

.... " they ( China ) pretty much own all of the US Treasury bonds " : John Key .

Yes John , they do , about 25 % of those in foreign ownership , in fact  ! .....  $US 1145 billion , out of a grand total of $US 4479 billion  , as at March 2011 . Japan holds $US 945 billion of them too !

With a grand debt total of $US 14 311 billion , the US is beholden to China to the tune of 8 % of their treasury debt .

..... And according to Dean Baker ( over @ businessinsider ) China is losing alot of munny on them , as they allow the yuan to gradually rise . But it's a loss the Chinese are pragmatic enough to make , to allow the US consumer to continue purchasing Chinese goods .

Close enough , JK , " all " or " 8 % " .... not much between them .

 

 

The proposition put forward by the "growth is good" gnomes and the importation of foreign capital is "good for growth" .. one needs to examine the US experiment closely .. the US is running an annual trade deficit with China of $200 bn per annum, PLUS an annual deficit with middle-east-oil of $400 bn per annum in petro-dollars .. (not much is heard about that) .. which end up in US Treasuries .. which is, in effect the importation of $600 bn per annum into the US of foreign capital .. and it just doesnt seem to be working for them.

It's working for the shareholders of the major corporations. They are making lots of money.  But they can't care much about the country as a whole...or they wouldn't allow these policies to remain in place. There is an "Apres moi, le deluge" flavour to the way the US plutocrats are determinedly pillaging their own country. It says a lot about the average American voter that they are so fogged by the propaganda they can't see it....and don't understand it when you explain it slowly in small words. 

Has seemed for some length of time now that we have a major party led by a man trained to buy the "main chance"wether good or bad for a country, before he entered politics,who now is pushing the same barrow  in politics.Strengthened by a add-on party with a supposed policy of letting the market rule.

While I surely don`t believe in Mother NZ supporting increased social welfare that has no end , I do believe that good government requires reponsable policies that will allow future generations to make their own choices,not be shackled to the serfdom of ideologies of other countries .

Should we all look back to go forward ,expect less monetarilly to have the Godsown for all?Hasn`t financial reform,globalisation through the late eighties only brought us more marginalisation socially, and "things" ,not really a better life?

We surely can`t sell our kids birthright  for short term gain on the balance sheet,that will ,like the asset sales of the 80`s,90`s show as a major loss on the balance sheet of NZ`ers in the not so long term.

 

Alex: I think the evidence is now very clear: National took ACT over. Banks' campaign manager being made National's sock puppet in Epsom, 'opposing' his boss, John Banks, effectively hung a large "Now Under New Management" sign on the ACT Party. We now have one party with two parts. That said.....we have MMP and I odn't vote for them. I'll let the fools who do worry about it.  

 Chinese consulate and embassy to advise politicians not to meet with the Dalai Lama....quick John...bugger off to Hawaii so you don't risk dilly dallying with the Dalai....remember all that Beijing loot comes at a price !

In the case of Synlait Key is right. Synlait needed funds to develop further so if the choice is raising funds from some  NZ based investment fund or group of investors or a Chinese company that can not give the finance needed but also assist with marketing in the fastest growing market for dairy products then it is "a no brainer" from a business point of view.

The decision in this case was the company's not the Government's. We have plenty of companies partially owned by overseas investors, simply because we don't have enough capital in NZ. It has been like this from 1840's and will continue to be the case in the future.

 

Having read these articles and gone back to the original posting trumpeting the 'scoop' on CIC's investments into NZ , I am reminded how a little bit of knowledge can be a dangerous thing . So lets get the facts right . Firstly ,1.5 % of China's FX Reserves would be the better part of $NZ 60bn ,not $6bn ,and there is no way NZ is getting this kind of allocation !! .Secondly , CIC , an arm of the Ministry of Finance , doesn't manage the bulk of China's Reserves - SAFE , an arm of the Central Bank , does . Thirdly , CIC finished allocating the 200bn ( out of China's 3 trn in Reserves) they initially got in late 2010 , and half of that went into their local banks !!. Fourthly , they have not had a subsequent allocation of funds , even though those discussions have been under way for some time . Which means CIC currently has no money to invest anywhere , let  alone NZ !!! . There were similar rumours of CIC 's supposed investment into Spanish banks earlier in the year that were also a media beat up. 

What is true in all this noise is the idea that SAFE has been buying NZ Government Bonds for some time , as they have everywhere as part of the diversification story , and that in the wake of Li Keiqang's visit to NZ in late 2009 there has been a greater recognition within China of the Investment opportunities available in NZ . But this is not a one way street . SAFE 's flows , for example , will slow and potentially reverse when the strength of their current capital inflows dissipates . The DMO is right to be feeding the fish ,when they are hungry because it is not guaranteed that they will be there ad infinitum..In fact the only thing guaranteed is that SAFE will inevitably be a seller of NZ Government debt at some point in the future .

Lets sell products to China not assets!

You will sell them what they bloody well tell you to sell them DC....you will do as you are told or you they will not buy your IOU Bonds and that will mean the economy will be in the shite and that leads to voter anger..... and to you being booted out of power...

They should be booted out of power anyway for their failures on public transport, peak oil, climate change, increasing Kiwi wages, unsustainable tax cuts and the monster deficit they have deliberately brewed up to allow them to crash the state. 

I thought Kiwis were too clever to fall for the Bush / GOP crony enrichment program, particalarly as it is visibly self-destructing in the headlines daily,......but Kiwis don't appear to read those stories in the newspapers...or they don't understand them if they do read them. 

I can forgive Americans for being fooled by it as it hadn't happened yet. But we're having the same thing done to us.....with the American example in full view. 

D'oh!

 

 

and vote in who?

Labour are little better.....except they'd borrow at a far higher rate, stealing from our future and our children.

Kiwi's too clever, yeah right.....both major parties wont go near tax increases knowing full well they'd be exterminated in an election....until we get some honesty from pollies and realism from voters any logical and honest discourse and  action wont happen.....until we are in extremis like Greece and Pollies will kick it down the road until they cant.....2 elections maybe 3....

Its obvious to an American if they paid attention...there is no excuse.....

regards

At this point, we'd be better off voting for a tree or a rock...which at least would do nothing. 

I'm voting green on the basis they have been correct on almost all the mega-trends for 20 years while the two major parties laughed about how silly it all was. Their cred is dead. It's time for people who actually deal in reality....and *today*, that's clearly the Greens by any objective measure.  

 

Who to vote in?

History unequivocally tell us that there always was and there always will be a strongman cleaning up the filth. I envisage an event analogous to Jesus throwing the usurers out of the temple (sorry about the religious analogy). There are umpteen historical examples and we will not be different. My hunch: it will be someone we haven't even heard of yet. The tempest is in the making.

"This will be a very dynamite show" F. Zappa

There doesn't seem to be a lot of notice eing taking by anyone in a position who matters. Latest is the sale of a whole lot of Southland Dairy farms to German interests. HOW ON EARTH do we get this message across and have something done about it. It just seems to be going on in an unabated fashion with only lip-service being paid to the concerns of the nation.

I would also like to know what Mr Key proposes will be the LEAST amount that his "mum and dad" investors will have to stump with in order to have a stake in the assets that they, what was it now, oh yes, already own. There has been no mention of this and I am fearful that such a limit could well be set too high. Not on purpose, of course. Would you guys mind finding that out for us

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