[CANBERRA]
AUSTRALIA yesterday approved a Chinese company's bid for a giant cotton farm, igniting new concerns about foreign investment in agriculture where resource-hungry China is showing growing interest.
Treasurer Wayne Swan approved Chinese textile group Shandong Ruyi's purchase of Cubbie Station, which covers almost 1,000 sq km of south-western Queensland and which has been in administration since 2009 with more than A$300 million (S$387 million) of debts.
"The proposal would bring an end to this long period of uncertainty, helping ensure the ongoing operation of Cubbie Group, protecting jobs and supporting economic activity," he said.
The approval comes as China, Australia's biggest trade partner, seeks to increase food security by encouraging its firms to expand overseas. Another Chinese firm, Shanghai Zhongfu Group, is eyeing agricultural developments in the remote northwest.
Ruyi and Cubbie's administrators would not comment on a price for the cotton farm, valued at up to US$500 million, but said the foreign investment approval cleared the way for further negotiations on a sale.
Under the proposed purchase, Ruyi will take 80 per cent of the Cubbie Group, while Ruyi's Australian partners, the fifth-generation wool processors the Lempriere family group, will take a 20 per cent stake.
Mr Swan imposed a number of conditions on the deal, saying Ruyi would need to reduce its stake to 51 per cent within three years.
Similar sell-down conditions were imposed on China's Yanzhou Coal on its takeover of coal miner Felix Resources in 2009. Mr Swan in March gave the company a one-year extension to cut its stake in its unit Yancoal.
Mr Swan said the Lempriere group would be responsible for operating Cubbie Station and for marketing the cotton on the international market, easing concerns Ruyi could use the deal to lock up cheap supplies of cotton.
Cubbie can grow up to 330,000 bales of cotton in a good year, as well as some wheat, barley, sorghum and corn. - Reuters
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