Canada tops list of big foreign investors

Canadian investment in the New Zealand forestry industry increased last year, with the Canadian pension board increasing its stake in the Kaingaroa Forest.

Chinese deals grow but KPMG research shows a wide range of nations buying in to New Zealand’s economy.

Canadians, not Chinese, take top spot as the biggest investors in New Zealand over the past two years, according to analysis released by KPMG today.

But the figures do show a rise in Chinese investment since the last survey in 2013.

Crunching the data from two years of Overseas Investment Office reports, KPMG's Foreign Direct Investment in New Zealand: Trends and Insights finds Canada accounted for 22 per cent of foreign direct investment, followed by China at 14 per cent, the US at 13 per cent and Australia at 11 per cent in the period January 2013 to December 2014.

The official government data does not include residential property investments. As has been well documented in the political debate about housing, the Overseas Investment Office only requires notification of investments worth more than $100 million, unless they involve fisheries or land deemed to be culturally sensitive.

Canada's position in the top spot was dominated by two big transactions made by its Public Sector Pension Investment Board: the $1.1 billion purchase of AMP Capital Property Assets and an increased stake in Kaingaroa Timberlands.

It has been China's emergence as a global economic power and liberalisation of rules restricting its citizens from investing around the world that have made it a focus for concern about foreign investment.

It has been reported that in the past 12 months, net capital outflow from China has reached $650 billion, prompting debate about its impacts from Vancouver to Singapore.

With the US, Canada, Europe and Australia accounting for 59 per cent of foreign investment, the KPMG survey does provide a timely reminder that the issue and the debate should be focused on more than just one country.

It has been China's emergence as a global economic power and liberalisation of rules restricting its citizens from investing around the world that have made it a focus for concern about foreign investment.

But comparisons with the last KPMG survey - which looked at investment from mid-2010 to the end of 2012 - show a marked rise in Chinese investment.

For that period, Asian investment accounted for 16 per cent and China just one-third of that - or about 5.3 per cent of all investment.

The big investments by Chinese companies during the past two years included Beijing Capital's acquisition of Waste Management for $950 million; Yashili's 52 per cent stake in a $212 million milk-processing plant; Yili Group's $214 million investment in Oceana Dairy; Lee Island Investments' $172 million Pararekau Island land purchase for development of luxury resorts; and SFL Holdings' acquisition of Synlait Farms.

One of the interesting trends that comes through is the drop-off in the value of Australian investment - perhaps reflecting tougher economic times across the Tasman.

However, the report authors note regulation changes that have relaxed OIO requirements for Australian companies may be behind the drop.

Australia has fallen from No 1 investor nation, accounting for 46 per cent of investment, to 11 per cent in the latest survey.

When it comes to the contentious issue of land purchases, the US tops the list by nationality, accounting for 46 per cent of the value of land sold and acquiring some 115,000ha.

This was dominated by one large forestry acquisition in 2013.

Of course, one could argue that the focus on the nationality of investors is overplayed.

What they are buying is probably more important.

That's good news in terms of New Zealand getting the kind of investment we want - that is, new capital investment to help grow the economy.

Sector-by-sector investment was relatively diverse. Energy and power accounted for 17 per cent of value, real estate 13 per cent, and agribusiness 11 per cent.

Retail, finance, healthcare, media and tech are among a wide range of other industries making up the total.

The breakdown by sector remains consistent with the previous survey.

In the agribusiness category, the focus on dairy processing has seen China and Hong Kong dominate, accounting for 30 per cent and 19 per cent respectively.

But a key point about the Chinese investments, which the report authors note, is a high level of investment in new assets.

That's good news in terms of New Zealand getting the kind of investment we want - that is, new capital investment to help grow the economy.

So what does this compilation of data tell us?

It confirms that China is a growing investor in New Zealand - particularly in the agribusiness sector.

But the data should also serve to remind us we should be careful not to overplay the influence of one nation.

Large-scale investments from the likes of retirement funds and private equity players anywhere in the world can have a big impact on the business ownership mix in a country as small as New Zealand.

One big transaction could put Australia back at the top of the list, or any other of a number of countries.

Total overseas investment above the $100 million threshold appears to be relatively stable. The report tallies it at $14.2 billion for this period compared with $18 billion in the two and half years covered in the last report.

What the critics of foreign investment will point out is that relying on the Overseas Investment Office's statistics with its high threshold may not be giving us the full story. That debate remains very much alive.

See the full research here: