Chinese farm purchase prompts 'xenophobia' row in NZ election campaign

New Zealand's main farming organization on Sunday expressed unease about Chinese food giant Shanghai Pengxin Group's planned purchase of a major dairy holding as the political row over the proposed sale deepened with accusations of xenophobia.

Federated Farmers President William Rolleston said the sale of the central North Island Lochinver Station, which is still subject to approval by New Zealand's Overseas Investment Office (OIO) and Chinese authorities, "may not provide sufficient benefit to New Zealand."

"New Zealand absolutely needs foreign investment, but it has to be of benefit to the local and national economy," Rolleston said in a statement.

The OIO had to assess the proposed sale on whether it had " substantial and identifiable benefit" over and above just making a farm work better, which a New Zealand buyer could also promise.

"Since Lochinver Station is highly regarded in farming circles, there must be something very special and we are keen to know what that is," said Rolleston.

Lochinver was close to 16 other North Island dairy farms that Shanghai Pengxin bought in 2012, which would increase speculation that vertical integration -- control of the entire dairy process from farm to processing -- was likely, he said.

"The reality is that here, no one knows how much of our farmland or housing is foreign owned. To base critical economic policy decisions around a hunch is unacceptable."

Shanghai Pengxin's intentions became a political issue in the run-up to the Sept. 20 general election when the fledgling Conservative Party on Friday revealed the plan to buy Lochinver, saying it was being kept secret from the public for fear of a backlash against sales of productive land to foreign interests.

The Conservative Party and opposition parties have called for tighter rules on land sales to foreigners and for a register of foreign-owned properties.

But in a television debate on Sunday, Economic Development Minister Steven Joyce called the main opposition Labour Party " xenophobic" because of its plans to tighten foreign ownership rules.

Labour finance spokesperson David Parker said in a statement that the government had broken its own promise to restrict foreign land sales.

"Labour has criticized the sale of farms and houses to American, European and Asian buyers. It is not racist or xenophobic to do so, " he said.

An online advertisement by selling agent Bayleys said Lochinver Station was valued at 70.6 million NZ dollars (60.12 million U.S. dollars), "placing it at the top of the most highly valued stations in the country."

The 13,800-hectare Lochinver Station had the capacity for 100, 000 stock and included three airstrips, a lake, 22 houses to accommodate the families of 20 permanent staff, a staff recreation center, a school and 91 km of roads, said the advertisement.

The Lochinver deal would be the third major purchase by Shanghai Pengxin to draw opposition the last three years.

In October last year, Shanghai Pengxin Group announced it was looking to take over South Island-based Synlait Farms Ltd., of which it already owned 74 percent through New Zealand Standard Farm, a subsidiary of its Milk New Zealand unit, prompting Federated Farmers to express concern over vertical integration.

Shanghai Pengxin bought 16 North Island dairy farms for 200 million NZ dollars (170.31 million U.S. dollars) in 2012 after a controversial and long legal battle through the New Zealand courts, which resulted in changes to the way the OIO had to assess land purchases by foreign interests.