January 4, 2017
On December 20, 2017, New Zealand’s Overseas Investment Office (OIO) blocked the takeover a unit of the ANZ bank called UDC Finance, to HNA Group, based in southern China, for a proposed US$462 million. This declined acquisition is part of a larger trend within the New Zealand government to resist perceived Chinese influence and economic power in New Zealand’s industry, real estate, and government sectors. Given the assertive stance against China in the current New Zealand and Australian governments, it seems China’s influence in this region may be in decline.
The OIO stated that the investor test in the 2005 Overseas Investment Act was not fulfilled by proposed UDC Finance acquisition: section 18 requires that the relevant overseas person has, or (if that person is not an individual) the individuals with control of the relevant overseas person collectively have, business experience and acumen relevant to that overseas investment, have demonstrated financial commitment, are of ‘good character’, and are eligible for a New Zealand visa. Because the OIO was not able to verify the controlling party of the acquirer, the takeover failed to meet the investor test and the acquisition was blocked.
New Zealand’s new coalition government, led by Prime Minister Jacinda Ardern, has sought a tougher attitude toward Chinese foreign influence, capital, and business operating in New Zealand. However, the UDC Finance-HNA Group deal had already been before the OIO for over a year (far longer than average), and was therefore unlikely to be approved, regardless of the election of the current New Zealand government in October of 2017. The OIO blocked four acquisitions over the last five years, all of which were bids made by Chinese companies.
It is expected that the current New Zealand government will announce further barriers to foreign investment this year, including new foreign capital restrictions on rural land purchases in addition to the recently introduced 15% tax on foreign purchases of property. These restrictions are in response to a growing public perception that foreign capital is responsible for skyrocketing house and land prices, which increased 75% over the last four years, and are the most unaffordable in the world, according to a report by the Economist in 2017. New Zealand has become a popular vacation home/farm destination for Asia and Australia, and Chinese buyers are the largest group of foreign investors, so it is likely that these restrictions are meant to target Chinese acquisitions in particular.
Such policies are in line with the coalition government’s tough stance on China and Chinese influence in New Zealand: while New Zealand was the first developed country to sign an FTA with China, and China is now New Zealand’s largest goods trading partner, and second largest services trading partner, it seems that Chinese soft and economic power in the region may, at least in the short term, be waning.