27 Jun 2012

Chinese SOEs no threat to rural sector - China expert

6:59 am on 27 June 2012

A China expert says the New Zealand government should shut Chinese state owned enterprises out of industries that need to protect national security or intellectual property, but they do not pose a threat to the agriculture sector.

Dr John Lee, from Sydney University's Centre for International Security Studies, has been brought to New Zealand to talk about its business relationship with China.

Dr Lee says New Zealand needs Chinese capital but it should pick and choose the investment.

He says governments are wary of foreign direct investment by Chinese SOEs because of their links with the Chinese Communist Party.

Dr Lee says senior personnel of the SOEs are appointed by agencies of the Chinese Communist Party and many are party members and former officials.

He says Chinese SOEs operate in an environment of very poor transparency so the accounts are very murky, as are, sometimes, their managerial processes and sources of funding.

Dr Lee says the Chinese SOEs are mainly interested in New Zealand's agricultural sector because it is world class.

But he says there is no reason to fear the investment.

He says it is not a threat for two reasons - there are no national security implications of buying into agricultural businesses and the volumes are not sufficient for a Chinese SOE to distort the operation of products or prices.

Dr Lee says there is one exception, if a company holds considerable intellectual property assets that are truly cutting edge.

Dr Lee says the New Zealand government should ensure it has strong regulations in place for foreign direct investment such as high standards of financial transparency and rules to prevent price distortion.